Far East plywood prices have been relatively stable over the past few weeks although their spread remains wide. Profit margins on Brazilian elliottii pine plywood are dismissed as practically non-existent by most in the trade, with one contact suggesting ‘it is not worth stocking, but unfortunately we cannot ignore it’.
Indo96 list prices expressed to TTJ this week varied between -18% to -27%, with size of order and the circumstances of the individual mill appearing to be the major factors in determining what price is on offer.
As a general rule of thumb, there appear to be few takers at the higher price end of the market. Meanwhile, one importer pointed to ‘lots of problems’ with customers being sold BB/CC grade but being supplied with third grade.
Mills in Indonesia and Malaysia have seemingly become more interested in securing higher volume business and still consider the European market as a steady and reliable source of orders despite the low prices being paid.
Traditional customers
Some of Indonesia and Malaysia’s traditional customers – for example, in Korea and Singapore – are showing increased interest in the burgeoning plywood production from China. One contact suggested China is winning increasing amounts of MR business in Japan and the Middle East.
As for the UK, International Plywood has confirmed that it will shortly receive its fourth shipment of Type 1 Chinese plywood into Portbury, and that its first consignment of WBP plywood from China is expected to arrive next month. According to the company, it has been working closely on developing this product with a mill in central China and will introduce it ‘slowly’ to the UK market.
Brazilian hardwood plywood mills are showing more interest in the European market because of reduced buying from the US and the Caribbean, although the price that the Continent is willing to pay has dampened their enthusiasm somewhat. The K14 list level is put as low as -29% to -30%. In elliottii, meanwhile, freight deals for containers have all but disappeared because of the lack of import containers reaching South America.
Anyone reading the news-papers might suspect North American plywood mills are fearing a nose-dive in business as a result of the well-publicised downturn in the domestic economy. However, according to one senior contact, order files are ‘not bad’ and mills are hoping for normal spring buying patterns to emerge during the course of this month. US housing starts during the early weeks of the year were ‘excellent’, he said, while the recent reduction in domestic interest rates could be expected to boost the market further.
Weighing up all the issues, he concluded: ‘I don’t think it is going to be a boom in the US, but neither is it going to be a great big bust. There is still room for optimism.’
Comparisons
Drawing comparisons with TTJ’s previous plywood report six weeks ago, the price of Sturdifloor is believed to have risen slightly to US$445-455 per thousand bd ft cif, while that for CDX sheathing was little changed at US$420-425. The biggest factor affecting sales, according to a UK agent, is the continuing low price of elliottii pine plywood from Brazil which is making it largely uneconomical to ship North American plywood across the Atlantic.
In terms of the European market as a whole, most recent figures available through the APA – the Engineered Wood Association provide some conflicting signals. In the first 11 months of last year, the EU as a whole imported 63,731m³as against 75,364m³ in the corresponding period of 1999.
Several leading importer nations recorded significant declines over the two comparative periods, most notably Germany whose imports of North American plywood slumped from an already low 18,230m³ in January-November 1999 to a mere 6,074m³ in the same 11 months last year. Dutch imports fell from 17,404m³ to 14,688m³, while those for Belgium/Luxembourg dropped from a shade under 7,000m³ to just over 3,000m³.
The overall trend may have been downwards but the UK stood alone in posting a significant increase in imports of North American plywood – from 22,573m³ in the first 11 months of 1999 to 34,177m³ in January-November 2000. According to the APA, the increase – albeit from a low base – must be attributable at least in part to the ongoing campaign surrounding the need to specify plywoods conforming to BS 5268 part 2 for load-bearing applications. In February, for example, APA sent a mailshot to all members of the Association of Building Engineers that explained all the issues surrounding the British Standard, and plans to target a similar information campaign at the Royal Institute of Chartered Surveyors.
Meanwhile, the Timber Trade Federation is to issue a list of all plywoods that meet the requirements of BS 5268 part 2, so there is no room for confusion among material specifiers.
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“We are getting to a situation where you can’t put a penny on the price of OSB without someone saying they will go elsewhere for it” |
A UK agent for North American plywood agreed that the overall campaign ‘has got to take some of the credit’ for the increase in UK imports last year. But he added: ‘The volumes are still slim. In 2001, UK imports will struggle to reach the same levels as last year.’
In common with North American plywoods, sales of Finnish spruce plywood are also being held back by the still substantial price differential in relation to Brazilian elliottii. Demand for Finnish spruce plywood is described as ‘quieter’, possibly as a consequence of the reportedly large volumes shipped towards the end of last year. This so-called business hiatus in January and February has been deepened by poor weather in Finland.
Finnish output rises
Recent projections from the Finnish Forest Research Institute suggest the country’s plywood production will rise by a further 13% this year to 1.39 million m³comes on top of a 14% increase last year. Exports are also expected to grow by 13% this year to 1.21 million m³rices are thought likely to increase by 1.5%.
For the moment, order files for Finnish plywood are generally good, but not spectacular, with the all-important German market said to have become busier over recent weeks. Delivery times are normal from Finnish mills while prices are described as ‘steady’. On the news front, Koskisen Oy’s new mill at Jarvela has begun production of white plywood and is expected to commence output of overlay plywood during the second half of April.
By contrast, prices for Baltic and Russian plywood have risen recently by around 3% and 5% respectively. According to a UK agent, the price increase for Baltic material was accepted reluctantly but the mills ‘are still looking for more’. Any further increases may be hampered, however, by the occasional ‘crazy’ price still to be found in the market.
Meanwhile, some poor weather has dampened forestry activity and affected the mills’ raw material supply. There is reportedly a shortage of Russian plywood in the UK – most pronounced in the thinner grades – as a result of the combined effects of logging difficulties and rising costs at the mills.
The recent price increase was welcome in Russia but has not gone nearly far enough to offset rising costs at the mills, according to a regional expert. As well as rising raw material and energy costs, an anticipated increase in rail costs will hit the many Russian mills that rely on rail wagons.
The OSB market has been unremittingly difficult throughout recent months. Product arriving in the UK from the near Continent is being blamed for keeping prices under constant pressure, with established domestic players prepared to compete with these low levels in order to hang on to what they regard as hard-earned market share. ‘Continental material is struggling to gain market share over here,’ said one leading source, ‘because we will always remain competitive in this market.’
Another contact complained of ‘some fairly horrendous prices’ coming out of the Continent and expressed concern that heavy pressure on the price of OSB 2 might extend to OSB 3.
The negative effects of oversupply have been exacerbated by a poor run of weather in the UK which has hindered or stalled building projects. Bad weather is often known to stimulate demand for panel products in the longer term, but beleaguered OSB operators are barely impressed by the promise of ‘jam tomorrow’.
th American demand
The weather has similarly dented immediate demand for OSB in North America, where the pressure on OSB is also reaching worrying proportions. Significant new capacity is hitting the OSB market at a time when it is already ‘bumping along the bottom’. This has heightened pressure on competing structural panel products.
For the moment, OSB order books in the UK are described as ‘reasonable’ and experts are convinced that overall demand in Europe will continue on its upward curve this year as the panel product continues to open up new application opportunities.
By contrast, there is little optimism to be found on the price front, with one source predicting the current difficult conditions will persist for at least another year until ‘the market comes back into balance again’. Another said: ‘We are getting to a situation where you can’t put a penny on the price of OSB without someone saying they will go elsewhere for it.’
In the light of existing OSB oversupply, contacts in the UK are unsurprisingly downbeat about the prospect of new capacity – thought to be around 300,000m³per year – due to come on stream shortly in Belgium.
