China, the key market leader did begin to recover some momentum and timber purchases strengthened slowly but steadily through the second and third quarter. The greater concentration appears to have focused on softwood logs and lumber.
That said, major importers believe that logs of tropical species will never return to the huge volumes of the years up to 2014. This view is another pointer to the changes that are occurring to the nature of timber and timber products in the region as both exporters and importers turn towards more diverse use of resources, partially driven by supply constraints for some species, partially in efforts to be price competitive by use of alternative, lower cost species, and not least by producer country governments’ pressing for further and more intensive in country timber processing.
Conversely, some timber importing and processing businesses in both China and India have accelerated the rate of relocation of their primary and even some secondary conversion facilities to Indonesia to utilize plantation grown falcata to manufacture plywood and some also moving to African countries, notably to Gabon’s tax free zone, importing back to the home country for example, veneers rather than the peeler logs and semi-processed timber components rather than sawn lumber.
There are also direct exports to consumer countries. The logistics of saving in freight costs alone can be significant, but much depends on the level of import tariffs into the home countries.
Some South American countries have had joint agreements, a mixture of export incentives and tariff free imports to stimulate further processing. China’s plywood exports in the first half-year were largely unchanged in volume but average value turned out around 5% lower. USA is the major market for Chinese plywood and there are quite large variations in price for the different import countries.
As a result of the Myanmar total halt or severe reduction in timber harvesting, India has had to become much more active in timber imports from elsewhere, continuing with very large volumes of softwood logs from New Zealand, strong buying of logs from Malaysia, but also reported to be purchasing some logs from Papua New Guinea as Sarawak log prices continue to increase year by year as total log production volumes fall year by year. Buying by India is holding tropical log prices very firm.
Myanmar log production is set to resume in April 2017 although volumes will be low and strictly monitored. The government has stepped up activities to stop timber being smuggled through borders into China, India and other adjoining countries and has been successful in being able to confiscate larger than ever volumes of illegal timber which will be sold on to local users.
Recently, Malaysia has become accepted as a Full Strategic Partner with China.
Plywood business is depressed and Malaysian plywood manufacturers have been reducing output by as much as 10% to 30%, with reasons being high cost of logs, the depressed market for imported plywood in
Japan and the Middle East, very stiff price competition from Chinese exports and also from alternative board products, especially MDF where high growth in demand is reported for various overlaid and film faced boards.
Good business in these specialist boards is stimulated by demand in Middle East markets where construction of luxury apartments and hotels is very active. For the time being, plain MDF is not of interest for Middle East buyers. India has recently imposed high antidumping tariffs against plain MDF from Vietnam and Indonesia.
After a slow start basic MDF is now becoming much more utilized domestically in furniture manufacture in the Asian region even by smaller workshops which had traditionally used solid timber or plywood and it would appear this trend will mop up the increasing production although prices will be held down by strong price competition, in particular by keenly priced exports from Thailand and Vietnam.
The most important news is of course the sign up of FLEGT approval for Indonesia to begin shipping a wide range of EUTR compliant timber products as from November 2016. First shipments are expected to be for buyers in the UK and Belgium.
Apart from the EU market advantages for Indonesian exporters and their EU buyers this news has stimulated other producer countries to look more actively at their own progress towards FLEGT compliance and is very likely to lead to much speedier progress by the competing, larger exporting countries. These countries are almost certainly going to be pressed by EU importers who will increasingly insist on imports of the time-saving, risk-free EUTR compliant FLEGT products.
One ongoing producer country problem is how best to assist smaller producers and exporters to enter into the system as they complain of the complexity and relatively high costs of the process involved. It is perhaps worth noting that Indonesia forecasts an economic growth of 5%, and India over 7% in the current year.
Sawn lumber markets are reporting a mix of moderate or slow uptake. Demand for China is moderate and statistics for building materials show demand moving up by over 10% and house prices in many areas also mostly moving higher than in the first quarter of the year.
Presently China’s construction sector is not overheated and government intervention seems unlikely so the market seems reasonably settled on a stable, slightly upward trend.
Meranti is facing strong competition in Middle East countries, business is quite good for higher quality in traditional framing sizes such as 2 x 8 but complaints have continued for some time over MLH quality and size conformity.
The US market for Asian and African hardwoods has been slower this year while US timber imports in the Asian region continue to increase.
Japan is struggling with the economic situation and fluctuations of the yen/US dollar rate have not helped. Plywood imports are depressed and significantly lower as are log imports, but imports of European timbers at almost 1.5 million m3 are more than 20% higher than in 2015. In contrast, Japanese domestic plywood manufacturers report very strong demand and supply barely able to keep pace.
For European markets, Malaysian plywood imports have faced strong competition from Indonesia and China while sawn lumber has shown little change from stability or a slow decline in demand overall for meranti and indeed for tropical timber from other sources. Prices are still stable and largely unchanged because producers face steady increases in cost of wages, power, raw logs and government taxes.
With the exception of Europe, demand is slowly improving, especially for trading within the Asia Pacific region and producers are minded to maintain the price stability.
