Only the most extreme optimist would have been expecting fireworks for the plywood sector at the end of the summer holiday period. And the reality is, sure enough, that demand and prices for most forms of plywood have been decidedly steady; however, the birch ply market has certainly enjoyed a more than decent run. "It’s the market with the most life in it," said a leading distributor. "Demand is good, lead times are going out and prices are heading upwards."
As reported, Finnish birch plywood prices have risen by 4-5% in the third quarter and producers are reporting lead times out as far as 12 weeks. "It’s a very healthy situation," said a producer. "All of our traditional markets are ticking along nicely and are taking the volumes." Although he anticipated no more headline price increases ahead of next year’s first quarter, he did not rule out further hikes on the spot market.
Also as forecast in our previous report, Latvian plywood prices are to increase by around 5% for the fourth quarter, a move which has sparked a flow of orders from buyers seeking to beat the hike. As a result, TTJ was told, producer lead times have drifted out to the turn of the year in some instances. Supply tightness has been exacerbated by the recent seasonal maintenance shutdowns and by the fact that stocks held in the UK are already "relatively low".
For Russian plywood, meanwhile, the overall tone was described this week as "bullish", with producers enjoying firm prices amid very solid demand from, in particular, the domestic and surrounding markets. According to a couple of experts, the strength of this demand has been exemplified by the significant number of late shipments to the UK.
Firm pricing is also to be found in the Brazilian elliottii pine ply market on the back of healthy regional demand, including from the US.
Asian products
As regards plywood from China and Malaysia, FOB prices have been generally steady over the last couple of months, with UK demand described this week as average to good for the summer, even though "most people have not been in the mood to buy large volumes".
The latest key development in China has been the implementation of 6% VAT on both the costs incurred from ex-mill to FOB and on prepaid freight. Originally it was announced that this would also be applied to the cost of goods actually being exported "but it now transpires that this was a misunderstanding in the announcement made by the relevant government department, and will not be applicable", a local expert told TTJ.
In response to the measure, suppliers who generally sell on a CIF basis have been increasing their prices in order to cover the additional cost of freight, or in some cases offering to sell on a FOB/"freight collect" basis, with the relevant freight cost being for the buyer’s account. Meanwhile, imposition of this VAT has coincided with rising freight rates. Looking ahead to the autumn in Europe, it has been suggested that the anticipated seasonal pick-up in plywood demand could be greeted with "a shortfall in supply from China". A local expert elaborated: "This is primarily because it is now proving virtually impossible to obtain any credible evidence of origin/legality of non-FSC tropical hardwood logs which in the past have traditionally been used in the production of Chinese hardwood plywood and, as a consequence, traditional suppliers to Europe are unable to comply with the EUTR."
Changing specification
There has been a noticeable increase in demand for plywood with either poplar or eucalyptus cores but buyers are still demanding a redwood face and back which is being produced at present from engineered/dyed plantation poplar, TTJ was told. "However," he added, "this type of veneer is a relatively new innovation with limited supply and, should demand from Europe improve, then there could be a shortfall in supply of this type of veneer."
It had been suggested recently that, in order to reduce the long chain of custody from overseas log suppliers to Chinese plywood manufacturers and to comply with EUTR, some of these manufacturers were trying to source logs and/or veneers direct from overseas suppliers. However, comments reportedly made by some plywood manufacturers in China indicate that this is not a viable option from a cost perspective and that they are either continuing to use engineered/dyed poplar or are examining the possibility of using temperate hardwood species.
Mills in Malaysia were described this week as "reasonably bullish" as currency exchange rates have been presenting them with "a decent return". At the same time, log supply problems for the country’s producers remain "a constant".
According to the latest statistical analysis from the Timber Trade Federation (TTF), the UK’s hardwood plywood imports were volatile in the first half of the year, with a weak March and May sandwiching a strong April when more than 100,000m³ arrived in the UK. The major factor was China whose exports to this country fell more than 70% in May when compared to the same month last year, duly slashing its market share from 62% in May 2012 to 37% this time round. UK hardwood plywood imports from all sources were 11.3% lower in January-May this year at 338,000m³.
Meanwhile, TTF figures confirm that incoming volumes of softwood plywood jumped 7.4% in this year’s January-May period to 189,000m³, with China increasing its deliveries "by a half" year on year to boost its market share from 14% to 20%.
