As anticipated, Far East hardwood plywood prices have shown no signs of retreating from the considerably higher levels established earlier in the year. Latest indications are of prices holding at between Indo96 list -12 to -14, although levels quoted this week ranged from -15 all the way up to -10.
However, there is some sense of the market pausing for breath in the wake of the rapid price increases witnessed several months ago – possibly the result of heightened buying activity during the period when prices began to rise rapidly. One source observed: “There is not the same panic as there was a couple of months ago because vessels have arrived in the UK and we have been in the holiday period. But I don’t think we’ll see any price collapse over the next few months because I can’t see any massive shipments of plywood coming in.” Another UK-based Far East plywood specialist pointed out: “If we can get the stock situation sorted out on Far East plywood, we are in for a few very good months.”
Price speculation
The general view is that there is sufficient material in the UK to meet market needs but that, at the same time, there is far less scope for bargain offers. That said, few experts appear willing to speculate on the future course of Far East plywood prices following this latest period of relative calm.
One UK player claimed that his company was already “having to turn away” some prospective customers and that higher prices would appear inevitable if the UK market wanted to fulfil its needs.
It was also suggested: “Some mills in the Far East are still talking about the Indo list price going back to net due to the amount of plywood taken off the market – but it may take longer than they anticipate.”
Supply issues have provided the impetus for the recent strength in Far East plywood prices. Log availability has fallen sharply owing to a mixture of tighter harvesting controls and a clampdown on illegal logging activities. There has been an immediate impact on the market with the reduction in supply out of Indonesia put as high as 30%.
Niche market
If this situation developed further, “it could ultimately mean Indonesian plywood becoming a niche market,” TTJ was told.
The severity of log supply problems at individual Far East mills appears to vary according to location although the rains in certain regions are likely to exacerbate the overall supply difficulties.
For the Brazilians, meanwhile, the latter part of the summer has brought a US$10-15 increase in the forward price of elliottii pine plywood. But while elements of the trade are happier that some value has been returned, many stress that this “is still basically a cheap wood”. UK demand for elliottii has remained steady over the summer.
Given the firming in hardwood plywood prices, there has been a suggestion that the decision by some Brazilian mills to run hardwood rather than softwood veneers will have impacted on the availability of elliottii.
Furthermore, there have been reports of poor availability of containers for shipping plywood cargoes out of Brazil, as well as problems with late arrivals. Some delivery times have virtually doubled.
Meanwhile, it is understood from Brazil itself that the US import duty on Brazilian plywood is to be cut from 8% to zero
whereas the duty applied to Indonesian plywood, for example, will remain at 8%. “The implication is that the US will buy more Brazilian plywood, and that there will be less available for the UK and at higher prices,” commented an industry expert.
Perhaps due to the higher plywood prices coming out of Indonesia, Malaysia and Brazil, a number of buyers have been prompted to take a closer look at okoume-faced plywood from China, which is understood to be more than 10% cheaper than Far East plywoods in many instances.
Differing opinion
This material continues to provoke differing reactions from the plywood trade. On the one hand, there were calls this week for the product to be more clearly distinguished from other, more established Far East plywoods, given question marks over its durability; on the other hand, several contacts maintained that a sizeable proportion of the product coming out of China was perfectly acceptable if it was sold responsibly and according to its intended end use.
“Chinese plywood gets a lot of negative publicity from people who are not involved in the Chinese market and want to ruin the trade for others,” complained one contact.
The Baltics remain “very busy” in terms of plywood production and the market has accepted a price increase of around 6% across all birch plywood products for shipments to the end of October. Delivery times were said to be eight to ten weeks compared with the usual three to four.
Demand from the UK and Ireland is understood to be quite healthy for the entire Baltic product range, with thicknesses of less than 9mm said to be attracting particularly strong interest. Russian mills have succeeded in securing 5-7.5% price increases depending on the thickness required. With the on-going rise in Russian production and transport costs, it is imperative for the mills to drive for higher prices, TTJ was told.
With the holiday season over, delivery times on Russian plywood are around five to six weeks and are expected to remain so for most of the remainder of the year.
Growth in Baltic and Russian plywood production has meant mounting pressure on the competitive position of standard birch plywood producers in Finland, prompting many of them to switch more to alternative, added-value products. The Finnish birch mills have returned from their summer breaks and understood to be “reasonably well sold” in the UK, with the average lead time at around four weeks. Finnish spruce plywood is enjoying stable market conditions and a fairly healthy order book.
North American plywood is continuing to be priced out of the UK market because of the sizeable differential with rival products. “Only small amounts have been sold over here for some time – and usually when somebody wants a panel for a specific use.”
Reduced US capacity
It should also be remembered, added a source, that a significant proportion of US plywood capacity has gone out of the market and some mills have opted to run veneer for LVL. “There is not so much plywood available for export – especially when you take into account the big demand from housing in the US itself,” he said.
The first half of 2002 saw the UK hold on to its position as the EU‘s leading importer of North American plywood. Some 1,056m3 was shipped to the UK in January-June this year out of an EU total of 7,783m3. Belgium and Luxembourg received a comparatively large shipment in May to become the EU’s second largest importer of North American plywood in the first half of the year with 562m3. France, the Netherlands and Spain were respectively third, fourth and fifth on 503m3, 293m3 and 287m3.
However, these totals pale into insignificance when set alongside those for January-June 2001 when EU countries imported 19,405m3 and the UK alone received 7,783m3. According to the APA – Engineered Wood Association, North American plywood exports to the EU have been badly affected by the availability of cheaper products of Brazilian and other origin.
Load-bearing applications
UK plywood and OSB industry contacts have again underlined the ongoing problem of builders and contractors using inappropriate plywoods for load-bearing applications. Among the companies taking action is Nexfor, which has written to specialist UK roofing merchants and to roofing contractors to explain the certification issues surrounding load-bearing applications.
A senior spokesperson for the company also pointed to “real awareness among distributors that they need to protect themselves” in this essential area. He urged interested parties to contact their local authorities and ask them to check that their certifications specifically excluded Brazilian elliottii pine plywood from load-bearing applications.
This issue is of extreme importance to an OSB production sector which views roofing as an increasingly important market and which, for the moment at least, is struggling well below the break-even point. OSB prices in the UK have recently risen by a few percentage points but, according to sector experts, increases are constrained by the availability of cheaper OSB from the near Continent and also from Bulgaria.
A further OSB price increase is anticipated for the fourth quarter but is unlikely to go far towards matching the 25-30% hike required to return the product to viability, said one expert. Another agreed: “Domestic manufacturers have increased prices by just a few percentage points but these are still awful, loss-making prices”.
That said, OSB is still almost universally regarded as a product with a bright future. The European Panel Federation says OSB production in Europe leapt by 28% to 1.6 million m3 last year while consumption improved by 30%.
Despite the summer being a traditionally slack period for industry in general, OSB sales over recent months appear to have been sufficiently good to underpin the latest price increase. According to one domestic expert, UK demand remains on an upward curve and consumption can be expected to grow by a further 15-18% in 2002. OSB was a product with “huge” long-term potential although lower prices and the supply/ demand imbalance were deterring investors from planning new capacity.
Another leading industry figure said: “We are trying to establish a reasonable level but, unfortunately, customers have got used to paying very low prices.”
