Far East timber trading still reflects dull market conditions through the first quarter of 2001.
While prices and traded volumes have not improved over the low point following the steady decline through the last quarter of 2000, at least the market has stabilised. Producers have worked hard to keep offers and production realistic and buyers have, no doubt, felt that it is unlikely that Far East prices could fall further, as they are already more than competitive with comparable current African lumber and log shipments.
South Sea log prices have remained stable though demand is weak, but to some extent this is helped by lower output from Papua New Guinea and the Solomon Islands where logging volumes are low because of rainy conditions hampering operations.
The People’s Republic of China (PRC), now a major force in the log market, reports adequate stocks of the lower quality, small sized and minor species but good demand for larger diameters and prime quality.
African logs favoured
This situation will tend to favour African logs and marks a steady change in buying by PRC importers who used to favour low cost, mixed hardwood logs but who are now much more selective and willing to pay for specific quality, size and species.
Prices for the lower grades are forecast to weaken and for high grades to hold their current levels.
Recent forecasts are that, in total, more imported timber and board products will be used in upgrading and renovation than in new build, another sign of the increasing sophistication in the timber products markets in China.
It is also interesting to note that China is exporting processed timber products to Japan.
Japan’s economy
The economic difficulties in Japan continue to dominate business sentiment in the region, not assisted when the expected first quarter upturn in construction activity in Korea also failed to materialise.
The Japanese timber product markets continue to evolve steadily into increasing imports of processed products while the local primary wood processing industries gradually reduce output and capacity.
In year 2000 primary wood imports were slightly down while total volumes consumed of plywood and board products were up. MDF imports and consumption were substantially higher and appear to be slowly replacing the use of plywood.
Plywood imports are still running at around 400,000m³ per month with 60% from Indonesia and 40% from Malaysia, but prices are down and remain weak – yet another reason why Japan’s domestic plywood manufacturers are continuing to reduce output.
Japan’s imports of hardwood products in 2000 totalled just under one million m³ and of this lumber was lower at 627,000m³, while processed products increased by 13.5% to 347,000m³, Malaysia being the largest supplier, followed by Indonesia.
Mill closures
In Sabah, it is reported, a number of mills have closed recently, partly because of the current very poor market conditions and partly due to the success of the forest authorities in clamping down on illegal logging operations. Sales are being made but business is reported as very slow.
Mixed red seraya, 22 x 44mm, was sold to Japan for use as frames for concrete shuttering and, although there is a ban on exports of selangan batu in selects and better and standard and better grades, merchantable quality is still allowed for export, subject to inspection and certification by a Timber Board inspector.
Traders in the region complain that currency changes are making it even more difficult to turn a profit in the inter-region markets.
For example, Indonesian suppliers of flooring blanks for China are helped by the weakness of the rupiah and prices are now too low for Sabah mills to compete for this product. In other markets Indonesian mills are asking higher prices and are undercut by Malaysian exporters.
Monsoon rains are easing off in Indonesia enabling increased log extraction, so it is likely there will be a consequent increase in lumber and products becoming available, possibly leading to a more competitive pricing policy.
Manufacturers are still pressing the Indonesian government to increase the log export tax to bring in other regulations to halt, or at least slow, the export of logs. The tax was reduced from 200% to only 10% as part of a package of economic reforms brought in by the IMF and, ever since, has caused controversy with processors complaining this goes against the policy of encouraging higher employment in the added value sector of the industry.
Slow demand
Demand in Europe is said to be very slow with the UK and Germany particularly quiet and buyers reluctant to commit far forward.
Offer prices for dark red meranti for Europe have changed little from those reported in January; there is an increase of about 60% in asking prices as shippers make efforts to halt the decline in prices which fell right through to the end of 2000 and have yet to show signs of an upturn.
Plywood is still the weakest in the processing sector. Prices have continued to be very weak and have in some cases declined still further; thicker panels have managed to keep fairly steady but thin ply, 2.7 to 6mm has dropped in price over the past few weeks.
Panel progress
Overall panel demand in the Far East region is low and prices are under pressure – the competition between plywood and MDF and other manufactured panels keeps prices low.
Plywood mills in Korea are still on restricted working days and, as in Japan, domestic production is declining.
Log stocks are low but mills are holding off new purchases from traditional suppliers in Papua New Guinea and the Solomons in the expectation of lower prices. New Zealand softwood log producers are facing tough negotiations with Korean buyers who are said to be offering some 10% less than the original NZ asking prices.
Plywood imports are increasing and were just under one million m³ in 2000. MDF and veneer imports were sharply up while sawn lumber imports fell almost 20%. Again, the figures point to fundamental changes in the timber using sector in Korea – more imports and less of primary products.
Conclusions
The first quarter prices for Far East logs, lumber and plywood have remained weak, with plywood being the poorest performer, or ‘weakest link’ in today’s popular jargon.
There is no doubt the perceived slow down in the US eco-nomy plus the continued difficult economic situation in Japan and weak yen, have dampened down prospects for any prompt improvement in market conditions. Producers and traders have done well to hold log and lumber prices stable at the same levels as at the end of last year.
There is no margin for any price reductions and producers expect some improvement in market sentiment late in the second quarter when the European buyers must begin to replenish stock and summer brings the usual upturn in construction activity.
