Summary
• Asian log and lumber business is more stable than the value-added sector.
• Europe’s hardwood stocks are low.
• West African exporters are picking up orders lost by Asia.
• The Asian plywood market is still down.
• India’s timber importers are more active.

As asian timber markets stand right now it isn’t easy to find any positive sentiments from either producers and exporters or from importers and merchants. While the old adage that no news is good news might be read as market stability, the downside is that the present stable conditions could also be seen as stagnation.

Is there any good news? Answer, not at the moment and most timber traders see the outlook as at best unchanged over the next few months.

A significant pointer could be the US statistics on imports of tropical hardwoods, reported to be around half of last year’s, but more disappointing for exporting countries is that average prices declined even more, by some 60%.

Looking first at the Far East producers, the Malaysian government has long encouraged the timber sector to move further downstream from just processed parts and components and on into furniture manufacture. This has been successful and statistics show that exports of primary forest products have steadily declined over the past 15 years or so to less than l% of total exports, while manufactured goods, including furniture, increased strongly.

Decline in furniture exports

For furniture, this of course depended on markets being available and the US has been a major target for Malaysia, China and the more recent furniture producer, Vietnam. US consumer demand has fallen away, joining Europe and the UK in the decline in the furniture sector as a whole. Vietnam producers say they are now seeking to diversify into what they call non-traditional markets, a difficult process and with fierce competition from China and Malaysia.

Exports of furniture from Brazil have slumped, which may leave a small window of opportunity for the other global players.

As reported, the global downturn did hit manufactured value-added timber products rather hard and, although log and lumber export business also fell markedly, this sector was able to take more drastic and immediate action to cut back on production, and what stability there is in the timber trade seems now to be led by log and lumber business.

Here, prices have changed very little through the third quarter and into the final months of this year. For both Malaysia and Indonesia the reported export prices for logs and sawn lumber are at the most between US$2-5 lower than in mid-year. It is likely that the statistics don’t in all cases entirely reflect the actual net selling prices finalised after negotiation but, undoubtedly, log prices have held remarkably stable over the past six months and there are no forecasts of any real change in the first quarter of 2010.

Potential shortages

At the same time, at AHEC’s European convention in Athens in October, reported by ITTO in the TTM bulletin, some delegates did express fears that any strong revival in demand could come up against shortages of the more popular tropical hardwood timbers.

This is borne out by comments to TTJ from West African exporters who said that, although trade with European buyers is slow, they have been picking up some increased orders due to the high prices and low availability of Far East meranti/serayah.

Some trade to Middle East countries has been affected by the global downturn and, according to exporters, Dubai has been the hardest hit. Malaysian timber exports are possibly the biggest losers in what has long been their traditional market for the lower qualities and mixed timbers. Conversely, some West African exporters have picked up increased orders to the Middle East in the past few months. It is not clear whether this is due to price considerations or preferences in species and grades.

No plywood recovery

Plywood production and export in both Indonesia and Malaysia have not recovered from the earlier problems of overproduction and drastically lower demand from importing countries. The effects of the massive increase in plywood production in China cannot be forgotten either, although this growth has slowed in recent months.

Again the US market for hardwood plywood may have led the slump in demand but just as significant for Indonesian and Malaysian exporters is the continued depressed market in Japan. This has not been helped by the fluctuations of these currencies against the US dollar that Japanese importers and merchants feel have made imports more expensive through the past few months.

Japanese domestic production has been cut back but the new government has put a hold on some publicly-funded construction projects and demand for concrete panel shuttering in particular is low and prices under pressure. On the more positive side, it is possible that Japan has moved out of recession and may see economic growth return.

India buoyant

The brightest picture is India where the economy is surging ahead and the timber import industries are very active. The global tendency is to remove or reduce tariffs but India has just slapped an import duty on MDF, no doubt to protect local industry.

Business for Europe remains at a low level and no-one is expecting a sudden revival in demand. The Netherlands has placed some emphasis on assistance for the building and construction industries, while other countries focused on car manufacturers.

European timber stocks are said still to be very low but merchants seem content to manage until signs of real improvements in the economic climate start to stimulate the building industries. This does not appear likely until at least mid-2010 and this situation does tend to favour West African producer countries with the shorter lead and shipping times able to fill any shortages much more quickly than Far East mills.

Outlook – no change in the short term.