Summary
¦ With the exception of rubberwood, price increases are small.
¦ Malaysian producers report a shortage of logs.
¦ China is expected to have problems finding a replacement for Gabonese okoumé peeler logs.
Although indications are that basic timber prices in the Asia-Pacific region are on the increase, the actual month-to-month changes are in reality quite small, amounting to around US$3-5/m³ better than in May/June. The exception is rubberwood which is some US$10/m³ higher.
Mid-year is usually a good time to reflect on progress, but on this occasion there is little to report in the way of real development in terms of either price or volume. For exporters there is still some way to go to return prices to where they were at the beginning of the global trade downturn in the final months of 2008.
In real terms, tropical hardwood timber is possibly the only basic multi-purpose raw material that has failed to keep pace with inflation and still less to achieve increases in sales value commensurate with other construction materials such as steel, cement, and bricks.
To restore prices to the market level of two years ago prices for SQ and up DRM logs would need to rise by as much as US$70-80/m³ and around US$50/m³ for SQ and up keruing. Sawn lumber has managed to reduce the gap and DRM lumber now stands an average of only around US$30/m³ lower than the pre-downturn price. Plywood prices are now on the increase after a fairly long period of stagnation but still need to regain up to an average of US$50/m³.
Indian growth
Currently the best placed consumer country is India, where forecasts of annual growth around 17% with a target of 20% far outstrip the slow recovery in European markets. However, tariffs mean that almost all imports into India are in log form, a situation that is unlikely to change in the foreseeable future.
Malaysia and Indonesia’s export policies appear to concentrate even more firmly on processed products, especially indoor and outdoor furniture and components. They are being chased now by Vietnam, as yet a much smaller player in the market but growing fast and helped by very low labour and infrastructure costs, although constrained by the need to import most of its raw timber.
Malaysian producers report a shortage of logs, and domestic log prices are higher by US$8-10/m³. China has had to review imports of softwood logs from Russia as a result of the recent big increase in export taxes, and is now increasing intake of sawn lumber. In view of the log export ban in Gabon, it is likely China will have difficulty in replacing the high volume of okoumé peeler logs that are no longer available. There are no single replacement species available in volume in the Asia-Pacific region. Papua New Guinea is now the largest log exporter in the region but has only a limited range of log species suitable for peeling.
Japanese market
On the Japanese market PNG premier species are now above the price for meranti. PNG could be in an interesting position in regard to illegal versus legal timber supply as, unlike virtually all other producer countries, the land and the forests were never alienated and therefore belong to the people and not to the government. To allow logging, the landowners have to give permission and the government then acts on their behalf to administer any concessions granted to loggers. Technically speaking, while it may not be ‘sustainable’, if the landowners allow timber to be taken perhaps it could not be held to be illegal since they are the rightful owners.
As has been widely reported, the European Parliament has passed legislation agreeing the draft law on prohibition of imports of illegal timber and timber products into EU countries and the law is scheduled to come into effect in 2012. Methods for inspecting, monitoring and regulating are not yet known but clearly it won’t be easy to examine every component of every item, for example, of upholstered furniture. Sanctions will be imposed but so far it seems as if it will be the primary importer that will be held responsible, giving producer countries a strong incentive to prioritise certification. It is hoped the EU law, having outlawed and closed off imports of lower cost illegal timber products into Europe, will allow the resulting more restricted market to go some way towards pushing up prices sufficiently to amortise the costs involved in certification.
Sawn lumber prices are firm and on a rising trend. The high freight costs haven’t helped Asia-Pacific exporters to compete against the shorter sea voyages and faster turnaround available to African producers, but longer lead times for African lumber have now reduced this disadvantage.
Market prospects for the European market are at best only moderate and it is certain there is no return to speculative bulk buying as importers everywhere operate on low stocks and smaller-volume purchases. Prices are likely to continue on a slowly rising trend through into the fourth quarter.
