OSB has undergone such a rapid turnround in fortunes that, as one leading supplier joked, “we are actually insisting that our customers say ‘please’ at the moment”. From the lows of July, OSB prices have risen dramatically over the ensuing month and, it is believed, continuing pressure could lead to further increases of around 20% in the short term. “We see prices continuing to rise into October and possibly through to November,” the supplier ventured. “Some people even see prices going strong in the US right through the winter.”
But rather than get too carried away with the sudden price surge, the same contact estimated that prices would have to increase by a further 30-40% in order to provide a return on investment.
The US has undoubtedly provided the engine room for this recovery. Until recently OSB was trading in the US “at prices higher than those for plywood”, prompting many European producers to ship any spare production across the Atlantic. OSB demand in Germany was described this week as surprisingly strong while the UK order picture was said to have been complicated by the large number of buyers who normally opted for Continental-made material but who are now finding that some suppliers are preferring to commit the volume to those customers in the US willing to pay top dollar. “UK importers could find themselves short of board,” it was suggested this week.
Loyal service
Senior spokesmen for domestic OSB suppliers underlined their intention to provide ongoing continuity of service to their regular UK customers despite the high prices on offer in the US.
In the past few weeks, plywood prices in the US have clambered back above OSB even though prices of the latter have shown no sign of running out of steam. With Sturdifloor recently fetching more than US$645 per thousand bd ft, the increases in plywood prices have been attributed to a combination of the surge in US housebuilding, a reduction in plywood production and long order files. The downstream effect of these high domestic prices has been to reduce US plywood exports to Europe to a trickle. “Nothing of any note has come to Europe for a long time – except perhaps the odd speciality item,” said one regional expert.
Brazilian suppliers of certified elliottii pine plywood have been among those to take advantage of the price boom in the US. With large volumes of elliottii thus taken off the wider market, one expert commented: “There is no reason for elliottii prices to be so low in Europe. I would expect them to find a higher level and recover some of what they have lost recently on currency exchange.”
Elliottii pine
The UK is understood to hold reasonable supplies of elliottii pine plywood and to have been relatively inactive in the market during the latter part of the summer. Looking at the general supply situation out of Brazil, a number of UK traders reported that customs documentation hold-ups and more stringent checks in some parts of the country had led to delays and to some consignments “missing the boat” – a situation exacerbated by a dispute involving truckers. “This has evened out supply and enabled people to lose some of their stock more quickly,” TTJ was told. Some contacts were even talking this week about Brazilian hardwood plywood becoming short in September owing to the supply problems on the other side of the Atlantic.
Plywood demand beached
This does not mean to say, of course, that plywood demand in the UK has been anything but lacklustre during the second half of the summer. “Since the sun started shining, everybody has been down the beach,” was the resigned comment from one industry expert. “There is a general malaise in panel products overall and the so-called building boom has not created any momentum for plywood sales.”
There is also widespread concern that UK plywood prices are nowhere near a reflection of replacement costs, partly because of “importers battling for market share”. One leading plywood player observed: “If plywood prices don’t start going up, the situation cannot be sustained for too long and the banks will start sitting up and taking notice.”
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“At some stage Indonesia is going to have to tackle its illegal logging problem and prices will have to increase – the only question is when” |
Market sentiment has also been affected by news that some key UK consumers – including Travis Perkins and Jewsons – have decided to suspend purchases of Indonesian rainforest plywood due to ongoing concerns over its legality. Travis Perkins based its decision on initial audit feedback which raised questions over whether all of the timber could be proved to have come from legal sources.
Mixed reaction
Industry reaction to these moves has been mixed. Some have welcomed the stand as a positive step towards introducing greater professionalism into the worldwide timber trade. One commented: “People are holding their breath and hoping this is going to go away – but it’s not going away. The only way out of this is for people to buy from mills with their own concessions and with their own stringent auditing procedures.” Another observed: “It has focused minds on helping mills in the Far East down the certification path.”
Others in the trade have maintained that such actions were unlikely to be mirrored throughout the timber chain. One source observed: “These Rolls Royce companies have to dot all the ‘is’ and cross all the ‘ts’. Independent merchants still want Far East hardwood plywood but the question is whether people will be prepared to pay more for certification.”
International Plywood has decided to test the market by placing an order for 500m3 of FSC plywood from Tawau Plywood Manufacturing Co of Sabah, part of Innoprise Corp. The consignment is expected to sell at around 20-25% above the normal market price and so, said the company, would provide an interesting indication as to how much extra customers were prepared to pay for environmental principles.
One trader spoke for many when saying: “At some stage, Indonesia is going to have to tackle its illegal logging problem and prices will have to increase – the only question is when.”
The debate over Far East hardwood plywood has helped to produce some significant weakening in the Indo 96 list price from around -23/-25 to nearer -28/-29. Some positive benefit has been reported for Brazilian hardwood plywood – not least because of an estimated 25% price differential in favour of the South American mat-erial. However, attempts to introduce relatively small price increases on Brazilian plywood are being hampered, it was claimed this week, by the “dumping” of Far East plywood already in the supply pipeline of which there are said to be “thousands of cubic metres sloshing around from some mills”.
At the same time, many traders argued that Brazilian hardwood plywood could not replace Far East material in either quality or quantity terms.
Birch plywood mills in Finland, meanwhile, have returned from their holiday breaks to thinnish order books, with lead times said to be around three weeks rather than the more normal six weeks for this time of year. Prices have remained relatively stable in the face of weak demand from Europe in general.
Spruce production
Finland’s spruce mills have also witnessed undramatic sales volumes even though, as one operator pointed out, the country is well-placed to attract environmentally-conscious customers because of its efforts relating both to certification and CE marking. Prices have been reasonably stable throughout most of the year due to lacklustre global demand and lead times are currently around the norm of three weeks.
Plywood exports from the Baltic states and Russia have been particularly thin during July and August, resulting in an extension of the summer maintenance shutdown for at least one of the region’s mills. According to one expert, “the UK market is already oversupplied and demand is low”, leaving only the hope that orders will pick up in early September once a definitive line is drawn under the holiday season.
