No-one expected a massive upsurge in business after the usual slow period of the European holiday season, though there were some expectations that demand might strengthen as importers would normally begin to cover for their winter stocks. However, in the event there was no discernable sign of any improvement at all this autumn in the dull market conditions which have held through the year so far.

As we noted in August, meranti log prices were moving around US$5/m3 higher, and that is where they have stayed. Keruing log prices had dropped US$10/m3 and have since regained this but not moved any higher. Selangan batu held its US$5/m3 rise and has not changed. These minor adjustments are scarcely large enough to show on the ITTO graph.

In spite of the very tight log supply in Peninsula Malaysia, prices for logs for domestic consumption have remained unchanged at close to or even higher than current export prices for Sarawak logs.

The stronger Japanese yen has had two contrasting effects on the internal log trade as the Japanese plywood manufacturers take this as a reason to offer lower prices and have, in fact, pressed domestic traded log prices down by Y50 or more.

Price rises

On the other hand, log producers see this as an opportunity to raise export prices by US$1-2, not with much hope of succeeding but to caution buyers that there is no downside to current levels. Log prices are firm and likely to continue unchanged or marginally higher through the fourth quarter.

China continues to grow as a major force in importing and processing all types of wood products and now purchases over 60% of West African okoume logs as well as many other African species. It is reported there is a hefty overstock of logs in China’s main ports of several species including padouk, andoung, ebiara, niove and ekop, to the extent that buyers for China are asking loggers to reduce or even stop production of logs in these species until the overstock has been cleared. Buyers are also continuing their efforts to force down the price of okoume logs destined for China and there are said to be delays in sending ships to Gabon to load existing contracts in the hopes that in the meantime a price reduction can be negotiated. With the current log supply situation in South-east Asia and the overall firm price levels, it seems likely that producers here and in West Africa will push prices upwards rather than concede any reduction.

&#8220China is fast becoming a major force in the furniture export markets of the world”

Malaysian efforts

Malaysia continues the strong push to further processed exports, and furniture and wood products exports increased in value through the first half of the year. This is very creditable in the light of the 2002 ITTO/ International Trade Centre report on tropical timber products which found that export selling prices for products, components and furniture fell as production increased, meaning manufacturers have to pedal harder to stay in the same place.

China is fast becoming a major force in the furniture export markets of the world. Exports in 2002 increased by over 35% year on year; the wooden furniture component of this showed growth of 47% over the previous year. At the same time imports of furniture went down by some 5%.

As with logs, sawn lumber prices have remained remarkably stable over the third quarter. The competition between meranti and sapele in European markets seems to have been running in favour of meranti. There is a heavy stock of sawn sapele lumber in West African ports and some mills have been forced to reduce production. Orders for sapele from some European buyers have been cancelled because of low sales in the major markets in Spain, France and Germany. African producers are hoping that the increased freight rates from South-east Asia, expected to come into force in November and December, will tip the price balance back to sapele and so far have been able to avoid substantial price cuts.

Poor export prospects

For exporters, there seem to be very poor prospects for sales to the Netherlands, which is still wrestling with a depressed economy. Buyers are more cautious than ever and, with wages fixed through 2004, it is unlikely that housing and furniture sales will do more than hold steady even though the Netherlands government has promised to fund some construction projects.

Plywood prices in the Asian region have been relatively unchanged. New Japanese standards have held back imports which has given local Japanese manufacturers a much needed boost in sales and kept price levels very firm. Other panel products markets have been active, with prices tending towards slight increases. There is a shortage of some thin MDF panels, possibly caused by manufacturers’ reluctance to make thin MDF as this results in lower production volumes.

All markets are dull, some are really poor and instead of an expected upturn in demand into the fourth quarter many have slowed even further. France, Spain and Germany are weaker than hoped while the UK, with its stronger economy, has managed to show a steady consumption level. Producers’ asking prices are still quite firm and supply is adequate but not excessive, with the exception of sapele.