It appears nothing has disturbed the quiet trading conditions which have prevailed in the Far East timber industry since the beginning of the fourth quarter of 2001, and trade is reported still as ‘quiet’ to ‘very quiet.’
Prices generally have struggled – with little success – to hold back a slow decline over the past three months. However, there are now some signs of an upturn in prices for dark red meranti (DRM) lumber as buyers in Netherlands have perceived – quite rightly – that DRM prices had reached the bottom and are now moving up, an increase of some 5% in the past week or two, around US$30 per ton.
After strong initial purchases, the price increase has met some buyer resistance but it seems likely that the higher prices will be established and have to be paid to have any chance of finding volume and specification over the next four to six weeks.
Monsoon rains
Reasons for this include a relative shortage in supply caused in part by the heavy monsoon rains which have led to quite severe flooding in some areas in Malaysia and Indonesia. Log supplies are tight, becoming more expensive and producers have little or no inventory of logs or lumber.
The usual low price offers to raise funds in front of the Lunar New Year holiday and bonus payments for workers have not materialised this year and this impending halt in production will further reduce the available volumes.
Buyers have been able to benefit from low priced container freight over the past month or two when rates had to be cut virtually in half for Netherlands destinations.
Current Far East log export prices are remarkably close to the levels of mid-2001. Meranti Sq and up grade is identical, while small and super small logs are now US$5/m³ lower. Keruing logs are up by the same amount and kapur and selangan batu are unchanged.
Latterly, there is no doubt the halt in exports of logs from Indonesia has helped to stabilise export prices from Far East and West African sources. Tighter controls on logging leading to higher prices of logs for domestic processing in both Peninsular Malaysia and Sabah have also contributed to price stability.
For Indonesia, where most processing mills still currently face a very difficult log supply problem, the local prices for logs are almost double the level of six months back.
Log company closures
In Sarawak, most of the major logging companies have cut back on production volumes and small loggers have closed down because, for many species – and especially meranti – log prices are below the cost of logging.
Keruing export log prices are up by around 10%. However, this is just a return to the same level as in the first half of last year and scarcely a bonanza for hard pressed loggers. Sarawak producers are allowed a quota of 40% of log production for export.
The People’s Republic of China is the dominant force in the Far East log market and forecasts are of increased log imports in 2002.
China’s domestic log supply declined by 10% last year and will fall again this year leading to increased imports needed to fill the gap between supply and demand.
Building activity in housing, office and industry sectors all increased by more than 30% last year and similar growth is confidently expected for 2002. First hand buyers are responding to demands for more varied and sophisticated products from increasingly choosy and affluent consumers.
An example of this is that the previous – almost unlimited – demand from Chinese consumers for kempas flooring now finds no market at all as consumers are now asking for more fancy and exotic species even from countries such as Africa and South America.
Russian conifers
Papua New Guinea log exports to China are fairly regular because of their lower prices but the major imports are of conifers from Russia which make up more than 50% of the total of some 15 – 16 million m³ imported last year.
In round figures 1.3 million m³ came from Malaysia, 1 million from Gabon and another 1 million m³ from Indonesia.
There are forecasts of increased competition leading to lower prices for the expected overall increase in log imports and to make up for the Indonesian share which will need to be replaced from elsewhere, at least for the next few months.
With the present state of log supply sources it would seem doubtful that the tropical log supplying countries would be willing to reduce prices, so that possibly the main competition will be for the conifer logs between Russia and New Zealand.
With the continually depressed log purchases in the past few years from Korea and Taiwan, New Zealand has had to develop other markets and India and China would be prime targets for the New Zealand radiata pine logs.
The ITTO price index graph reinforces TTJ’s last Far East market report (TTJ November 3, 2001) which stressed the halt in the price decline for DRM and a slight upwards trend. The current prices are once again slightly up and set to remain firm for the first quarter, as mentioned above.
There is already a shortage in supply of shorts and strips in meranti and merbau.
In contrast and in spite of very firm log prices, keruing to the UK specification of 16ft and longer allowing 10 – 15% 12 – 15ft is currently on offer at US$65 per ton net fob less than the December 2001 price, and yet still no takers.
Serayah sawnwood has recovered an average around US$5/m³ of the US$10/m³ fall in price which occurred in the first half of 2001, while most other species have just managed to hold firm throughout the last quarter and on into January.
Here again, volume availability is restricted by the general tight log supply and is not likely to improve through the next month to six weeks. Prices seem set to continue very firm or trend gently upwards.
Japanese economy
Japan has once again indicated lower imports of many timber products due mainly to the lower housing starts.
The economy is still sluggish despite numerous government financial initiatives. The weak yen is a constant drawback to any sudden return to full recovery and the Japanese consumers remain cautious, preferring, as usual, to hold onto their savings.
The plywood sector once more showed no signs of having moved out of the very depressed market which has been in place now for more than a year. It is reported that manufacturers in Malaysia and Indonesia presently are more optimistic than for some time with the US market slightly better and even European buyers showing more interest. It has to be said that current prices are substantially lower than January 2001. Indonesian 2.7 mm thickness is about US$60 m³ lower, 3mm is US$45 lower and 6mm US$20 – 30 less. Malaysian prices show similar price falls, though their thicker ply is currently almost the same as a year ago.
Perhaps, as with the sawn lumber market, plywood prices have reached a low point and canny buyers might well be poised to move in at what must be bargain basement levels.
In other Far East board products, MDF and particle boards, export prices are still very low while domestic prices for these products in both Malaysia and Indonesia are much higher – substantially higher in the case of Indonesia.
High domestic prices
Sometimes, European buyers may fail to remember that these days timber products in the domestic markets in the Far East producing countries are at higher prices than those obtained for exports.
Plywood export prices must surely be at or below the cost of production and the steadily higher costs of logging are, without doubt, just one reason why timber processors are finding intense difficulty in reaching break-even, not only in the Far East but also for producers in Africa.
Related Files
Tropical Hardwood Log FOB Price Trends 2001
Meranti and Keruing Log FOB Price Trends 2001
Tropical Plywood FOB Price Trends 2001
Dark Red Meranti Sel and Btr 25mm FOB Price Trends 2001
