Uncertainty over the scope and timing of EU anti-dumping duties has helped to create “a state of paralysis” in the UK plywood market, TTJ was told this week.
While latest figures confirm that Chinese material commanded a more than 40% share of UK imports of hardwood plywood in the early months of this year, a large proportion of buyers in this country are now reportedly awaiting further details of the measures to be implemented by the EU before placing further business. One contact declared: “We are not shipping any more Chinese plywood until this is resolved.”
Described as “a sword of Damacles” hanging over the Chinese plywood export market, it is unclear whether the EU is confining its anti-dumping duty review solely to redwood-faced poplar plywood or to a wider basket of Chinese plywood products. It is also not known at what point any duty changes will be introduced: the majority of plywood industry contacts believe implementation will come no earlier than November this year although rumours persist that new duties could be in place before the end of the summer.
To complicate matters still further, it has been confirmed that export incentives on Chinese plywood have been slashed from 11% to 5% with effect from July 1 – the very date on which, at the time of writing, importers of Chinese plywood were expecting to sustain substantial increases in container freight rates. On their own, changes to the export incentives and to freight rates would not wipe out the competitive advantage of Chinese plywood. However, the possible addition of the anti-dumping duty levels currently being mentioned “would take it well over the price of Malaysian and Brazilian material”, an importer confirmed.
Whereas orders for Chinese plywood had remained consistently high until only recently, the last few weeks have seen customers “turn away from Chinese material” in response to “the very strong level of uncertainty over what will happen to exports”. At present, stocks in the UK are generally deemed to be adequate to meet current demand levels.
Given these comments, UK import figures for June should make interesting reading. However, latest statistics from independent analyst timbertrends confirm the growing dominance of Chinese and Malaysian imports in the first four months of this year. Imports from China almost tripled to 120,900m3 in January-April compared to the same period last year, while Malaysian imports climbed around 60% to 76,200m3. Imports from Brazil fell 14% to 33,200m3 while those from Indonesia plummeted a further 57% to 8,600m3, leaving the latter with a sub-3% share of the UK hardwood plywood import market.
In general, imports from Indonesia are now focused on very specific grades and sizes rather than on the bulk items of the past. Its supporters in the UK fear volumes entering this market may continue to fall, especially if the EU “fudges” the issue of anti-dumping duties or allows any new rulings to be circumvented. On a more positive note, one experienced operator identified “just a few signs” of renewed interest in Indonesian plywood – as well as in Malaysian material – in response to concerns over quality/technical attributes and shipment delays relating to Chinese ply.
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“There is not much scope for new business or adding on to existing orders” |
Malaysian plywood
As for Malaysian plywood, stocks in the UK are currently more than adequate while lead times from the mills are quite short. Faced by high log prices and elevated freight rates, producers have nevertheless resisted any weakening of prices. Of course, any disruption to Chinese supplies could prompt a potentially swift reduction in UK stocks of Malaysian plywood.
The strength of the real in relation to the US dollar is deterring many Brazilian producers from engaging in export business. Elliottii pine plywood prices have gained more than US$20 per m3 over the last couple of months while Brazilian hardwood plywood prices have risen by as much as US$30 over the same period to carry them close to those of Malaysian material. Meanwhile, container shipment rates are understood to have risen by more than US$500 per box.
As reported recently, the shortage of birch logs in Finland has become so severe that at least one leading plywood producer has been forced into a series of temporary staff layoffs. With emerging logs “already spoken for”, buyers of Finnish plywood can expect no improvement in product availability before the end of this year. And if next winter is as mild as the previous one, shortages and long lead times are inevitable.
According to a UK spokesperson for a leading Finnish plywood producer, the company is allocating volumes and is quoting production times as far ahead as November or even December for new orders. Against this backdrop, price increases for the second half of this year are between 10-20% depending on the specification, with thinner boards generally towards the top end of this range.
Spruce plywood
Spruce plywood from Finland is slightly easier to source than the birch equivalent – “but is still tight”, TTJ was assured this week. According to one producer spokesperson, his own company “has orders placed through to the end of the third quarter” and is in a position to sell whatever becomes available. Second-half 2007 price increases on spruce plywood are thought to average around 5%.
Availability of birch plywood from other parts of northern Europe is also proving difficult, with shortages emerging in the UK for certain grades and specifications. Producers in Russia, for example, are operating on extended delivery times of, typically, six to 10 weeks. Despite a slowing of the upward price momentum noted in our previous plywood report, there is no hint of any near-term price reductions or of any improvement in availability thanks to: strong demand both domestically and across leading export markets; raw material shortages; and looming maintenance-related shutdowns.
Emboldened by these bullish market conditions, mills are continuing to ask for offers rather than coming forward with their own price lists. According to several contacts, evidence of missing deliveries implies already-bought material is being re-directed to the highest bidder.
Competition for logs in northern Europe has also informed the market strategy of Latvian birch plywood producers, some of whom are working on allocation and are sold out for the remainder of the year. “There is not much scope for new business or adding on to existing orders,” one contact said. Depending on the specification, price increases of between 10-30% have been slated for the third quarter of this year.
Looking at the plywood market overall and the preponderance of demand over supply, the following key message is ringing out from operators in this sector: “Buy now – because tomorrow it’s going to cost more.”
