Most reports from the Far East express a more optimistic outlook than there was at the start of the year.
This year, mills in China were very slow to move back into production following the New Year holiday, but are now beginning to move more steadily towards normal inputs and outputs. As TTJ has reported, particularly large volumes of Chinese plywood were shipped to Europe ahead of the introduction of the EU Timber Regulation (EUTR) and this will have reduced stocks at the manufacturers, some of which are still puzzling as to whether they can comply with the EUTR.
The Chinese authorities are trialling a so called Red Wood price index with the stated aim of reducing this speculation. This would possibly refer to internal speculation in the very few top species such as padouk where there have been large price swings.
While there are some reports that timber importers and traders in China’s main centres have a less optimistic outlook about 2013 market prospects, with a current slackening in demand for tropical log and lumber imports, this appears contrary to opinions from export countries which point to a tightening in log supply in both African and Far East regions. African exporters in particular say that Chinese demand is good and prices are firm or trending marginally higher and they are confident of positive prospects into the second half.
According to the ITTO’s MIS market bulletin, China’s imports of logs from Africa have fallen from 1.78 million m3 in 2007 to around only 800,000m3 in 2012, indicating that log export bans by Ghana, Gabon and Cameroon and volume restrictions imposed by other supply countries have had the planned results.
An overview of the trade appears to show that, although some log, lumber and plywood prices are on the rise, both export and import countries seem to have a less clearly established view of how markets will develop through 2013 and beyond. Virtually all reports and trade opinion point to the more difficult and tighter supply of logs and that, as a consequence, domestic log prices in producer countries are higher. This has not always translated into higher prices for processed timber products but currently plywood mills are managing some increases and forecast a further rise to follow.
Papua New Guinea (PNG) is a major supplier of logs to China and to Japan, generally at prices under those paid for Malaysian logs. PNG’s annual log harvest is around 2 million m3 and a recent study indicated the future potential is for up to a sustainable 3 million m3 on a rotation of around 45 years, which the government may extend to 50 years. Processed timber output remains very low and is unlikely to increase because of the vast diversity in species and distribution in the forest, plus the difficult terrain and limited infrastructure.
Nearby Solomon Islands also exports logs, up to 500,000m3 a year and, like PNG, is very low on processing. In both countries any future increase in sawmilling or other downstream conversion would best depend on plantation wood. Some NGOs in PNG are helping villagers to establish small portable sawmills that are thought to have less impact on the forest resource.
Japan appears to have moved into a higher gear. Consumer confidence is said to be more positive and the authorities are coming to grips more with post-tsunami rebuilding. Reports are that plywood imports have increased significantly in the past month or so, going some way to boost exports from Malaysia and reversing the downwards trend seen in 2012 and early months of this year.
Japanese consumption
Forecasts of consumption of wood in Japan for the current year indicate demand is largely unchanged, though trending slightly upwards. Producing countries are asking higher prices and there have been a few gains, but Japanese importers say stocks are reasonable and they are prepared to wait before making new purchases.
On the other hand, exporters believe a further small rise of around 5% for plywood is possible, taking into account that Sarawak plywood manufacturers are struggling to locate adequate log supply. Reports are that export meranti SQ and up and small logs are now US$10 higher, with kapur logs also up by US$10. No doubt domestic log prices are also rising.
Finding reliable data on lumber prices in the region is not easy; the variations in price right through 2012 were small, within 2-5%, and there are no indications that there would be any major changes into the third quarter of 2013, although mills are already asking for prices high enough to recover the recent extra log cost.
Malaysian exporters cite difficulty in establishing firm freight rates as ship-owners attempt to raise their rates in dull freight markets. Last year major shipping line Maersk indicated that because of low returns it would gradually reduce the percentage of operating dependency on ordinary freights in favour of the company’s other more profitable activities.
India continues to be very active; recent domestic log purchases have been at higher prices and wood product imports and exports are very firm and positive. India is Sarawak’s biggest buyer of logs and, ironically, India is selling sawn meranti lumber to Middle East importers at more competitive prices than some direct exports from Malaysia.
Amongst the problems raised by the EUTR, the latest ITTO MIS reports of India’s concern over the substantial exports of handicrafts that provide the main source of income for the many thousands of people in small craft workshops and homes. Identifying timber sources in this diverse, informal, but very important wood-using sector is an insurmountable task and cutting off exports to the European market would cause hardship and poverty to many individuals and small village industries. As India and China are target markets for EU exports of many products, it is to be hoped that the effects of the EUTR will not trigger some form of countervailing import regulations in the future.
Reports from Indonesia are of good levels of business. After many years of lower prices Indonesian export plywood prices have become equal to Malaysian on world markets. Major attention is reported on the extent of exploration for minerals and any subsequent development that could be permitted in forests and forest reserves. Indonesia has an active programme for plantation wood and, while not always meeting annual planting targets, the government is already considering whether to allow export of plantation logs.
In the market for Far East timber, Europe continues very slow and importers are well stocked and not minded to buy forward. The Middle East is strong, with direct business becoming more concentrated on a small number of importer destinations which then distribute to merchants through the region. Trade within the ASEAN countries is at good levels and prices appear stable with perhaps an upwards trend.
