UK prices may not have moved too much, but several contacts this week reported healthy demand for Far East hardwood plywood. At the same time, buyers are reportedly encountering little difficulty in sourcing the material they need; plywood of 18mm thickness is said to have run low towards the end of last year, for instance, but UK supplies have subsequently been bolstered by the arrival of several vessels.
A decent level of business has been reported for January, with a couple of contacts going as far as to describe trade in Far East hardwood plywood as ‘buoyant’ during the early weeks of the new year. ‘I don’t think that there are the huge stocks of Far East plywood in this country that there once were,’ said one.
Logs over plywood
Many Far East plywood mills are still clearly unhappy with the prices paid for their material. This has led to logs often being sold for more of a profit than the finished plywood product, with India, Taiwan and, notably, China emerging as keen log buyers. Should log sales remain an important factor, it is suggested that plywood production will suffer and prices should increase.
The Indo96 list price for BB/CC material from Indonesia and Malaysia is put generally at -25% or -26%, although some sources insisted this week that business was also being concluded at -21%. One contact said: ‘The -26% level is still there but one major mill is sticking to -23% for March/April shipment. The market may be used to low prices but there is a feeling that the low prices won’t be around for too much longer.’
US economy
Turning to plywood prices in general, one source ventured: ‘People may be concerned about the US economy but the willingness to sell plywood at below cost is not there any more and this will impact on the market in due course. You can only stop the barrel from leaking for so long.’
Another added: ‘We need to get prices up because people are surviving on stupid margins. I think there is more of a chance of achieving that this year than last.’
If a certain air of optimism pervaded discussion of the Far East hardwood plywood market this week, talk of the Brazilian hardwood plywood market was dominated by concerns over quality. ‘A drop in prices has led to a drop in quality,’ according to one importer.
‘Merchants over here are getting fed up with the quality and are switching instead to Far East material.’ As a result, he added, ‘there is too much virola over here at the moment’. One suggestion is that lower grade material is having to be used in plywood production ‘because the higher grade logs are going elsewhere’.
According to many sources this week, elliottii pine plywood from Brazil is virtually the only softwood plywood to be seen in volume in the UK at the moment – largely as a result of its low price. Latest reports suggest a level of US$210-225 fom for 18mm CC repaired material.
Two large vessels had been expected to top up UK supplies of elliottii around Christmas but, in the event, they were running several weeks behind schedule. The effect of this new material on UK price levels would depend on ‘how much people have got on board that is unsold’, according to an importer. With material still available in the market place, however, nobody is expecting elliottii prices to firm in the near term.
Rising costs
Brazil’s elliottii pine plywood producers are having to contend with rising log and glue costs, and yet one contact reported what he described as ‘worrying’ rumours that some mills were intending to increase output still further. From north Brazil and Guyana, meanwhile, there are reports of a significant shortage of raw material because of rain.
Back at home, the Timber Trade Federation (TTF) and Flat Roofing Alliance joined forces late last year to clarify the situation regarding use of Brazilian elliottii pine plywood. The TTF subsequently issued a statement to members saying that, if plywood is used in structural applications in accordance with BS 5268 part 2, then only approved types can be used. And it adds that, to the TTF’s knowledge, very few of Brazil’s elliottii pine plywood producers have such approval.
North American plywood prices have fallen once again but they remain uncompetitive alongside those for Brazilian elliottii pine plywood.
Sturdifloor is down in the range US$435-450 per thousand bd ft cif while CDX sheathing trailed behind at its customary distance on US$415-430.
According to one source, the majority of UK buyers are ‘still not willing to pay the £40 differential to elliottii’ and so purchases of North American plywood are generally restricted to satisfying special needs. Another offered the more blunt comment: ‘North American plywood is the cheapest it has been for some time, but we are still being trashed by Brazilian plywood.’
With the US economy showing real signs of coming off the boil, some are predicting tough times ahead for the domestic plywood production sector. Others, however, are quick to emphasise the astounding growth achieved in recent years, with one reportedly saying: ‘The US is coming off a great economy to a good economy. House starts are still high and there is still a big demand for timber products.’
Strong buyer
The US has emerged over recent months as a strong buyer of both Baltic and Russian plywood, leading one expert to suggest: ‘US plywood is expensive at the moment [compared with the competition] and so purchasers are looking elsewhere for their material.’ UK demand for Baltic and Russian plywood was described as more steady although volumes have shown some improvement over the same period last year.
Prices of Baltic plywood are said to be ‘firming’ across the range, with increases of between 3-5% since the beginning of January.
Temperatures in the region have not been particularly low and so the resultant boggy forest conditions have created logging difficulties in some areas, which in turn have placed pressure on the timber supply pipeline. Delivery times to the UK are said to have gone out from the normal two weeks or so to ‘three to four weeks’, according to one source.
Russian prices
The adjective ‘firm’ was also applied to Russian prices, with one leading mill having imposed a blanket 5% increase on January 1. The move met with resistance but the producer ‘still has a full order book’, TTJ was told this week. More firming in prices is anticipated given that Russian prices are at low levels in real terms compared with several years ago and that the mills’ raw materials costs are continuing to rise.
The steady upward drift in Russian plywood prices has been assisted by shortages in certain thicknesses, notably 4mm and 15mm.
In Finland, meanwhile, domestic spruce plywood production is said to be ‘in good shape’ with firm prices, good order books and strong demand – particularly from the Netherlands. Requirements for Finnish birch plywood are ‘steady’, with some mills very busy through to the winter holidays. Demand is across the board ‘with all the markets buying’, according to one source.
It was also confirmed that all machinery has now been installed and trials have begun on Koskisen Oy‘s plywood development at Jarvela in Finland. The facility is on course to start production of 1800x4000mm panels by April this year, a spokesperson told TTJ.
In Estonia, meanwhile, production was due to start around the turn of the year at a new birch plywood and veneer mill set up by two domestic forest product companies – AS Forestex and AS Sylvester – and Schauman Wood Oy. FSS Plywood AS at Otepaa will have an annual capacity of 20,000m³ but could expand production to 50,000m³.
Falling OSB price
Looking at the wider picture, the competitive position of plywood is undoubtedly being affected by the falling OSB price. As additional OSB production capacity continues to come on stream, notably in the US, the market for this material has become difficult, to say the least, with several contacts suggesting that imported materials from the Continent had continued to play a significant role in pulling down prices in the UK at a time when costs were increasing. Rising round timber prices were having a ‘devastating effect on the cost base’, he said.
One leading producer pointed to price drops totalling around 10% over the past three months but believed that current OSB price levels in the UK had probably bottomed out ‘because everybody has reached the pain threshold’.
He added: ‘OSB is still the right product and capacity will get soaked up at some point. The low price will increase and quicken the substitution factor in relation to plywood – and I mean all plywoods, not just construction plywoods.’
The same contact suggested 2001 would probably be a good year for OSB in terms of increased use, but a poor one for profitability. The main frustration, he said, was that new entrants were dragging down a market which others had worked hard to build. In a bid to improve the situation, the European Panel Federation (EPF) is understood to be drawing together a marketing initiative for OSB. At its general assembly in Brussels late last year, EPF reported a 16% rise in OSB production in the first half of last year. The organisation estimated that capacity would expand by 64% over the next few years.
The current downturn in OSB market prospects has helped to prompt a re-think at Kronospan, which had been planning a 300,000m³ per year production facility for its Chirk factory in North Wales. A senior spokesperson for the company confirmed this week that the project had been put on the back burner, although he stressed that the notion of introducing OSB capacity at Chirk was not being dropped completely.
Flexible approach
‘Raw material costs and market potential means the UK is not the place to invest in OSB at the moment,’ he said. ‘We will always keep a flexible approach to capital investment.’
Group investment in the OSB sector was more likely to be concentrated in eastern European countries such as Poland, Bulgaria and possibly the Czech Republic, Kronospan’s spokesperson added.
