The UK plywood market is failing to generate any sustained momentum, prompting producers in the Far East and Brazil to warn their agents of further production curtailments if prices do not show any improvement. Meanwhile, despondency continues to envelop an OSB sector dominated by low-price offers and a battle for market share.
Prices for Far East plywood appear to have weakened slightly over the past few weeks and many loggers have suspended operations because their activities are no longer profitable. Many mills are thought to be operating at well below normal productivity levels while some have shut down altogether.
Further ‘serious’ decisions regarding production are anticipated given the current lacklustre state of the trade. Shipping lines are also feeling the impact. Currency movements are having a major impact on the Far East plywood trade at a time when some importers and agents consider the fundamentals to be indicating higher prices.
Producers in Brazil are also worried by the lower prices commanded by their products and by the apparent dearth in demand from most markets.
Shipping delays
Meanwhile, buyers are complaining of delays in shipments. There has been a further weakening in the price of elliottii pine plywood but not a lot of forward buying of late. According to one source, this has resulted in certain specifications – particularly 12mm – becoming less than abundant, although most contacts stopped short of suggesting a scarcity.
One senior contact wondered why traders persisted with the current approach to plywood and bargain basement prices. ‘Perhaps there are too many people involved in importing plywood and too many people whose sales policy is governed by their cash flow, with no regard to replacement cost or to the value of the product,’ he said. ‘The reality is we have all got to get used to lower profits.’
Slow period
The early part of this year was a generally slow period for UK imports of plywood. For example, figures from APA – the Engineered Wood Association show that American softwood shipments to the UK totalled just 6,867m³ in the first quarter of this year compared with 18,427m³ in the corresponding period of 2000.
Similar declines were to be found elsewhere in Europe: the Netherlands imported 5,730m³ of American plywood in January-March this year as against 13,992m³ last year, while the comparative totals for Germany were 2,062m³ and 2,278m³ Taking the EU as a whole, American shipments fell from 38,561m³ in the first quarter of last year to 15,593m³ this time round.
US plywood prices were ‘in the clouds’ and ‘out of reach’ of the majority of buyers on this side of the Atlantic, with southern yellow pine plywood at something like 14% higher in price than elliottii pine plywood from Brazil, one expert said. Stocks of US plywood are said to be available on the ground in this country but are simply not moving because of this price strength. It was suggested that production curtailments on the other side of the Atlantic had helped create the upward price movement although, according to one observer, prices seem to have found a level.
Fortunately for the Americans, their domestic house starts have remained at reasonably healthy levels and demand for plywood continues to be good, perhaps suggesting that stories of the US’s economic demise had been exaggerated – or were at least premature.
At the same time, the housebuilding market in the UK is something of a mixed bag, with experiences varying from one region to another. For example, housebuilder Barratt has pointed to a sharp rise in sales of new homes in the north-east of Scotland – an area which has been enjoying some renewed confidence following an upturn in the fortunes of the local oil industry.
While the debate rages as to the robustness of the US economy, the outlook in Russia has been quite rosy. Domestic demand for birch plywood has been strong and prices paid have remained above those for export, thereby creating some tightness in the export supply chain. Demand for Russian plywood is said to be particularly strong in southern Europe, as well as in the Middle East and North America.
With veneer quality pushing production more in the favour of thicker panels, lead times on thinner panels are said to be out to six to eight weeks as against three to four weeks for their thicker counterparts. Demand for both Russian and Baltic plywood has been sufficient to convince some mills to shorten their proposed production breaks in the summer.
Last month saw another round of 2-5% price increases for forward shipments of Russian plywood. However, mills are still keen to build on what they regard as relatively modest price rises because they have yet to offset the price declines witnessed over the previous two years.
Similarly promising levels of activity are reported from Finland, where birch mills are said to be booked beyond the summer holiday period and into the second half of August and even September. One source explained: ‘We are busy in most markets, including a lot of end use business in Germany.’ Prices for Finnish birch plywood are said to be broadly stable.
Similar price stability is reported for spruce plywood from the same country; producers are generally said to be ‘remarkably busy’ for this time of year with many now quoting the end of August for ex works.
Jarvela plant
Meanwhile, it has been confirmed that the large new single birch panel press at Koskisen‘s Jarvela plant in Finland has completed its trial phase and is producing ‘at full steam’. The 1.9x4m product is being branded ‘new size’ by the company, a spokesperson pointed out.
UK demand for coniferous plywood is understood to have improved slightly in recent weeks but this could be a ‘false dawn’, it was feared, given the imminent arrival of the summer holiday run.
Allegations of widespread product misrepresentation quoted in the previous plywood market report (TTJ May 12) have shown no signs of abating. Indeed, the subject has taken on an even higher profile after the National Panel Products Division (NPPD) of the Timber Trade Federation expressed concern over a specific consignment arriving in the UK from Thailand (TTJ June 23). Packaging around the radiata C+C plywood had been marked BS 5268 Part 2 which denotes fitness for structural use but, according to an NPPD spokesperson, the product could not qualify for this marking, whatever its origin. ‘If this is a deliberate attempt to misrepresent the plywood, it is scandalous,’ he added. Agents for the Thai manufacturer have apologised for what they have deemed to be an honest mistake.
One contact this week tried to put a positive slant on the whole issue of misrepresentation. While suggesting the practice was widespread and served to undermine the plywood trade, there was growing evidence of buyer backlash. ‘Some customers are waking up to the cheap selling and the misrepresentation of BB/CC,’ he said. ‘If I had more volume to sell today of good quality BB/CC grade plywood, I could sell it because there are people out there looking for good quality plywood – they are sick of buying rubbish.’
That said, the misrepresentation of timber products was ‘here to stay’ because ‘there are too many buyers who are uneducated about what they are buying,’ he said. ‘They think plywood is plywood.’
Continuing this contentious theme, plywood and OSB industry efforts have played a significant role in highlighting issues surrounding the use of uncertified elliottii pine plywood in structural applications, although there is a consensus that more work remains to be done. Indeed, Nexfor‘s sales director Maurice Fitzgibbon has called for a further industry-wide initiative to overcome the continuing confusion surrounding the BS 5268 Part 2 certification issue.
Nexfor mailshots
Nexfor recently sent out mailshots on the subject to 10,000 RIBA architects and 9,000 roofing contractors, as well as to local authority officials. Information supplied on reply-paid cards indicated that many roofing contractors believed they were using certified materials when they were not, thus identifying a need for yet more information and education on the subject, according to Mr Fitzgibbon.
APA – the Engineered Wood Association pointed out that it had sent certification information packs to 4,000 building control officers some time ago but acknowledged that more needed to be done to prevent the use of uncertified materials in load-bearing applications.
According to trade sources contacted this week, the crescendo of publicity surrounding BS 5268 Part 2 was beginning to have a marked impact on the plywood trade. One stated: ‘People are starting to take it seriously now. Importers realise that they could be in for some serious problems [if they are found to have supplied inappropriate material].’
OSB problems
In the OSB sector, optimism has become a rare commodity. Prices have remained weak and problems are expected to be exacerbated still further as the UK heads into the summer holiday period.
Spot offers of cheap material from the near Continent have continued to dominate a UK market scene in which day-to-day price weakness has become something of an accepted fact. Prices have exhibited greater stability of late but remain at ‘very low levels’, with all producers claimed to be working ‘at below cost’.
One expert observed: ‘There is so much capacity around that it is giving the impression that demand has been hit, but I don’t believe demand for OSB is dropping.’ Another agreed: ‘We are comfortable with demand – but not with prices.’
Continuing the same train of thought, a major player in the UK’s OSB market acknow-ledged the ongoing battle for market share but also suggested that OSB itself was claiming an ever-larger slice of the panel products market. ‘The substitution effect seems to be kicking in – particularly for OSB 3 18mm for the flat roofing sector because of worries over other products that might be used in this application,’ he contended. Sales into timber frame and the floor construction sectors were also becoming increasingly healthy, he noted.
Meanwhile, US domestic demand for OSB is understood to be holding up well despite suggestions of an ailing domestic economy and the introduction of new capacity, notably in Canada. One contact commented: ‘The market seems to be absorbing it.’
