Despite the odd dissenting voice, the majority of UK plywood contacts are reporting that the busy end to 2013 has continued into 2014 – a testament, they argue, to a construction-inspired injection of confidence into the market.
And "an air of optimism" is also said to be pervading Chinese plywood mills owing to the swell of orders received during the early weeks of 2014. "A number of mills have returned after the Chinese New Year holidays with a backlog of orders and full order books for at least the next six to eight weeks," a local expert said.
"Demand for FSC plywood appears to be increasing and, with relatively few mills being able to offer this item, their order books are particularly full with earliest shipments being April/May."
"Chinese mills were very bullish ahead of the holidays," said another contact. "It was tougher to get prices out of them because they already had good order files."
One of the factors behind this optimism in China was the decision towards the end of last year by the US International Trade Commission to throw out an anti-dumping order on Chinese hardwood plywood. This has contributed to a "surge" in demand from America and would give China’s mills the confidence to push for higher prices on the international market once business returned to normal after the Chinese New Year holidays, according to one contact.
But Chinese plywood producers are not without their challenges; for example, the increasing strength of the domestic currency in relation to the US dollar has effectively dented their income and has prompted some to push for higher prices already. Nevertheless, one contact noted that "most mills can be persuaded to accept orders at unchanged prices" while several others described FOB values as having been "reasonably stable" of late.
Meanwhile, mills completing orders in the run-up to the Chinese New Year holidays were affected by high freight rates which peaked at around US$3,200 per container before falling back to around US$2,800 last week. While some contacts said rates could be expected to continue falling during the coming weeks, others stressed that the uncertainty over the direction of freight costs was making life very difficult. According to one international trader, buyers were headed into "the freight unknown" and this was "helping to fuel a bull market".
For China’s mills, the post-Chinese New Year period also brings problems with labour as, traditionally, many workers decline to return to plywood factories after having travelled to celebrate the holidays with their families, often because these long journeys provide them with an opportunity to source jobs closer to home that offer better working conditions. Several mills are already reporting that some employees have failed to return after the holidays which, in the short term, will affect both output rates and product quality as replacement workers take time to develop the requisite skills.
Difficulty in finding workers has been mentioned as one of the key reasons behind the closure of several Chinese plywood mills last year; other factors included an inability to compete because of lack of investment and competition from new mills in areas outside the bigger cities "where construction costs and raw material costs are lower and where labour is more readily available", a local expert said.
New mills are also opening in southern China’s Guanxi province, and these enjoy close proximity to large eucalyptus plantations "which are now reaching maturity and are approved for felling by the national and local authorities".
Quality issues
Meanwhile, in the UK there is still widespread disenchantment with the quality of some Chinese plywood imports, with some contacts alleging ongoing misrepresentation of species and a failure to invest sufficient resources in physical checking. One timber trade veteran stated: "There is a danger of the industry being seen as willing to accept what it wants to believe. Buyers should make sure they get what they buy as a matter of their due diligence."
With a massive price gap already favouring Chinese plywood over a typical Malaysian alternative, Malaysian mills’ sales prospects have not been helped by the loss of the beneficial duty rate at the start of January.
However, reasonable demand from their domestic and regional customer base, as well as from the US, has offset low buying interest in the UK. Malaysia’s plywood mills were described this week as "bullish on price" against a backdrop of ongoing logging issues caused by the rainy season and the rising costs of labour, energy and raw materials. Several contacts have reported some additional UK interest in Malaysian ply,
specifically among purchasers "who are not confident about buying Chinese". The same applies to Indonesian plywood, although the volumes involved remain small given that it is even more expensive than Malaysian material. As for Brazilian elliottii pine plywood, prices are continuing firm and orders for the mills both regionally and in the US are said to be healthy.
In Finland, birch plywood producers kicked off 2014 with price increases of 4-5% – a reflection of good order files and lead times out as far as 10 weeks. "There is a lot of spot pricing per job," a contact said. Finnish spruce ply is subject to shorter lead times of, typically, three to four weeks but business is good and price increases of around 4% are likely to be attempted for the second quarter.
Latvia’s birch plywood producers were able to convert strong demand into quarterly price increases throughout 2013 and the current year has begun in similar vein. Prices were increased by 3-5% at the beginning of January and delivery times to the UK are out to around eight weeks. It has yet to be decided whether a further increase will be sought at the start of the second quarter, according to a Latvian ply trader, but prices appear set to remain firm at the very worst.
Russia’s birch plywood mills have also increased their prices to take account of the extra duty and of logging issues, and also in response to healthy demand from the domestic market and foreign buyers like the US. The mills "are out to June and July for deliveries", TTJ was told
