Two factors have dominated Far East timber trading through the past three months: continuously rising prices, and producers reporting shortages of log input for processing.

At the other end of the supply pipeline, importers and merchants had been much more optimistic and prepared to pay higher prices to secure supplies for improved market demand. This was particularly noticeable in the Netherlands where, up until the last two to three months, building and timber trade activity had been poor and many had expected this gloomy outlook to continue.

The rather abrupt turnaround in European buying had to compete with the ongoing strong demand from China and India, in both of which markets buyers are more flexible in accepting a wider range of species, and also are more willing to take in and process the whole spectrum of grades. No doubt this may be in part because lower wage costs allow a higher labour content to sort and process and because in these economies nothing is wasted – every scrap is used.

Sellers’ market

The change to what has now become very much more a sellers’ market is supported by efforts worldwide to control logging and stamp out production and trading in illegally sourced timber. Indonesia, Peru and Brazil are the obvious examples and buyers are seeing quite clearly it is no longer possible to locate lower priced alternative supplies easily. This is illustrated by an increase in substantial enquiries for West African sawn lumber from Asian traders anxious to maintain supply of tropical hardwoods for their European buyers. This is partially on price but increasingly because their regular Asian mills are short of raw timber input and are not able to offer.

Although West African producer countries Ghana, Cameroon, Ivory Coast and now Gabon are committed to increasing production of sawn lumber and further processed products, there are constraints here also on the volumes available and traders report that most mills are fully booked and it is not easy to induce them to respond even to firm enquiries. Except for Ghana, the constraints are in the main the sheer lack of overall processing capacity rather than shortage of logs.

Log prices had already begun to rise at the end of 2005 and have since continued on a steady upward trend, with meranti SQ and up gaining a further 13% up to mid-year, keruing and kapur SQ and up both now around 15% higher and selangan batu nominally up by over 25%, but in truth there is very little to be found and prices can be much higher depending on how keen the buyer is.

Log prices

West African log prices also rose through the first half, with even sapele putting on another 10% to around €230/m3 FOB and many other species now close to parity with Sarawak prices for comparable species. Papua New Guinea log export prices are still reported at some 50% or more under the prices for comparable Malaysian species. The prestigious newspaper The Australian has recently published a long article entitled The rape of PNG forests with allegations of corruption and illegal logging. This joins a whole series of reports from various organisations alleging illegal practice in the PNG timber sector. Most of PNG’s annual 1 million m3 plus of logs are exported to China and perhaps the UK-funded project of the Tropical Forest Trust might find these allegations a useful starting point in their endeavours to assist China’s timber users to source only good wood.

&#8220The change to what has become very much more a sellers’ market is supported by efforts worldwide to stamp out illegally-sourced timber”

There may be some effect on market prices resulting from the report that the UN has lifted the ban on exports of timber from Liberia. All the previous concessions were declared null and void and the Liberian government has said it proposes to put in place regulations to protect over 1 million hectares and to manage the total resource covering 50% of Liberia’s land area on a sustainable basis. This is said to allow harvest of up to 750,000m3 of timber each year. It is not clear at this stage just how quickly exports will resume but they are sure to be of great interest to French importers who had sadly missed the supply of niangon from Liberia.

Indonesian exports

Indonesia has lifted the ban on the export of sawn lumber that had been in place since October 2004. There are some restrictions including that lumber must be 18% moisture content or less, and of “regular shape with parallel sides”. Presumably this is to prohibit export of through-and-through sawn flitches that have featured heavily in allegations of illegal cross-border trade. As in the past couple of years a large number of Indonesian plywood mills and other facilities have closed due to shortage of logs, it seems unlikely there will be any sudden surge in lumber exports.

Malaysian furniture manufacturers are once again reporting problems in finding sufficient rubberwood to keep their factories in full production and the government is encouraging growers in marginal areas to change over from oil palm to planting rubber trees. Malaysian plywood exports well overtook Indonesia’s much reduced volumes and here again prices have moved upwards almost month by month since early last year, gaining another 8-11% through the first half of 2006; 2.7mm is now reported at around US$460/m3, 3mm about US$450 and 9mm and up in the US$370 sFOB.

Japanese plywood mills that were trying to bargain down log prices earlier in the year are now complaining that their demand exceeds the supply. However, plywood prices on the Japanese domestic market have picked up as demand improved quite suddenly after a rather long period of dull trading conditions.

Asian economies

Although the timber market within Malaysia is said to be quieter than in recent years, with building and construction industries less active, economies in the Asian region as a whole are reported as progressing well and many Malaysian timber product exporters see the local Asian and Middle East timber importing countries as being more attractive than the more distant European markets.

Prices for timber and timber products are still rising, perhaps more gently than in recent months, but they are firm and on an upward trend. Trade levels are good and it seems most producers are less worried about order books and new business than in making sure of supplies of their raw timber input to keep their mills in full production.