It’s a sporting cliché that, when a team is performing well, players would prefer not to hear the half-time whistle because of possible disruption to their momentum. And a parallel can be drawn with the plywood market, it would seem, as this week a number of suppliers were bemoaning the arrival of the Easter and Bank Holiday breaks at a time of decent, sustained demand.
Stocks in the UK appear to be largely adequate – with the possible exception of thin softwood plywood, according to one leading player. Otherwise, he said, the market "has got all the ingredients for stability at the moment".
Meanwhile, a leading UK distributor commented: "We are not too unhappy with our sales in the UK. Demand is good. We are increasingly seeing a two-tier market, with discerning buyers on the one side who are prepared to pay a bit more for a top-quality plywood, and those on the other side who are happy with something cheaper."
Demand from the UK and Europe for Chinese plywood has continued to be relatively healthy but FOB prices have remained broadly unchanged despite an improvement in the exchange rate. Having been equivalent to RMB6.05 at the start of this year, the US dollar was worth nearer RMB6.25 at the time of writing.
"This in effect means that, when selling in US dollars, suppliers are actually now getting about a 3% better return in local currency than they were in January," a local expert said.
But while FOB values have been largely static, freight rates have continued to be extremely volatile. On April 1 shipping lines announced substantial increases of around US$800 per 40-foot container on and, in subsequent weeks, they have proved more resolute than in previous months at making these hikes stick. The increases pushed up rates to around US$2,500 per container.
However, despite some shipping lines being fully booked, there is still talk of renewed downward pressure on rates in the immediate term.
While FSC plywood continues to attract good demand, there are serious concerns about the raw materials being used by some suppliers, with rumours that they are employing non-FSC logs or veneers in their production.
A locally-based expert commented to TTJ: "Reputable FSC plywood suppliers who have their own FSC-certified poplar plantations are able to provide genuine FSC and EU Timber Regulation (EUTR) documents to confirm that the plywood they are producing is genuinely FSC. It is recommended that buyers pay very close attention to documents that suppliers provide to make absolutely sure they confirm compliance with both FSC and EUTR – especially when prices offered are significantly below market prices for FSC plywood."
Meanwhile, some Chinese plywood producers are still suffering the outfall from the Chinese New Year break. As has become tradition, a significant proportion of experienced workers chose not to return to the mills after the holidays, partly because many of them find more attractive jobs closer to their family homes. This results in decreased production but an increase in issues concerned with quality as time is required to train new employees. Some producers are still trying to catch up on their shipments – some of which have already been delayed by up to three months, with evidence that some contracts may yet run six months late.
Prices move sideways
One adjective dominated experts’ assessments of plywood price developments over the last couple of months: "sideways". As noted earlier, FOB values of Chinese plywood have been static and there has been little change in prices for Malaysian and Indonesian ply. With Brazilian elliottii pine plywood too, supply and demand in the UK were described this week as "roughly in balance" by a top distributor. "It’s not flying off the shelves but neither is it overstocked," he said. "Nobody is looking to put on huge volumes."
Several other contacts said they were not UK demand for plywood is satisfactory expecting a significant shift in elliottii pine ply prices "until the quota expires". Feedback from the Baltic states and Russia focused this week on the availability issues caused by a mild winter and resultant logging problems. A UK representative for Baltic production indicated that prices have been held firm for the first half of 2014 but that lead times were at around 10 weeks amid "very strong" demand in the UK from across the main consuming sectors, including construction.
"If anything, it has got more demanding since the early part of the year," he said. "We are having to plan already for the summer shuts which will affect July, August and September. These will put even more pressure on production and supply."
Meanwhile, there have been murmurs from some other quarters that market conditions in February and March did not fully maintain the promise of the early weeks of this year. According to a Finnish spruce plywood producer, for example, there had been pressure to hold back on slated price increases, not least because prospective purchasers could be tempted to buy elsewhere if the differential to South American elliottii pine ply became any wider.
Largely stable pricing was reported this week for Finnish birch plywood, although added-value business was generally being quoted on a job-by-job basis depending on the specification and volumes, according to a regional expert. Lead times were at a "normal to slightly extended" six to eight weeks but there was sufficient slack in the system for product to be made available more quickly for particularly lucrative business, TTJ was told this week. With demand for Finnish birch plywood continuing to be "pretty strong" and with order books "relatively full", a continuation of these conditions could see mills pushing for higher prices for the third quarter, contacts said.
Trade statistics
Latest hardwood plywood statistics from the Timber Trade Federation (TTF) reveal that Finland was one of the countries – along with Malaysia and Russia – to have its UK market share eroded by China in January this year. UK imports from all sources were virtually unchanged from January 2013 at around 74,000m³ and yet China supplied almost 5,000m³ more than in the opening month of last year, thereby pushing up its share of the UK’s overseas purchases of hardwood ply to 63%.
Conversely, UK imports of Chinese softwood plywood were around a fifth lower in January when making the same year-on-year comparison – despite the fact that total incoming volumes for the month were 28% higher than in January 2013 at 56,000m³. Volumes imported from Brazil soared 50% while Chilean supply increased more than five-fold to give respective UK market shares of 47% and 9%.