Last year’s bullishness has given way to widespread nervousness in the plywood trade after experts queued up to describe UK demand as pancake flat and forward buying as practically non-existent. At the same time, imports of Chinese plywood are having a depth of impact on the UK plywood market that few in the sector would ever have envisaged.

And in a week in which TTJ heard widespread criticism of agents “sitting on consignment stocks and dragging the market lower”, one industry expert offered the following market summary: “These are challenging times – we could be in for a long summer.”

The one crumb of comfort offered this week was that, should buyers continue to hold off on forward buying, shortages would surely start to emerge and the market would hopefully receive the kick-start it desperately needed. According to some contacts, large-size plywood and marine plywood are not particularly plentiful even now.

Several reasons were put forward for the hiatus in UK buying activity, including: over-stocking in previous months; caution ahead of the general election; a fall-off in housebuilding activity; and the fact that a lot of civil and local authority contracts do not come out until May. However, many observers suggested that the massive increase in imports of relatively cheap Chinese plywood had created confusion over market price levels, leading to ultra-conservative buying patterns.

Import figures

Figures suggest that China was responsible for around a quarter of all the plywood shipped into the UK over the latter part of 2004; and more recent statistics from independent industry analyst Timber Trends indicate that Chinese imports surged from 2,200m3 in January-February 2004 to 19,300m3 in the corresponding period this year. Over the same comparative periods, imports from other key regions of the world have charted downward paths: Brazilian hardwood plywood arrivals fell by 3,500m3 in the first two months of 2005 to 29,000m3; Indonesian imports slid 4,600m3 to 13,000m3; and Malaysian shipments to the UK fell by 5,600m3 to 16,100m3. In effect, all these producer countries lost market share in the first two months of this year.

Experts reckon that, typically, Chinese plywood is enjoying a price advantage over Far East material of well over 20% and perhaps as much as 30%. Moreover, Chinese plywood has usurped a large proportion of the “second tier” of the UK plywood business traditionally occupied by Brazilian material. In effect, Brazil has been unable to lower its prices to a competitive level owing to currency exchange rate considerations.

As indicated in previous reports, any mention of Chinese plywood provokes widely differing responses from the UK trade. Many experts believe these imports are de-stabilising the market and point to their misgivings over product quality, glue lines, certification, misrepresentation, environmental compliance and a host of other issues. While it is not denied that many of China’s estimated 6,000 mills produce plywood that would not suit most export markets, it is argued at the same time that a number of exporting mills are supplying a good quality, general purpose plywood that will satisfy a wide number of applications.

A senior representative from a leading UK importer of Chinese plywood said: “Some people don’t invest the time in finding the right product. They should go to companies who understand the market.” Noting particularly strong demand from the shopfitting and vehicle lining sectors, he added that these “right” products were “improving in quality” and represented “good value for money”. He added: “Some sellers have been mis-selling – but that’s a trade issue, not a Chinese product issue.”

In a letter to TTJ in January, Christopher Williams of Panda Panel Agencies Ltd said that the purpose of applying anti-dumping duty on okoumé-faced (and okoumé throughout) plywood was supposedly to protect EUropean manufacturers “whereas China’s new production of bintangor-faced poplar plywood does not compete with EU production”. The writer concluded that “Chinese plywoods should not all be tarred with the same brush”.

Far East plywood prices are occupying quite a wide range, according to trade feedback. Some experts suggested this week that Malaysian material was fetching as little as Indo96 list +5 whereas top-end Indonesian plywood was attracting +12. That said, regional experts confirmed that very little Indonesia plywood was being offered because of the clampdown on illegal logging and thus rising hardwood face/back costs. “A lot of the mills which had been supplying to the UK in the past have either stopped production or reduced it substantially,” TTJ was told. Indonesia has announced that log-cutting quotas are to remain in place and so the struggle to obtain material is likely to become ever more acute.

&#8220Most suppliers are looking just to recover their additional costs – such as higher wages – because they want to stay in the market for the long term and so are looking for stability”

As for hardwood plywood out of Brazil, prices as low as K14 list -20 were being bandied around this week; many mills in the country are reportedly closing down or curtailing production because “there is nowhere for them to go”. Elliottii pine plywood from the same country has suffered a moderate price fall over recent weeks.

Finnish production

Plywood of northern European origin has been attracting good demand and firming prices. In Finland, for example, many spruce plywood mills are understood to be more or less sold out for the year if regular customers follow existing buying patterns, although no major price increases have been reported in recent months. Indeed, there are suggestions that prices will remain stable until beyond the summer shutdowns.

Meanwhile, many Finnish birch plywood mills are offering delivery times no earlier than September although a few are said to have some availability remaining ahead of the summer breaks. Prices went up by an average of 4-5% in the first quarter and further rises are anticipated by early in the second half of the year. “We have seen a lot of freight increases and rising costs elsewhere which we need to claw back,” TTJ was told.

In Latvia, the problems caused by huge storms earlier in the year have been rectified such that roads are now clear, loggers have access to the forests and weather conditions have become more conducive to their activities; as a result, log stocks are reasonably strong and shipping times have largely returned to normal. With order books strong across Europe, delivery times of six weeks or longer are still reported, although the more popular sizes are said to be available within a shorter time frame.

Latvian plywood prices have firmed during the second quarter but “not dramatically”, according to a UK representative. “Most suppliers are looking just to recover their additional costs – such as higher wages – because they want to stay in the market for the long term and so are looking for stability.”

Russian mills are still benefiting from strong domestic demand and healthy sales in the giant US market. Given that producers are “being more selective about what they make in order to maximise their returns”, there is little evidence of surpluses in the UK market.

For the moment, UK demand for OSB is described as stable while some claim prices are coming under pressure from Continental suppliers who are experiencing unspectacular order levels in their own countries and in other export destinations. The concern for producers is that this price pressure comes at a time when they must look to recover costs wherever possible, TTJ was told this week; for example, glue costs are said to have soared 40% year on year.

According to latest statistics from the European Panel Federation (EPF), OSB production increased by 14% last year to a new record level of almost 2.8 million m3 while consumption is estimated to have improved by 15% to 2.4 million m3. Production in Europe is expected to break through the 3 million m3 barrier this year, thanks in part to new capacity developments which are scheduled to come on stream during the course of the year, says EPF.

A leading OSB expert suggested this week that the UK was likely to see a 10-15% improvement in consumption this year.