An excess of hardwood plywood supply, exacerbated by the arrival of a significant volume of imported board from China, is being blamed for the continued softening of the market. Ex-quay distributors are already said to be engaged in fierce competition and have been dropping prices in order to move material. TTJ was assured this week that “a competitive final quarter” was in prospect but also that the market place was “not in freefall”.

Having peaked at an Indo96 list price of +12 to +17 around May this year, plywood from the Far East is now generally said to be nearer +4 or +5, although some contacts quoted figures as high as +9. A few mills in the Far East are understood to have dropped their prices in a bid to secure volume business. In the UK, meanwhile, old and new shipments arriving at around the same time have been causing confusion in the market.

Meanwhile, Brazilian hardwood ply has dropped from the heady heights of just below US$400/m on a FOB basis and is struggling to stay above US$300/m3. Even elliottii pine plywood from Brazil has continued to suffer: the fob price had escalated towards US$300/m3 in late spring but recently slid as low as US$225/m3. According to some experts, elliottii prices have subsequently mounted something of a recovery, with one of them quoting US$245-250/m3 as the prevailing level towards the end of September. One suggested this improvement could be attributed in part to the impact of hurricane damage on demand on the other side of the Atlantic.


Looking at the overall picture, leading UK plywood industry players were clearly disappointed by post-summer market developments. One commented this week: “Demand has been poor and there is just too much stock in the market place. We are selling product over here at well below what we paid for it.” Another said: “It’s been a horrible few months. People with wood on the floor or on the water have got slaughtered.”

Previous high levels of inter-importer trading “have come to an abrupt halt” because all the major players “have got sufficient stocks”, TTJ was informed. Meanwhile, freight rates have continued to rise, with one of the major shipping lines into Tilbury announcing a further 10% increase with effect from the start of October.

In response to these less favourable conditions, a large section of the UK plywood community has directed its criticism at imports of poplar-core plywood from China. Recently, at least 12,000m3/ of competitively-priced Chinese board has been brought into the country “and we are all being dragged down by it”, according to one source. These imports have increased the general availability of plywood in the UK at a time when demand has not been too strong. Some sellers have been forced to drop prices to turn wood into cash while many buyers have adopted a wait-and-see approach rather than buy material on a falling market.

Post-summer blues

Undoubtedly, September trading fell well short of general expectations amid what one contact described as “a strong sense of post-summer apathy”. However, as several contacts emphasised, buyers cannot remain on the sidelines for too long and therefore purchasing activity is expected to regain momentum at some stage in the fourth quarter.

Leading industry players contacted this week put three main question marks against the Chinese product: CPD compliance; glue lines; and the legality of log sources. One observed: “The quality may be questionable but this Chinese board is setting the market level.” And another added: “A lot of us bought CE-marked panels in good faith when new regulations came in earlier this year and we are disappointed the market place is still being driven by price. There seems to be no benefit to playing by the rules.”

However, a significant number of contacts were prepared to accept that the Chinese board could fulfil a function for those end users who do not require the highest specification. Meanwhile, a spokesperson for one of the companies behind these imports agreed that not all board from China was of acceptable quality, but that superior product from “tried and tested” mills would increase its foothold in the market during the fourth quarter and into next year.

&#8220A lot of us bought CE-marked panels in good faith when new regulations came in… and we are disappointed the market place is still being driven by price. There seems to be no benefit to playing by the rules”

One leading operator believed Brazil’s plywood producers would be forced to mount a response to the threat imposed by Chinese board “because they won’t want to let a market disappear that they have spent so many years developing”. He said that some mills were already “looking at FSC and CPD as a means of differentiating their product”.

A more upbeat assessment of plywood prospects comes from the Finnish production sector. “The UK is extremely short of Finnish spruce plywood,” TTJ was told. “There has been a lot of inter-importer trading and people have been looking to get hold of material wherever they can.” Availability of 18mm 3/3 spruce plywood is described as “particularly short”.

This imbalance between supply and demand is expected to continue throughout the fourth quarter and even into 2005. These market conditions have already sparked some price increases but further hikes are widely anticipated.

According to one leading expert, Finnish spruce has been gaining ground in the market because of its compliance with the likes of CPD, PEFC and BS 5268. “A lot more customers now accept that they have to pay more compliant material,” he said. Along similar lines, another plywood specialist argued that attitudes towards FSC accreditation appeared to be changing fast. “We can’t buy enough FSC wood to meet the demand,” he explained. “Customers are prepared to pay a higher price for it, although some of the prices for FSC material from the Far East are just pie in the sky.”

Finnish birch

Most of Finland’s birch plywood mills no longer have product to offer for the current year. This upturn in demand and sales was attributed at least in part to the diversion of competing Russian product into international rather than European markets. With the Middle East, US and China all buying significant quantities of Russian material, Finnish birch plywood producers have been left to focus on satisfying “high demand” from the Continent. Prices have been increasing on a regular basis and further rises are expected to be introduced by early next year at the latest.

“Amazing” shortages have been reported in birch plywood squares out of Russia and the Baltics, and particularly in the C grades favoured by more than 80% of UK customers. Although some relaxation in prices had been anticipated by this stage of the year, producers are understood to be still asking “horrendously high” levels. Indeed, it is estimated that strong domestic demand has helped to push up Baltic and Russian squares prices by approaching 50% over the past 12 months.

Lead times are already out to end October/November and supply could be further hampered by a wet autumn. Already, one mill in the region has reported logging problems relating to mud.

By comparison with the bumpy ride being experienced by the plywood sector, OSB manufacturers are enjoying a period of calm characterised by reasonably strong demand in both the UK and on the Continent, as well as by stable prices since the start of the summer.

There has been evidence of some OSB imports arriving from France, but these are reported to have had no major impact on the market equilibrium. “Prices are likely to remain stable for the rest of the year,” said one leading seller. “I can’t see any hikes in the near term but I don’t see prices dropping either.” Any available supply readily finds a buyer, he added.

In the US, the strength of OSB demand is illustrated by the fact that prices are running at significantly higher levels than those in the UK.