As might be expected, Far East trade is quiet over the European winter. The slow but steady rise in sawn meranti lumber prices petered out and prices throughout the market have remained stable over the past few weeks. In spite of the low trading volumes, stocks in Europe are not excessive, having been tailored closely to the modest demand levels seen in the fourth quarter of 2002.

Log prices in Malaysia are rising. Both export logs and those for domestic use are showing quite strong gains, no doubt at least partially as a result of the steps taken by the Malaysian and Indonesian authorities to stop the illegal export of logs from Indonesia. In contrast, domestic log prices in Indonesia are weaker even though prices for the top quality are already around US$100/m3 lower than Peninsular Malaysian logs and even peeler core logs are US$30-35 cheaper then the Malaysian equivalent.

It is certain that the tight log supply in the Far East region will continue. Closer control and monitoring by forest authorities has become much more effective in reducing the opportunities for illegal operators

Log prices in Japan have stabilised after some rises caused by importers re-stocking to restore a balanced inventory.

China remains top log buyer

China is still the region’s major log buyer and import volumes are continuing to grow. This is especially notable for conifer logs with Russia as the most significant supplier. China’s recent forest conservation regulations have restricted the harvesting of indigenous conifers and imports of softwoods in logs and lumber grew by around 95% in the first nine months of 2002 while imports of hardwoods grew by around 30% in the same period.

The Finnish timber group UPM-Kymmene has signed an agreement with the Chinese Academy of Forestry to conduct research into the market for forest products in China. It will establish a Forest Products Research Centre, study the market and publish the information. It would seem likely that this initiative might well give an edge to Finland in extending markets for Finnish timber products and processing equipment.

Virtually all qualities of Myanmar (Burmese) teak are higher, logs are up by US$20/m3 and sawn lumber between US$20-50 higher, and all prices very firm.

As noted above, meranti and serayah prices are now stable. “A”grade serayah is tending to move slightly higher and there seems little doubt that with the restricted log supply in Sabah and Peninsular Malaysia, sawmillers will be seeking to raise prices after the Chinese New Year. However, higher freights of up to US$100 per container from Port Kelang will not help producers to persuade buyers to pay more for the actual timber. Log freights in the region also are higher by US$1-1.50/m3 from Sabah and Sarawak and US$2.50-3/m3 for Papua New Guinea and Solomon Islands.

Prices in Malaysia for rubberwood have continued to move upwards and in a dramatic move Thailand has banned the export of sawn but unprocessed rubberwood with the aim of reserving the total supply for in-country manufacturing of export goods such as furniture and small woodware.

Many smallholder farmers are lobbying the government hard as they contend this will restrict, rather than assist, trade. One of the major problems in the rubberwood trade is that a large percentage of the total potential ‘log’ supply is in the hands of smallholders whose timetables and reasons for felling and re-planting their rubber trees are very often different from the more formal schedules of the large rubber estates. This makes for intermittent supply from scattered sources, causing difficulties in transporting, sawing and treating within the very short time necessary to avoid discolouration and deterioration.

After a surge in purchases in the last quarter of 2002, Japanese importers now have adequate stocks and have regained their usual cautious approach to new contracts. As a consequence since mid-November 2002 Malaysian export ply MR BB/CC prices are lower by US$10/m3 for 2.7mm, minus US$5 for 3mm and down US$15/m3 for 9mm and thicker.

Indonesian prices lost more in the same period, down US$25m3 for 2.7mm, US$10 for 3mm and minus US$5-10 for 6mm.

The Japanese domestic manufacturers of plywood still face the slow decline of their market share and most of the larger businesses are now diversified into manufacture of MDF and other board products. One Japanese company is setting up manufacture of plywood and LVL in China.

The plywood markets generally remain quiet, with prices stable at the lower level.