As noted in our final plywood report of 2006, the UK was experiencing what many believed to be a “temporary” oversupply of Chinese hardwood plywood. This indigestion has persisted into the early weeks of 2007 and also applies to Malaysian material following the arrival of substantial volumes onto the UK market. Stocks at the Port of Tilbury, for example, were described this week as “bulging”.
UK demand during January and early February has been lacklustre but some leading market specialists are anticipating an improvement in sales momentum towards the end of the first quarter. “Stocks are a bit out of balance in the short term but I don’t see any reason to panic,” said one.
Meanwhile, another contact has dispelled rumours within the trade that anti-dumping duties might be imposed temporarily on Chinese plywood. The European Commission’s Directorate General for Trade has confirmed to him in writing that its partial interim review of anti-dumping measures on okoumé plywood from China would not yield any decision prior to June this year, and possibly not until December. Before making its final decision, interested parties would be consulted and given time to comment, it was pointed out.
This process was sparked by a call from the European Federation of the Plywood Industry (FEIC) for duties on okoumé-faced poplar plywood to be extended to other Chinese plywood products with different veneers such as bintangor, red canarium and kedondong. The European Union called a meeting with Chinese plywood suppliers for February 9 but, having argued that the notice period was too short, the latter have succeeded in having the meeting postponed until after Chinese New Year.
The European Commission’s clarification of the review timescale has been welcomed by UK companies with an interest in Chinese plywood since there had been concerns that talk of anti-dumping duties would damage demand in this country. That said, orders for Chinese plywood have been relatively slow at the start of 2007 “because stock levels are very high and there is quite a lot more on the way”. A prominent UK-based seller of Chinese plywood reckoned his sales have been 15-20% lower compared to the early part of last year.
Chinese prices
Despite a significant price increase resulting partly from higher freight rates, Chinese plywood generally remains significantly cheaper than, for example, Malaysian hardwood. However, contacts also pointed this week to major price variations for plywood from different sources in China, with one claiming that his own imported product was currently 10-15% more expensive than some rival materials. “There is a very big issue in respect of quality coming out of China,” he said. “With China, price is quality.”
November 2006 plywood import statistics from independent analyst timbertrends reinforced the trends established throughout last year. “Exceptionally strong” Chinese imports of 42,000m3 during the month pushed the cumulative total for January-November 2006 to 274,400m3 – more than 100,000m3 ahead of the 168,000m3 recorded in the first 11 months of 2005.
As for the UK’s more established suppliers of hardwood plywood, imports from Malaysia also rose significantly from 134,900m3 to 174,200m3 over the two comparative periods, while shipments from Brazil slipped – albeit by little more than 1% – from 136,000m3 to around 134,000m3. By contrast, imports from Indonesia slumped almost 50% from just under 70,000m3 during the first 11 months of 2005 to 36,000m3 in January-November 2006.
And so UK imports of Indonesian plywood were in steep decline last year even though the overall trend was upwards. Hardwood plywood volumes arriving in the UK from the countries mentioned above – China, Malaysia, Brazil and Indonesia – jumped from around 509,000m3 in January-November 2005 to nearer 619,000m3 in the corresponding period last year. Indeed, imports of Indonesian material were actually lower than the volumes sourced from Russia: the latter supplied the UK with 47,000m3 of plywood in the first 11 months of last year compared to 42,600m3 in January-November 2005.
Import duty
With Indonesian plywood remaining at a disadvantage to Malaysian product in terms of its GSP status, there have been calls for the government to grant zero import duty on FSC products. However, the government’s response to this proposal has been described as lukewarm.
Over recent weeks, sales of Brazilian hardwood plywood have been “hammered” by the availability of Chinese material, landed stocks of which are reportedly at least 15% cheaper. With little Brazilian product being bought forward, experts are anticipating significant shortages by the end of the first quarter.
As for softwood product, elliottii pine plywood from Brazil has been selling reasonably well in the UK; prices have improved by around 8% since the start of the year and further increases are widely anticipated. However, there is some debate as to whether the current tightness of supply is “artificial” and stems back to delays in unloading containers at the port of Tilbury.
Temperatures may have dropped recently but northern Europe is still grappling with the effects of an unusually mild start to the winter. Among those struggling with raw material supply are Finland’s birch plywood mills, with the result that UK buyers placing orders in the first full week of February may have to wait until late April or May for delivery. The delivery time on spruce plywood is only slightly shorter. Despite a resumption of the flow of logs to Finnish mills, one local expert commented: “There is a backlog of orders to catch up. It’s a very firm market with no room for negotiation.”
Logging problems
In Russia, wet conditions in the forests have also hit logging activities while shortages of Russian plywood have been exacerbated by the longer than normal holiday breaks over Christmas and the early new year period. This lack of supply has coincided with good demand for Russian plywood from the UK, the wider European market and the US. Lead times have extended from the seasonal norm of two to four weeks to nearer four to eight weeks, with squares proving slightly easier to obtain than 8×4 sheets. Inevitably, prices have firmed significantly over recent weeks, with one regional expert telling TTJ this week: “A lot of price lists have been withdrawn. Mills are looking for buyers to make them an offer.”
Similarly in Latvia, mild weather forced a suspension of logging earlier in the winter. Birch logs are now making their way to the plywood mills but new business bookings have been hit as producers look to fulfil earlier orders. A leading UK-based supplier commented: “We put our prices up by 10% on January 1 but we still can’t keep up with orders. Lead times are out until April across the board.” A further increase was likely at the start of the second quarter, he added.
Indeed, the northern European birch plywood market as a whole is expected to remain firm for the foreseeable future owing to a combination of tight supply and rising costs, notably for logs and glue.
OSB market
OSB producers reported a reasonably strong start to 2007 characterised by healthy order books for the UK and most other markets. Lead times are averaging around two weeks while prices have been firming. According to a spokesperson for a producer which raised its prices by 5-7% at the start of this year, further increases were likely to be introduced in the second quarter. Prices into the timber frame market would definitely increase in the second quarter “because these have been lagging behind”. However, pressure for more immediate increases has been alleviated to some extent by the availability of cheap Chinese plywood in the UK.
On mainland Europe, some OSB mills are understood to have shortened their working weeks owing to difficulties in sourcing sufficient logs. One major Continental producer confirmed that no material whatsoever was being allocated to the UK market because supply was limited and more attractive prices were obtainable closer to home where demand was extremely healthy.
