The debate over apparently increasing imports of Chinese plywood has continued to rage during the early weeks of the year.

Some members of the trade say that buyers have often over-specified plywood required for non-critical applications in the past, and the Chinese material is now enabling them to pick the right product for the job. However, others suggest that a significant number of companies, influenced only by price, have been snapping up the Chinese product for inappropriate uses, such as structural or exterior.

One contact who falls into the latter camp said: “There is a lot of Chinese material coming in and many experts in the industry are warning customers about such issues as CPD compliance, legal source of supply and glue lines. There has been a dual market for some time – the compliant market and the price market – but the gap between the two is getting wider.”

Another key topic concerns the longer-term implications of the Indian Ocean tsunami disaster. It has been suggested that Indonesia alone may need to channel up to 8.5 million m3 of its production into the reconstruction of Aceh province. This is considered likely to have an impact on export availability and prices down the line.

Given the impact of the rains and of Chinese new year celebrations, Far East mills are already being more bullish in their approach and plywood prices have firmed to between Indo96 list +5 and +10. It was suggested this week that an increase in the level of inter-importer trading was a sign of caution and that shortages of Far Eastern plywood may begin to emerge before the end of the first quarter of this year. Stocks of 9mm and 15mm material are already getting low, several sources indicated.

Brazilian alternatives

According to several industry experts, the availability of cheaper Chinese plywood has been holding back the price development of Brazilian hardwood alternatives. Prices of the latter have certainly firmed since towards the end of last year although “patchy” UK demand has somewhat dampened the impact on this side of the Atlantic. “Shippers are asking for higher prices but there are not a lot of takers,” TTJ was told.

Prices of elliottii pine plywood out of Brazil have risen by an estimated 20% over recent weeks although few if any UK buyers are believed to be willing to meet these elevated asking levels. In addition, few industry experts believe the upward momentum will be sustained for much longer. “We are approaching levels at which alarm bells normally start to ring,” said one source, “although it depends very much on the strength of US demand.” Another explained: “Since plywood returns have been so poor, especially due to the weakness of the US dollar, mills in Brazil tend to become a bit aggressive when the opportunity arises to push up prices. As a result, they go up fast but can come down very fast too.” That said, two factors make further elliottii price increases a possibility: supplies are said to be running low in certain specifications such as 9 and 12mm; and Finnish plywood is fully booked out.

Supplies of elliottii have been hindered to some extent by logistics issues. With the main shipping line out of Brazil fully booked because of good economic conditions for exporters, schedules have been affected and shipments of large volumes of plywood have been subject to delay.

The Finnish plywood sector has picked up where it left off in 2004. Demand for the country’s spruce plywood has been so strong that mills are reportedly fully sold for the first quarter, and are expected to find similar conditions in the second quarter too. Some producers are operating “almost on allocation,” said one contact. “If a customer hasn’t got himself in on the budget for 2005, he probably won’t get in now.”

&#8220Since plywood returns have been so poor, especially due to the weakness of the US dollar, mills in Brazil tend to become a bit aggressive when the opportunity arises to push up prices. As a result, they go up fast but can come down very fast too”

Buoyant Finnish birch plywood

As for Finnish birch plywood, mills have moved progressively towards higher value and specific end user products, for which demand remains “buoyant”. Estimating current lead times to be “April onwards”, a UK spokesperson for a leading Finnish producer added: “I can see significant price increases in the near future – they went up late last year and there may be more to come, possibly for the second quarter. I can also see shortages to come in Finnish birch plywood – there is already a lot of inter-importer trading going on.”

Another producer spokesperson agreed that the birch plywood market was “very busy” and that, once having taken account of volumes reserved for regular customers, there was “very little else”. He put lead times at five to six weeks, adding that prices had risen of late by around 5% or slightly above, depending on the specification.

As for supply issues out of Finland, wetter autumn weather has now given way to colder conditions more suitable for logging activities. No major problems are reported with ice at the ports.

Given the bullish noises coming from the mills and strong UK sales in January, a number of contacts expressed surprise this week that the Finns had not attempted to push up prices more aggressively. However, others expect the Finnish producers to wait and see what happens with the price of elliottii pine plywood out of Brazil.

Weather conditions have also been a major factor in Latvia over recent weeks. Huge storms led to large-scale windblow and disrupted logging activities that had already been hit by milder conditions. According to regional experts, swift government action has helped to restore the situation to approaching normality although several more weeks will be required to catch up on production and shipments. Colder weather has helped the Latvian loggers too.

In the UK, there has been evidence of some shortages and prices of Latvian plywood have firmed – but not dramatically. However, further increases are envisaged if the strong, general demand for birch plywood remains in place.

Russian plywood prices high

Meanwhile, prices of Russian plywood remain “incredibly high”. UK buyers have not been helped by a recent huge increase in freight charges – estimated by one source to be in the region of 25-30% – or by the decision of many mills to convert to the strong euro. Russian producers are still enjoying relatively healthy domestic orders on the back of favourable economic conditions abroad and growing demand for value-added goods. The latest statistics reveal that Russian plywood production advanced by some 13% to around 2 million m3 during the first 11 months of last year. In the first 10 months plywood export volumes increased by over 20% too.

A sluggish start to the new year has been reported by UK-based OSB interests. In some instances, prices were moved down by around 5% last month in response to what one leading industry figure described as a “temporary blip caused by stock problems”. However, he expected his company to return prices to previous levels quite shortly and underlined the need for OSB producers to maintain steady price development in the face of rising costs. He calculated that, year on year, glue costs have risen by 40%, distribution costs by 10%, and energy by 18-20%. It was also suggested this week that rising plywood prices may have a positive impact on OSB levels.

Slow sales of OSB in some key areas of mainland Europe have also meant an upturn in the volume of imported board coming into the UK. One contact expressed the hope that a recovery in orders from the US – where demand is said to be “flying” – would prompt European exporters to focus more of their attention on the other side of the Atlantic rather than on the UK.