Easter and the May Bank Holiday further disrupted plywood sales momentum in the UK. Indeed, the second quarter has brought little relief from the generally difficult conditions experienced in the first three months of the year. The general tone of the UK market is subdued and buying is continuing to take place on a largely hand-to-mouth basis.

Despite these uninspiring conditions being repeated in many other countries around the world, there is evidence of prices becoming firmer on the back of supply issues. In the Far East, for example, the ever-tightening grip of log restrictions has led to higher raw material costs and to shipping delays as vessels have to travel around to accumulate full cargoes. According to one UK importer, operators in the Far East were having to rely far more on their own concessions than in the past and so any local difficulties meant more of a struggle to meet supply requirements.

The strength of the Indonesia rupiah in relation to the US dollar and a general increase in costs have added to the pressure on mills to obtain higher plywood prices. Industry experts pointed to an Indo96 list range as wide as -18 and -24, given that some mills are in more urgent need of selling stock than others. “If a mill has a reasonable order file, it is tending to be more bullish on price,” TTJ was told.

Optimism rises

While the recent holidays have been blamed for “upsetting the rhythm” of plywood trading in the UK, it was widely accepted this week that buying levels were far from spectacular in any case. However, higher prices and the prospect of few vessels arriving within the next few weeks have combined to create a greater degree of optimism within the plywood sector than was apparent towards the end of the first quarter. It was even suggested that the UK could begin to see pronounced shortages in some specifications, notably 6mm, 9mm and 25mm.

“Those people who are waiting for Far East plywood prices to fall even further will be disappointed,” predicted one contact. Another ventured: “Sentiment is changing – the market is no longer bumping along the bottom. I would expect modest price increases as we go through the summer.”

Nevertheless, there are still those UK traders who remain sceptical about near-term market prospects, with one source describing evidence of price firmness as “a blip” caused by a need to place orders among customers who had been holding off buying for some time. There was an underlying lack of demand that was effectively releasing some of the pressure that has been building up on the supply side, he added.

Meanwhile, the price of Brazilian elliottii pine plywood rose by more than US$10/m3 during late April and early May. To some extent, mills have been prompted into making this adjustment by the recent weakness of the US dollar in relation to the Brazilian real. Some industry observers are expecting to see further price increases of up to US$20/m3 before not too long.

Recent weeks have also brought upward momentum in the Brazilian hardwood plywood price, which was slashed by as much as US$100/m3 towards the end of last year after the market became over-stocked. Since then, many of the mills in the south which “got their fingers burned” through “dabbling” in hardwood veneers have re-focused on softwood plywood production with the result that inventories have improved. Several UK contacts spoke of the emergence of shortages in Brazilian hardwood plywood, with 6mm and 25mm specifications mentioned in particular.

Looking at the overall Brazilian plywood market, one experienced trader described the first four months of the year as “grim” but suggested the “first shoots of spring” had started to emerge – albeit somewhat late – towards the end of April. Several others pointed to a major recovery in the K14 list price from the recent depths of -44 to around -34 or even better. One trader said that he had heard quotes of -32 for ‘combi’ plywood and -29 for hardwood throughout.

Brazilians target construction

Meanwhile, the country’s industry association ABIMCI suggested in London last month that, as a result of progress on its PNQM (National Programme for Quality) standard, its plywood should be in a position to be widely specified for structural applications in the UK from April next year. “It is up to the manufacturers to make this work,” one contact told TTJ this week, “and the more enlightened ones are going down the right path.”

&#8220In the Far East the ever-tightening grip of log restrictions has led to higher raw material costs and to shipping delays as vessels have to travel around to accumulate full cargoes”

Another issue for Brazil surrounds the loss of its GSP status from later this year, which will effectively increase the duty on both its hardwood and softwood plywood.

Prolonged problems with ice over recent months have had a significant impact on Baltic and Russian timber shipments, particularly out of Riga, Tallinn and St Petersburg. But despite the somewhat “erratic” shipments from these ports, the UK birch plywood market appears to have suffered no major ill effects, which strongly suggests that the domestic demand/supply equation is in reasonable balance. By way of example and explanation, several contacts pointed to slow order intake from the all-important furniture sector, with many manufacturers reporting lower sales compared with the same period last year.

Russian demand strong

Prices for both Russian and Baltic plywood have remained relatively stable during the second quarter. Russian producers have seen strong domestic demand offset to some extent by a reduction in orders from key export markets such as Germany and the US. A regional expert welcomed the relative stability in the Russian and Baltic plywood market before adding: “I don’t see any likelihood of upward price movement during the summer months but neither do I see grounds for price weakness.”

The relatively low cost base enjoyed by birch plywood producers in the Baltics and Russia has continued to impinge upon the competitiveness of their counterparts in Finland, particularly with regard to white and standard sizes. Finland’s producers are also having to battle against lacklustre demand across most of Europe and downright poor demand from the key export market of Germany.

Finns busy

Finnish birch plywood mills are said to be reasonably busy, lead times are hovering around the norm of three to four weeks, and prices have remained largely unchanged over recent months. Similar price stability can be claimed for Finnish spruce plywood, volume sales of which have been “pretty static” in the UK over the last couple of months. The somewhat “lifeless” feel to the UK market place has prompted at least one supplier to shelve a planned price increase.

Meanwhile, April provided an opportun-ity for some long-awaited and extremely welcome price increases in the OSB sector, although the modest rises – put at 5-6% in one case and £5 in another – went only a small way towards recovering ground lost over the material’s recent history. As TTJ went to press, further price increases were described as “fairly imminent”.

The healthier price outlook for OSB was attributed not only to a need to accommodate rising resin costs but also to reasonable demand in Europe. A leading player pointed out: “I think the growth is still there for OSB. We are selling more this year than we did last year.” Furthermore, production has been reined in at certain plants with the result that the supply/demand balance is offering improved scope for higher prices.

It is believed that the UK market could achieve 20%-plus growth in 2003 and that the wider European market might fare better still. Strong prices in the US market are providing a welcome export outlet for some of Europe’s OSB producers, while also serving to improve the overall supply/demand balance.