Heading into the final straight of 2013, the tone of the plywood market is certainly firm, with product from most sources attracting stable to rising prices. At the same time, demand in the UK has been reasonable, although forward ordering was described this week as "fairly sporadic". Despite the fact that the majority of plywood traders appear to remain quite guarded in their interpretations and expectations of the market, many are now prepared to acknowledge a shift in buyer sentiment towards greater optimism. "We have been looking for more regular volume specification business and we now seem to be on the cusp of that," said one. "Although a lot of people are still just topping up their stocks, there seems to be a bit more confidence to place monthly volumes."

And reflecting the glimmers of a recovery in the UK construction sector, most traders confirmed this week that their plywood volumes have been higher in 2013 than last year.

Regarding plywood exports from China, the country’s implementation at the beginning of August of 6% VAT on both the costs incurred from ex-mill to FOB and on prepaid freight seems to have had little effect on the market. Product prices have remained reasonably steady in recent months, with several contacts pointing out that increases of US$3-5/m³ have been applied only recently. Inflationary pressure has come from several sources, including wet weather in the south of China which, in particular, is said to have made eucalyptus logging more difficult.

However, freight rates have not been subject to the same relative stability. A recent increase was subsequently more than cancelled out, but shipping lines are trying again for major hikes with effect from November 1 of up to, reportedly, US$800 per 40-foot container. This would be equivalent to around US$16/m³ – a figure dismissed by many plywood contacts as aspirational rather than achievable.

Meanwhile, plywood suppliers in China are already making their preparations for the approaching winter and Chinese New Year, requesting new orders for production and shipment prior to the holiday period. Indeed, some mills "are already fully committed for shipments up to the end of December", according to a local contact. The holidays typically entail supply issues, not only because some mills are closed for up to five weeks, especially in the north of China, but also because many workers opt not to return after the break and have to be replaced by more inexperienced employees, which impacts on production efficiency. In the UK, long-time buyers of Chinese ply are familiar with these issues "and have been aligning themselves with supply with Chinese New Year in mind".

Also with regard to China, there is ongoing difficulty in securing credible documentary evidence to confirm the legal origin of non-FSC red tropical hardwood logs. Against this backdrop, demand from Europe for engineered/dyed poplar-faced plywood is said to be gradually increasing – although some concerns remain about the quality and durability of the glue used in its production. Comments have also been made about the difficulty of sanding these veneers to a perfectly smooth finish, said one contact.

"At the same time, producers are now beginning to understand the merits of producing plywood with FSC redwood face veneers with non-FSC poplar and/or eucalyptus core veneers," he said. Credible documentary evidence of origin is available for compliance with the EU Timber Regulation while this option also provides "a higher-quality alternative to plywood produced with engineered veneers", he added.

Hardwood ply imports fall

According to latest statistics from the Timber Trade Federation (TTF), UK hardwood plywood imports fell 5.3%, or approaching 30,000m³, in the first seven months of this year to 509,000m³ – with more than half of this decline in volume shouldered by China. Nevertheless, the Asian giant maintained its 55% share of the UK import market whereas the 6,000m³ drop in Malaysian arrivals over the same period trimmed its UK share from 12% to 11%. In contrast, Finland and Russia both recorded small increases in volume and market share in the UK.

As for softwood ply imports, China’s share of overall sales into the UK rose from 16% in January-July 2012 to 21% in the same period this year. In total, UK softwood plywood imports edged 0.6% higher to 259,000m³.

At present, Malaysian plywood is typically costing 25-30% more than Chinese alternatives but, according to at least one distributor in the UK, there are an increasing number of "more discerning buyers out there who want something that is fit for purpose and are going for better-quality Malaysian or Indonesian plywood" – and, by extension, are prepared to pay the extra for it. Faced with the onset of the rainy season and logging problems, plywood producers in Malaysia have been generally firm on their pricing.

Elsewhere, Finnish birch plywood prices were raised by around 4-5% in the third quarter, and fourth-quarter production was sold out very early, although there has been some spot pricing for "special", generally added-value business. Lead times are already extending well into January on the back of healthy demand in many parts of Europe.

"It’s a strong market for the mills and they are making the most of it," one contact told TTJ. "They will definitely be looking for an increase of around 5% or even more for the first quarter of next year."

Following increases in the third quarter, Finnish spruce plywood prices were held for the final quarter of the year – but again, further hikes of perhaps 2-3% are widely anticipated for the start of 2014. Order books are "still pretty full" and lead times are out at, typically, between four and six weeks, TTJ was told.

In contrast, fourth-quarter price increases have been reported for Russian and Latvian plywood, with hikes of up to 10% reported in some cases.

Of late, mills in Brazil have been looking to add US$5-10/m³ to their elliottii pine plywood prices against a backdrop of good demand, rising freight costs and also flooding – notably in the south of the country – which has led to delays at some ports. "The mills are not struggling for business," a contact said, pointing to particularly healthy sales into the domestic, US, Mexican and Caribbean markets.