• UK demand for plywood is variable.
• Freight rates are rising because of lower capacity.
• These rates are reflected in higher plywood prices.
• Other countries’ economic recovery could have an adverse affect on UK trade.

It’s not the ideal adjective to use in a market report trying to pin some direction on trading patterns, but the picture in UK plywood does seem to be mixed.

According to some of our sources, demand remains subdued, although there is uncertainty over whether this is down to the normal summer slowdown or seasonal factors masking deeper underlying consumption problems.

Or as one agent said: “Due to the recession it is hard to tell if it is a typical August or something more ominous”.

Another described the market as currently going through a flat stretch, despite “a very good June and July”.

“There has been no real sense of consistency; I thought good times may continue, but worryingly, I haven’t had a single order enquiry this month,” he said.

Forward ordering

He added that his company was seeing little forward ordering and, generally, products being bought on a hand-to-mouth basis; as it has been since the recession began in October.

Contrarily, however, other sources reported trade picking up, with one saying that they had seen forward ordering continuing to grow since March. After driving stocks down, cautious importers, he maintained, were now rebuilding inventories.

And a merchant reported that, while day to day trading is patchy, inter importer business is “reasonably brisk as traders try to fulfill orders”.

“They can see forward prices are moving up due to high freight rates and shipping difficulties, so are using stuff from the ground to balance stocks,” he said. “The most popular wood being traded between importers is Malaysian ply but there has also been an increase in the trade of elliottii pine, due to shipping problems from Brazil.”

Shipping prices

A key issue raised by one contact was that shipping prices have doubled in the past two months, boosting prices of Malaysian and Chinese ply. One agent added that further hikes in freight rates would prove to be more significant than currency fluctuations. The reduction in freight capacity is affecting Brazil’s exports in particular. As other producers and industries pay better money than timber, plywood shipments are being left behind and, although at present lead times are as low as three weeks, they could lengthen.

Global economic uncertainty is also causing concern. On one side the emergence of Germany, France and Japan from recession, with the US expected to follow soon, is greeted as good news, but there are also concerns that the recovery of these big consumers earlier than the UK could result in it losing a share of the plywood market. As one importer said: “Those countries tend to buy ahead of us in any event, with the UK tending to be more cautious. If prices keep rising and the UK gets on board too late then we will have to pay more for less. It’s a trepidatious situation.”