The UK appears to be reasonably well-stocked with Far East plywood and prices have failed to gather upward momentum. But while the market remains difficult, many in the trade point to signs of a possible improvement during the second quarter, even though demand remains lacklustre.

One operator confirmed this week that he had been looking to buy material for May/June delivery ‘because we expect stocks to be needed by then’. Another observed that supply of thinner specifications – 3.6, 4, 5.5 and 6mm in particular – no longer appeared to be as plentiful as in the recent past, adding that ‘if these go short, others may follow’. Certain specifications were not so much scarce but were becoming more ‘uncommon’ than others, said one operator.

Whether this will lead to higher prices in the near term remains in doubt, especially since competition appears to be as fierce as ever. The consensus within the UK industry is that prices must rise because there is little opportunity for operators to achieve a meaningful margin.

Several contacts pointed this week to the ever-growing impact of highly-competitive rates offered by those companies bringing charter vessels into smaller UK ports. One contact observed: ‘A lot of companies are able to buy material cheaper off the ground, even though forward prices are so low. They are selling it for considerably less than mills are prepared to sell at, and at nowhere near replacement cost.’

Indeed, mills in the Far East appear to have hardened their approach and established a base price below which they are no longer willing to do business. Furthermore, supply to the producers has been affected by the rainy season, by closer monitoring of logging activities and, in the case of Indonesia, by industrial action. ‘A lot of mills are in financial trouble,’ it was pointed out. ‘They can’t afford to make plywood in some cases and so, with their prices, it is a case of take it or leave it.’

Brazilian production

There is also a growing sense among Brazilian mills that production cuts rather than price cuts may provide the way forward. There was evidence of some ‘suicidal’ buying of elliottii pine plywood in the early part of the year in anticipation of a level of demand that failed to materialise. Meanwhile, Brazilian virola had been ‘sold too cheap’ in the recent past, with signs that the forward price was already beginning to firm. ‘We expect acute shortages of virola in the UK very shortly,’ TTJ was told.

It is understood that, at mill level, the elliottii pine plywood price has been put up by US$5-10 this year, partly in response to extended producer downtime during the carnival period in February. However, a 4-5% decline in container freight rates resulting from a reduction in bunker surcharges has meant little impact on the price in the UK.

Early-year space problems and delays at the port of Tilbury appear to have eased during the first quarter. Material has been moving off the quay at a more reasonable pace compared with the Christmas period, while the time taken for containers to be de-stuffed is now generally between one and two weeks. Earlier in the year, there were claims that it was taking anything up to three months to de-stuff containers, with softwood plywood from Brazil being particularly badly affected.

The situation at Tilbury has been helped by the relative lack of plywood-carrying vessels entering the port in recent weeks, whereas there was a glut of arrivals prior to Christmas.


Looking further afield, Finland’s birch plywood producers are feeling the effects of ever-stronger competition from the Baltics and, more recently, from Russia. Helped to some extent by Finnish technology, Russian plywood producers are now ‘eating the Finns’ lunch’, was how one contact expressed the situation. As a result, the Finns have been forced to concentrate their efforts more on added-value and specialised plywood products, which is said to be paying off in many instances.

Spruce plywood manufacturers in Finland had witnessed some weakening in prices around the turn of the year and business is said to have remained relatively quiet throughout most of the first quarter of 2002. That said, mills are generally operating on relatively long lead times.

Long lead times are also being experienced in the Baltics on the back of healthy demand, not least from the UK. Four to six weeks was quoted as the lead time by one contact, who added that greater reliability of shipments was helping the Baltics to ‘stay ahead’ of the Russian competition. The renewed impetus to demand was particularly welcome, he added, given the dearth in forward orders recorded in December and January.

Turning to Russia itself, plywood producers are continuing to benefit from the relative strength of the country’s eco-nomy, with prices on the home market still outstripping those available on the export front. The strength of plywood demand in Russia was highlighted by a report this week that one factory was already sold out for the year purely on the back of domestic orders. However, freight movements within Russia are still being dogged by lack of available wagons.

Reduced duty

Russian material continues to be obtainable for those buyers in the UK ‘willing to pay the price’ and demand in this country is relatively good.

Meanwhile, the EU is understood to have reduced the duty rate on GSP with effect from the start of the year, although this attracted little publicity at the time. The rate has been dropped from 4.9% to 3.5% for possessors of one of the EU’s GSP A forms, although there has been scant evidence of Russian mills putting up their prices to pocket the gain for themselves.

Plywood producers in the US have managed to push prices somewhat higher since the start of the year, although one effect has been virtually no sales to the UK in recent weeks. A market expert observed that the Sturdifloor price was now exceeding that for comparative product from Finland – ‘and so any BS 5268 Part 2 business is going to the Finns,’ he said. The price differential between Sturdifloor and CDX sheathing had gone out to around US$40 earlier in the year but has subsequently returned to a more normal level of around US$25, he added.

Renewed confidence

The plywood price has been driven up in the US by a number of factors including: encouraging housing figure forecasts; generally reasonable order files; and the return of a greater level of confidence to the US market. Furthermore, the combination of logging problems created by the mild winter and prolonged producer downtime earlier in the year for general maintenance has resulted in a reduction in inventory levels and more balanced overall market conditions within the US.

End of year statistics from APA – the Engineered Wood Association offer proof positive of the rapid evaporation of North American plywood shipments to the UK and Europe. During the whole of 2001, exports to the EU totalled 24,882m³ compared to 69,194m³ in the previous year; the UK remained the leading buyer within the EU but its total for 2001 of 9,212m³ was less than a quarter of the 37,415m³ recorded in the previous year.

As an APA spokesperson pointed out, previous years had seen UK imports average nearer the 270,000m³ mark, with the steep decline in North American exports being mirrored by the increase in UK imports of Brazilian elliottii pine plywood.

Against this backdrop, North American plywood interests have reacted angrily to rumours that some elliottii may be leaving Brazil in unmarked form prior to being ‘mis-marked’ in Europe. ‘If we find evidence of somebody mis-marking plywood, we will certainly take them to court,’ said a spokes-person for a leading industry organisation. Such actions undermined the image of both the industry and the product while also playing into the hands of alternative materials, he added.

Another contact with a heavy involvement in North American plywood warned: ‘If there is evidence of someone mis-marking plywood, the industry won’t be afraid to name and shame.’

The same contact went on to attack the large number of UK buyers who ‘go for cheap material rather than quality and then wonder why they can’t make any money on it’. He confessed himself ‘sick’ of hearing about the parlous state of the UK plywood market at a time when actual consumption of structural panels in this country ‘has never been higher’.

Large volumes of duty-free plywood tend to result in below average sales of OSB during the early part of the year – and 2002 has been no different in that respect. Prices are generally flat and are expected to remain under pressure, although one manufacturer did report an increase in its OSB 2 price earlier this year.

Meanwhile, there are strong rumours of small quantities of Bulgarian board being offered into the UK at very low prices. But as one industry expert pointed out: ‘There is over-capacity in Europe and so you are always going to get cheap offers being made.’

OSB consumption

On a more positive note, latest figures from the European Panel Federation reveal that Europe-wide consumption of OSB increased by around 29% last year to 1.4 million m³ while production jumped by 28% to some 1.6 million m³. Exports of OSB to non-European countries are also on the increase.

On the news front, Ireland’s state-owned forestry company Coillte has bought Louisiana-Pacific Corporation’s 65% shareholding in its OSB joint venture at Waterford – subject to approvals under Irish merger and takeover law (TTJ March 2). This means the taking up of an option agreed between the two parties when the plant was set up in 1996.

Meanwhile, the planning process has begun for a new continuous line at Waterford to provide additional OSB board size flexibility for servicing the Continental market. No details of a likely timescale for the project or size of plant have yet been disclosed.