The efforts of Greenpeace and other environmental lobby groups have ensured a higher profile for hardwood plywood recently. However, latest evidence suggests that a large proportion of the UK market still leans towards the best price on offer rather than, for example, towards FSC accreditation. “We are getting a lot more enquiries for FSC material,” noted one trader, “but the higher prices are still putting people off.”
The decision by most Far East mills to hold firm on their own prices can be attributed to a number of factors, including the imminent arrival of the rainy season, the ongoing struggle with log quality and relatively good demand from some of their markets, most notably Japan. The Indo 96 list price is said to be occupying a reasonably broad range between -22 and -26.
Meanwhile, evidence of softness in the UK market has been blamed on “traders and agents who need the business”. Some companies are accused of having brought in too much Far East plywood and of “cutting prices to get the few big orders around” in a market where demand was described this week as “diabolical”. Forward buying has been severely limited given that supplies can be snapped up off the ground.
Changes forecast
One prominent trader confirmed that “the summer season has come a lot earlier this year”. Elsewhere, the tone was more bleak, with a couple of contacts predicting major changes within the industry before the end of this year. One commented: “I wouldn’t be surprised to see the demise of a large importer or at least a serious reduction in plywood market exposure.”
End consumer demand is relatively weak and orders generally reflect hand-to-mouth buying policies, with one trader contending that, while his order volumes have been higher than at the same stage of 2002, “the size and the value are greatly reduced”. Few experts anticipate an early upturn in fortunes given that the market is now entering the main holiday months of July and August.
Shipments slow
One consolation is that there is a lull in plywood shipments following the arrival of several vessels in close succession. There are also hopes that a backlog in civil and housing projects might produce a demand boost after the summer holiday period.
The pain of those engaged in the Brazilian hardwood plywood market has abated to some extent now that much of the low-price material has gone through the system. However, the recent experience of soaring and then nose-diving prices has prompted many UK importers to limit their forward commitments on Brazilian material which, in any case, enjoys the advantage of a shorter delivery time to the UK compared with Far East hardwood plywood. Purchasing levels on mainland Europe are also said to be below normal for the time of year.
The K14 list price is put at anything between -39 and -42 for ‘combi’ plywood and -36 to -39 for hardwood throughout. Mills have needed to maintain prices to meet rising overheads, including a recent substantial increase in glue costs.
The elliottii pine plywood price has also edged lower although, as many contacts were quick to point out, the decline has been completely overshadowed by currency fluctuations. Competition remains stiff and stocks are thought to be generally on the low side.
Eastern competition
Finland’s birch plywood producers are continuing to feel the generally adverse effects of increased competition from the Baltics and Russia, currency exchange fluctuations and relatively static sales volumes as buyers continue to purchase largely on a hand-to-mouth basis. “Finnish mills are very reliant on the German market which is as bad as it has been,” noted one producer. Mill shutdowns are likely to help peg prices even though order books are quieter than normal for the time of year. Most producers are now quoting delivery times after the shutdown period, ie mid to late August.
Finnish spruce plywood is achieving satisfactory UK sales at stable prices, although currency-related problems apply here too. The mills’ summer closures tend to be shorter than those on the birch plywood side of the industry and so end July/early August delivery times are still being quoted in a number of instances.
Once the ice finally cleared from Baltic and Russian harbours, there was the inevitable surge in exports from the region. Substantial volumes of plywood – most notably out of St Petersburg – have arrived on to a UK market which, according to one expert, “is as quiet as I have ever known it” thanks to the combined effects of currency exchange rates, war in Iraq and generally lacklustre commercial sentiment. As a result, there was now stock in the UK that was “begging to be eaten up”. A return to normality was not anticipated until September or October.
A few isolated deals on Baltic and Russian plywood have been reported, along with suggestions that a new Russian organisation has been offering lower prices through a UK agency. That said, sales prices for the region’s plywood had dropped slightly in euro terms but were “not all that different” in US dollar terms.
While European and US demand has been largely unspectacular, lead times quoted by Russian mills remain at around two weeks, partly on the back of continuing strength in domestic plywood demand which has allowed producers to sell their output at “quite high” prices.
Exports of North American plywood to the UK continue to be hampered by an effectively unbridegable price differential compared with rival Finnish and Brazilian elliottii pine plywood. Some material arrived in January and May “to beat the duty” but the market had gone “deadly quiet” since then, according to a regional expert. More competitive export prices may emerge later in the year once the US housing market begins to cool. For the moment, however, US housing starts remain around 1.7 million and housebuilders are catching up on their plywood purchases following the restrictions imposed by severe winter and spring weather.
CE marking
One of the main issues facing plywood is CE marking and North American producers are anticipating that southern yellow pine will gain an advantage by the introduction of a marking system by October this year. “Major players will not risk having non-CE marked plywood in their sheds because they will not want to let it escape on to a building site,” noted a North American specialist.
The other major news from the US has been the strength of demand for OSB, with prices reportedly reaching record levels. European producers are shipping greater volumes of material across the Atlantic in a bid to benefit from conditions which are markedly different from those on their own side of the ocean. While some increases were introduced during the second quarter, UK manufacturers are now experiencing price pressure on the back of an increase in competitively-priced imports from the near Continent and also Bulgaria. “It’s frustrating because nobody in the industry wants prices to fall but the Continent sees the UK as a place to dump its OSB,” said a leading producer. At the same time, he added, buyers were not showing sufficient regard to quality nor, in some cases, to load-bearing requirements.
OSB demand from the furniture and timber frame sectors appears to be reasonable for the time of year, although orders are expected to become thinner as the summer progresses. “The overall situation is not as bad as it was this time last year, but it’s going to be a quiet summer,” said one producer. Another ventured: “We are selling everything that we make at the moment, but the summer is always a testing time. It is a finely balanced market.”
