So where are we now, now that the Chinese New Year celebrations in the Asian region are over and the workers return to the forests, mills and factories? Answer: pretty much where we were three or four months ago, waiting for a sign of revival in timber consumption and a restoration of confidence in China’s economy and financial circumstances. Timber trading with China has not completely shut down, business is being done on a small scale in a number of species, even including high quality okume logs.
At this stage markets are less about the asking prices, more about economics, currency variations and government policies, not to mention trade flows in the complexities of timber business today. In Europe we tend to forget that the largest timber trade flows in the Asian region are within the region but with China for the time being firmly on the back burner the steady increase in tropical timber and product imports into the EU in 2015 meant that this market has without doubt held the key to overall market price stability, although the about 1 million cubic metres EU import volume in 2015 was still only half the volume of what used to be a normal average. Cameroon was the most successful exporter to the EU with 300,800m3 in 2015. Certainly African producers of logs and lumber and especially Asian plywood exporters are expecting the steady growth in EU imports will continue through 2016. This view is supported by statistics showing signs of recovery in building and construction business in most EU countries including the Netherlands which has had a long period of low or no growth in the building sector Asian producer and consumer countries have had recently to cope with quite large variations in currency exchange rates which seems to have been the main driver of who bought what from where. Malaysia made early gains during a period of a weaker ringgit, which has now come to an end. Japan also had notable yen variations against the US dollar making difficulties in the longterm efforts to stabilise the economy. Japan did succeed with GDP growth of 1% in 2015, with a forecast of 1.4 – 1.7% this year and in fact now has a -0.1% interest rate. In an unusual move to stimulate the economy the Bank of Japan announced it is prepared now to invest in companies that are ‘proactive investors’ and the yen has now moved up by 3% against the US dollar. Housing demand has improved again for high priced units, ahead of a new 10% consumer tax due to come into force in 2017. Japan’s very large plywood trade has concentrated on local production where prices have been lower than the imports, more than halving plywood stocks and even creating supply constraints and longer delivery times. For plywood imports Malaysia is the largest supplier to Japan.
Looking at prices in ringgit for Malaysian logs and for plywood, the 2015 average prices were almost the same as in 2014. For 2016, producers are now pressing for increases because of lower log supply and higher costs for plywood manufacturers. More than 50% of Sarawak log exports are shipped to India. The Indian government is considering a system for export financing to increase further the already successful sales of furniture and other timber products to China, Japan and Korea, but at home the housing sector was down in 2015 and there remains an oversupply of unsold homes. Myanmar has proposed a reduction in the allowable teak harvest and may consider further reductions because of alleged past over cutting. This will push teak prices higher, and in India the recent auctions prices of local teak have already moved higher.
Concerns in the EU over the mixture of timber contained in processed imports such as furniture, plywood, laminated boards, plywood and others that could fail to pass the EUTR have now triggered regulations in Indonesia and Malaysia which require all timber imports to be fully certified in compliance with their own already established export regulations. This is to ensure that whatever the mix of local or imported timber components, all manufactured products exported to EU will comply fully with the EUTR. Both Indonesia and Malaysia also have pledged to support their timber industries through increased promotion. Malaysia already has very active organisations engaged in promotion and market research and states that market intelligence will be stepped up as the key factor to improving timber and wood products exports. Japan is building a traditional Japanese wooden house in China as a promotional demonstration of the use of timber as well as to boost trade in other Japanese exports.
Another success story in the region is Vietnam’s furniture industry with exports valued at over US$1bn in the two years 2012-2014. Markets are within the Asian region and significant business with the US. No one is forecasting the timing for a recovery in China’s raw timber imports. There still exists stocks at marked down prices and although house prices and domestic spending have risen there was in 2015 a heavy fall in real estate purchases of land for building, which would seem to preclude a strong housing market at least in 2016.
Meanwhile, the Middle East remains active with very strong competition between Asian and West African exporters competing for business in this traditionally low price buyers’ market, though there are sales of high-priced timber and board products for luxury apartments and hotels.
House prices and new construction in the US have now resumed growth with opportunities to increase tropical timber sales.
Cameroon has been most successful with sapele and khaya however the US also does buy keruing from South East Asia but as yet in small volume.
All producer countries are searching for new or alternative outlets to make up for the temporary slow down in business with China. This may well bring a modest re-alignment in choices and sources of species and markets for both exporters and importers.
Europe is certainly active and supporting price stability for tropical timbers and for Asian producers the inter-regional business is still strong with a trend for a slow rise in log and plywood prices.
Government policies in the region are strongly in favour of further processed timber products coupled with tighter control of forest utilisation and increases in plantation areas.
