The UK plywood trade enjoyed a reasonably busy October although the early days of November were less encouraging from the point of sales and enquiries. Stocks are generally quite low, prompting suggestions that any significant upturn in demand will quickly expose shortages.

For the moment, a big issue for the plywood trade is the report released last month by Greenpeace which claims that illegally-logged timber from Papua New Guinea is being processed in China and then exported to Britain in plywood. The document names individual companies as either importing or stocking Chinese plywood which allegedly contains illegally-sourced wood. Leading merchant Wolseley UK has responded by suspending the purchasing and sale of Chinese plywood while its supplier, International Plywood, has confirmed that it is contacting suppliers to re-verify the legality of the material imported.

According to several importers, some customers have responded by insisting that none of their supplies should be sourced in China. However, an equal number have maintained that, while larger high-profile companies might act to avoid such publicity, many of the smaller to medium-sized merchants would continue to buy on price. Another source said this week that the furore surrounding the Greenpeace report “has had no adverse impact on UK sales of Chinese hardwood plywood”, although he added that stocks were becoming depleted.

China leads exports

During the course of this year, China has developed into the leading exporter of hardwood plywood to the UK with a total of 105,000m3 delivered in the first eight months of 2005, according to statistics from independent industry analyst Timber Trends. The figure represents an increase of 109% over the 50,000m3 dispatched from China to the UK in the corresponding period of last year.

UK imports of Malaysian hardwood plywood decreased over the comparative periods – by 12% to 99,000m3 – while deliveries of Brazilian and Indonesian material declined further: imports of the former dropped 24% from 132,000m3 in the first eight months of 2004 to 100,000m3 while the latter tumbled 35% from 88,000m3 to 57,000m3.

Overall, UK imports of hardwood ply from these four supplier nations fell 6% to 361,000m3 over the first eight months of the year. It should be remembered that trends can be skewed by the timing of vessel arrivals and by other factors not directly related to consumption.

It was said this week that UK stocks of both Indonesian and Malaysian hardwood plywood are not too plentiful. Several experts claimed that, irrespective of origin, there was a general shortage in the UK of hardwood plywood thicknesses below 9mm, while one contact highlighted diminishing stocks of marine ply. “I would also expect 9mm and 12mm hardwood plywood from Indonesia and Malaysia to get short because there are not many big vessels to come in,” TTJ was told.

Overall, UK demand for hardwood plywood has been poor or below average for most of this year. The majority of companies are claiming that, in recent weeks, enquiries and sales volumes have been much lower than at the same stage of last year. The availability of cheaper Chinese hardwood plywood in the UK is blamed by many for keeping prices “flat” and “depressed”. That said, China’s loss of GSP status at the start of 2006 is expected to impact on the base price while also creating a flurry of activity during the rest of this year.

Premium problem

&#8220If you want to buy a certified product, you have to pay a premium. That makes it very difficult to compete”

Many importers are said to be struggling to justify their involvement in hardwood plywood. “The problem,” said one source, “is that, if you want to buy a certified product, you have to pay a premium. That makes it very difficult to compete.”

Indo96 list prices for Indonesian and Malaysian hardwood plywood were put at between net and +5 this week. However, mills in Indonesia are pushing for higher prices, not least because they are struggling to offset the higher costs of freight, power and logging. Of course, any such move will only widen the differential to Chinese hardwood plywood, which is currently estimated at 25-30%.

UK sales of Brazilian hardwood ply have been devastated by the availability of cheaper alternatives and by currency movements. On a more positive note, there was a firming in the price of Brazilian elliottii pine plywood following increased US demand for hurricane-related reconstruction work. Prices have subsequently receded although they have not returned – as yet, at least – to pre-Katrina levels. Production capacities have been falling over recent times as the Brazilian mills struggle to make money out of elliottii on the back of, once again, currency movements and rising costs. Having noted that his own company’s turnover on elliottii had slumped 70% this year, one importer spokesperson suggested the UK market could see shortages by early next year.

A leading Finnish plywood producer told TTJ that, overall, 2005 had been “a very good year” despite economic uncertainties in the key German market. Extended lead times have become a fact of life for buyers of Finnish spruce plywood, with a spokesperson for a leading manufacturer said: “Order files are firm and prices will probably remain firm into the first quarter of next year. It could be difficult to offer someone volumes next year if they are not already on allocation.” Demand has been particularly strong from the UK and Scandinavia, to the extent that they have been mopping up volumes becoming available as a result of lower consumption elsewhere.

Lead times on Finnish birch plywood are now also extending into next year in most instances, although shorter delivery times may be available for specifications that suit the individual producer. Prices have remained firm, it was confirmed this week.

Importers of Latvian plywood reported that, as a result of a lack of spare capacity, supply into the UK was likely to remain tight into 2006.

Lead times

Lead times vary between three and eight weeks depending on product and specification, according to a leading player in this market. “We expect to see some modest firming on all birch plywood prices next year,” he added.

For the bulk of the UK plywood trade, 2005 will not be remembered with any great affection. One expert pointed to the significant lay-offs announced by several leading customers and to redundancies and closures within the timber trade itself. And he added: “If prices don’t improve, there will be more of that next year because costs are continuing to go up.”

This year has also brought little cheer to the OSB market, although UK demand is said to have improved slightly over recent weeks, to the extent that lead times have re-entered the equation in some cases. Supply and demand have become more balanced in the UK, partly because significant volumes of Continental board have been going instead to the US for use in post-hurricane rebuilding work.

A senior spokesperson for a leading OSB manufacturer complained that product was still being sold at a loss but that an opportunity to increase prices might arise even before the end of this year. “We have seen a gradual decline but I think we have now reached the bottom of the current cycle,” he said. Price increases were necessary, he added, to mitigate the effects of rising costs, particularly for glue and energy.