Of course, the big Asian news is arrival in the EU of the first FLEGT-licensed timber products from Indonesia.
But other Asian producers are also progressing toward full implementation of their EU FLEGT Voluntary Partnership Agreements (VPA), as well as imposing tougher conservation and other controls on forest resources.
Malaysia’s efforts are long term and it is steadily reducing total log harvest volumes. This couples with major increases in furniture production and other downstream processing for export and local sales.
It is also reported that Vietnam has agreed in principle to sign a VPA and it is hoped this will be formally ratified in 2017 following ongoing technical and procedural discussions with the EU.
Turning to current trade levels, the days of Asia/Pacific providing unlimited log output in response to demand, even for processed timber products, are over. Currently, business is slower and affecting plywood demand in particular. That is largely due to lower consumption of imported ply in Japan and slacker pricing, despite manufacturers’ recent initiatives to propose modest price increases in response to rising log input costs, now up again by some US$20/m3.
Plywood manufacturers in Japan are now using more local plantation wood, but negative financial implications of replanting are causing concern and discussion on whether investors and landowners can be persuaded to replant sufficient areas to balance the increasing volumes now being harvested.
The Japanese have also had to cope with quite large currency fluctuations, which strongly affect market sentiment. In other plywood news, the US industry has requested the US government apply anti-dumping import duties on Chinese plywood. A decision is expected January- February 2017 with possible imposition by the end of the first quarter.
Malaysia buyers switch to PNG
The reduction in Malaysia’s log harvest results in limited availability of export logs, forcing Indian importers to switch to Papua New Guinea (PNG) sources.
The PNG species mix differs from that of Sarawak, but Indian processors are adaptable. PNG log exports in recent years have been focused on China and the recent past slowdown in demand impacted heavily on logging, which is mainly operated by Malaysian-owned companies.
A debate has opened on the question of disposal of illegal logs seized by the government of Myanmar, as to whether and how these logs may be utilized.
There is a wider, international debate to be had because, if logs are illegally harvested in any country, they and any products made from them could never become ‘legal’ and could not, for example, enter the EU under the EU Timber Regulation. Sale for incountry local use appears to be the answer as it would be wasteful to burn such a valuable resource.
The wider marketplace reports a mixed, but largely positive picture. Through 2016 there has been a stable and slowly rising trend in price and volume as China’s economy strengthens and construction starts to recover. India too was more actively in the market, partly because timber from Myanmar, both legal and smuggled, trickled almost to a halt.
The US managed to sustain ongoing recovery in employment and stability in the housing sector. This impacted favourably on furniture and plywood imports and is forecast to continue into 2017.
Middle east trend to quality
The Middle East battleground of price and product competition between Asian and African suppliers might well be called a draw. There were no winners or losers and business continues briskly, but with emphasis on the higher qualities and more sophisticated board products that tend to favour Asian suppliers. Meranti is still the best-regarded timber for larger dimension internal woodwork.
A similar though smaller battle of the species is in going on in South Africa, which has been a strong buyer through the year, but now warns of less positive conditions for the coming year.
It is not clear why there should be any drop off in demand, but certainly timber import prices are now under some pressure, with Asian suppliers having fared better than the West African suppliers in recent months.
Europe tropical decline ongoing
And what of Europe? Statistics indicate the slow decline in imported tropical hardwoods was either slowed or halted. Contrast this with high demands for Europe’s temperate hardwoods, notably oak.
Overall, as with other import countries, construction sectors improved significantly in almost all major European countries. Most prices were stable or on a slightly rising trend, but there was a dramatic fall in prices for sapele and sipo. It is difficult to pin down a root cause, but most likely because of very low purchases for China. There were no signs of any recovery in these prices and khaya also weakened a little with lower demand in USA.
Until the current European designer fashion for light coloured woods changes it seems unlikely the current slow volume decline in European demand for tropical timbers will reverse.
As always, forecasts of forward market prospects are mixed and unclear. The question is whether modest price gains and the steady increase in volumes traded in 2016 can be maintained through 2017.
Economists acknowledge progress but seem to feel that growth will slow, whilst the trade is much more confident that the stability and slow improvements will last through 2017. And yes, the signs are positive for two of the major players, China and the US, both of which have maintained gradual economic recovery over the past two years and their economic pointers strongly indicate continued progress.
Stable and positive trend
European demand seems likely to hold firm as construction works have improved, although there may be some occasional variations because of the UK Brexit vote and government elections elsewhere.
But markets in Asia look to be settled and hopes are that Japan’s building programme will continue at current levels, with concerns now that supply may outstrip demand. The Chinese New Year falls on January 28th and this will also affect first quarter production.
Overall, the news for the trade appears to trend to stable and positive.
