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Wood Products Prices in The UK & Holland

16-30th November 2009

Report from Europe, the UK and Russia

Limited supply and low consumption
The European market for tropical hardwood sawn lumber
has changed little over recent weeks maintaining a fine
(and potentially unstable) balance between generally low
landed stock levels, very low forward business and much
reduced consumption. CIF prices are generally firming on
the back of rising freight rates and shippers efforts to raise
FOB prices.

The supply situation is relatively easy to read. Although
shippers are able to meet current levels of limited demand
without too much difficulty, their stock levels are low and
there is little wood in the pipeline. Therefore the
suggestion is that any increase in demand is likely to lead
to shortages fairly quickly.

The demand situation is much more difficult to read.
Given the significant reductions in tropical wood imports
revealed by EU trade data, there can be no doubt that
underlying consumption has been well down this year.

It is also clear that many hardwood trading companies in
Europe, particularly smaller, more narrowly focused
companies without resources and capacity to hold stock,
have suffered considerably during 2009.

Nevertheless, surviving European hardwood traders
contacted in late November report that, while a difficult
year, 2009 was not as bad as they had originally
anticipated. These traders are generally larger, better
capitalised and more diversified companies. They suggest
that while consumption of softwoods and panels in the
new build sector has been very badly hit, hardwoods
which are more widely used in the finishing and
decorative sectors, have at least seen some benefit from
continuing activity in the renovation and refurbishment

As to prospects for next year, few traders are willing to
make any far-reaching predictions. The recession may be
technically over in many European countries, but
continuing high levels of unemployment and of public and
consumer debt imply only a slow return to growth.

There continue to be mixed reports of European
continental stock levels of sapele sawn lumber. There are
indications that these are now much lower than in the
summer months.

Kiln drying operators that were still working through large
quantities of sapele sawn lumber this time last year are
now very quiet. Nevertheless, traders report that the large
continental stockists are still offering sapele sawn lumber
from existing landed stock at competitive prices.

Competition for sales of sapele stocks remains extremely
fierce, with traders reporting that sales will be lost if prices
are only very marginally above the competition.

Given the current market conditions there are still very
few people willing to speculate on the forward market,
particularly as shipping times are now very extended.
Forward orders placed for sapele at the end of November
would not be shipped now until March/April.

Freight rates are another area of uncertainty. After hitting
a low in early 2009, they have been rising steeply from the
second quarter of the year onwards.

The market for iroko remains patchy, some traders
reporting ¡°consistent demand¡±, other suggesting sales are
sluggish. The market picture for framire is equally mixed.
One large European trader noted that ¡°framire supply was
insufficient to meet demand at the start of the year but by
the summer months production was again in excess of
consumption. Now it is again becoming difficult to secure
adequate supplies and prices are firming¡±.

Prospects for Meranti improving
A trader in the UK reports that ¡°at present meranti is very
much taking a back seat - this market has become
increasingly oriented towards sapele¡±. Although he also
conceded that the situation in the UK is different from that
on the European continent: ¡°the UK has generally only
ever bought the lightest and cheapest meranti species
which means it is often compared unfavourably against
sapele and dismissed unfairly¡±.

Furthermore, longer term prospects for meranti in the UK
and wider European market are improving now that it is
widely available as MTCS certified, and soon PEFC
certified, and with faster delivery times for forward orders
than equivalent African species. This trader noted that
FOB prices for meranti, after falling significantly during
the first part of 2009, have remained stable over recent
months. However CIF prices have increased in response to
rising freight rates.

Some traders optimistic about European prospects
European traders interviewed over the last few days have
questioned some of the more gloomy conclusions
regarding future long-term prospects for tropical
hardwoods in Europe reported in previous ITTO reports.
For example, one trader made the following comment
regarding the threat posed to tropical hardwoods from

¡°Species like sapele and iroko all have a trigger point at
which customers will start looking for alternatives. Prices
for these species are not at that level yet. In practice there
are not actually that many alternatives. I am not entirely
convinced by modified softwoods ¨C while quality and
durability can be very good, availability is still quite
restricted and prices are not very competitive. In a
conservative market like the UK, many buyers prefer to
use what they know. That means sapele which has become
very well established in the market¡±.

Another trader noted that heat-treated and acytelised
softwood alternatives to tropical hardwood are ¡°still very
much on the fringes¡± and that those companies now
trading in these products ¡°are having difficulty moving
them in volume¡±. This trader also felt that ¡°the timber
trade generally has a significant problem of loss of market
share to alternative materials. But I don¡¯t necessarily think
that tropical wood is in long-term decline against other

This comment was mirrored by another tropical hardwood
trader who was optimistic that the growing availability of
legally verified and PEFC and FSC certified tropical
hardwood should neutralise the negative environmental
image and help turn the tide.

Preference for legally verified over FSC certified
Reports continue to suggest that relatively high prices
have meant only limited demand for FSC certified tropical
hardwoods in Europe. Those buyers seeking
environmental assurances have tended to prefer wood
supplied under various legality assurance systems being
offered at little or no premium over the unverified product.

In the UK, there are some preliminary enquiries just
coming through specifically for FSC certified tropical
hardwood for 2012 Olympic construction projects.
However it is too early to say whether procurement
officials will be willing to pay the 20% or so premium
generally required to secure FSC certified tropical product.

Some traders also expressed concern over the release of
new FSC report indicating that PEFC certification does
not meet the requirements of the FSC Controlled Wood
(CW) standard.

Non-certified material in FSC %-labelled and FSC Mixed
products must comply with FSC CW and be independently
verified before being mixed with certified material.

Many traders supplying FSC percentage labelled products
had been relying on PEFC certified wood to demonstrate
conformance to FSC CW. This was seen as a pragmatic
response to the challenges and extra costs faced by traders
due to the failure of FSC and PEFC to co-operate in any
meaningful way. However trading companies using the
FSC labels will now have no option but to introduce
additional potentially costly CW risk assessment and
verification procedures.

The underlying message of the FSC report seems to be
that the two certification systems remain as far apart as
ever. Unless there is progress on cooperation the only
realistic option for traders may be to choose to work
exclusively with one or other of the two systems.

FSC evidently wants to encourage more traders into their
camp. But a strategy that implies extra costs at a time
when there is no strong market incentive for FSC may
have the opposite effect.

In fact one plywood trader suggested that the negative
implications of the FSC report are already being felt in
Malaysia where the MTCS certification system was
recently endorsed by the PEFC.

Those Malaysian plywood mills that previously supplied
FSC Mixed products and which had relied heavily on
MTCS certified material for the non-FSC component are
now showing signs of switching to supply of PEFC
products. The latter is given equivalent recognition to FSC
in many European government procurement policies so
there may be little incentive for Malaysian suppliers to
continue to engage with FSC.


LM       Loyale Merchant, a grade of log parcel  Cu.m         Cubic Metre
QS        Qualite Superieure    Koku         0.278 Cu.m or 120BF
CI          Choix Industriel                                                       FFR           French Franc
CE         Choix Economique                                                        SQ              Sawmill Quality
CS         Choix Supplimentaire      SSQ            Select Sawmill Quality
FOB      Free-on-Board     FAS            Sawnwood Grade First and
KD        Kiln Dry                               Second 
AD        Air Dry        WBP           Water and Boil Proof
Boule    A Log Sawn Through and Through MR              Moisture Resistant
              the boards from one log are bundled                      pc         per piece      
              together                      ea                each      
BB/CC  Grade B faced and Grade C backed MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF        Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot              Price has moved up or down

Source: ITTO'  Tropical Timber Market Report

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