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Wood Products Prices in The UK & Holland

01-15th December 2011

Report from Europe  

 
  Challenging European market for tropical hardwood plywood
The European market for tropical hardwood plywood
faces numerous challenges. Prices for existing landed
stocks are under downward pressure as consumption is
slow in the winter season and, with the European
economic situation so fragile, few importers are expecting
a significant rise in sales next year.

However, rising production costs in SE Asia mean that
shippers either have to raise prices C currently very
difficult in an unreceptive market - or to cut costs. Many
are choosing the latter course and this risks compromising
on quality.

Chinese manufacturers have been the major beneficiaries
of these trends. Their ability to offer low prices, combined
with the willingness of many importers to buy on price not
quality, has meant that China has continued to gain market
share in Europe this year.

European importers unconcerned about impact of
Chinese New Year on supplies as landed stocks are
adequate

Despite the anticipated slowing in supply of plywood from
mid-January during the Chinese New Year, orders for
Chinese hardwood plywood from China by European
buyers remain subdued.

Consumption of existing European inventories of this
commodity remains slow. With availability in China good
and relatively short turnaround times for new orders,
European importers seem little concerned about any
potential shortfall in supply.

According to Timber Trades Journal (TTJ), the UKs
timber industry magazine, the sale of assets of UK-based
RKL Plywood which recently went into administration,
has led to increased availability of Chinese plywood on the
UK market.

This has further dampened prices on the ground in Europe
at a time when other issues of limited raw material supply
and rising production costs argue in favour of increased
prices.

With Chinese exporters also wanting to reduce
inventories, some are offering discounted prices in the
hope of stimulating sales. However there has been no
reduction in production costs in China.

FOB prices of better quality Chinese plywood have
remained stable or even tended to rise to accommodate
increased costs of labour and raw material in China.

This rise is being offset in the European market by
continuing decline in container freight rates from China.
Rates for a 40ft container on the China-Europe route have
fallen from around US$2000 in May this year to close to
US$1000 today.

Serious quality issues emerge in UK plywood market
According to the TTJ, quality issues are now emerging as
a very serious concern in the UK plywood market. One
UK plywood industry expert alleges that around 80% of
all Chinese plywood currently in the UK is MR with
dyed red glue to look like WBP, with a large proportion
being under-thickness but marked as full thickness.

Furthermore, says the TTJ, a significant percentage of
Chinese plywood supplied to the UK is CE marked and
yet a number of suppliers appear not having their
plywood performance-tested on a regular basis to confirm
the structural performance. If these allegations are true,
the long-term repercussions for the reputation of Chinese
hardwood plywood in the UK could be very severe.

Slow sales of SE Asian plywood in Europe
Sales of Malaysian plywood in the European market have
remained slow in recent weeks. In the UK, Malaysia has
generally been losing share to Chinese products during
2011. Prices for Malaysian BB/CC WBP plywood,
composed of tropical hardwood throughout are currently
in the region of Indo96 +30%.

Significantly cheaper prices are available, although as with
Chinese plywood, compromises have been made on
quality. With price expectations now so low in Europe,
more Malaysian manufacturers have followed the Chinese
route of offering combi-plywood composed of a tropical
hardwood face and a poplar core.

Prices for the best quality Indonesian BB/CC WPB
plywood on offer in Europe have declined slightly from
levels achieved a couple of months ago, but are still
significantly higher than those for Malaysian plywood,
exceeding Indo96 +40%.

Very little Brazilian hardwood plywood is now imported
into Europe. Brazilian suppliers are generally unable to
compete with Malaysian plywood at the higher end and
against Chinese plywood at the low quality end of the
market.

Meanwhile European imports of plywood manufactured
from eucalyptus plantations in South America, while still
quite small, are rising following recent investments by
Weyerhauser in Uruguay.

EU and Vietnam move towards agreement on illegal wood trade
A report from Vietnamnet.vn suggests that Vietnam and
the EU have entered the final negotiation stage towards a
bilateral agreement to minimize the risk of illegal wood
trade between the two trading partners.

The so-called FLEGT Voluntary Partnership Agreement
(VPA) may be implemented prior to March 3, 2013, the
date when the EU Timber Regulation (EUTR) is due to
take effect.

Under the EUTR, all European importers will be obliged
to implement due diligence systems to minimize the risk
of any wood being derived from an illegal source.

They will also be liable to prosecution if found in
possession of wood extracted or traded in contravention of
the laws of any country.

However according to EUTR, any timber or timber
product licensed under the terms of a VPA C such as that
likely to be agreed with Vietnam C will be automatically
recognized as legal in the EU market. European importers
will be under no obligation to seek further safeguards
(such as certification) to demonstrate the legal origin of
VPA Licensed timber.

Vietnam and the EU successfully completed the second
negotiation round of the VPA agreement in early
December. The agreement is particularly significant for
the Vietnamese furniture manufacturing sector which is a
major supplier to the EU. In 2010, EU imports of wood
furniture from Vietnam had a total value €539 million.
Vietnam is currently the second largest external supplier
of wood furniture to the EU after China.

According to vietnamnet.vn, some Vietnamese furniture
manufacturers remain unconvinced about the benefits of a
FLEGT VPA, believing that the additional costs of VPA
Licensing will undermine competitiveness. However,
others are gradually coming round to the idea that the
FLEGT VPA process may be less of a trade barrier and
more of an opportunity to gain greater share of the
European market.

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Abbreviations

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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