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Wood Products Prices in The UK & Holland

01-15th January 2013

Report from Europe  

   European plywood market undergoing rapid

The European plywood market is changing rapidly.
Since the start of a recession in 2008, the market has
become less willing to pay premium prices for tropical
hardwood plywood. Instead it has opted for plywood
manufactured from alternative hardwood species.

The emergence of China as a major supplier of large
volumes of hardwood plywood at competitive prices
played an important role to drive this change. Now the
market looks set to alter again.

This time the main driver is likely to be the EU Timber
Regulation (EUTR), to be enforced from March 2013.
The EUTR will require that EU importers have access
to documents demonstrating negligible risk of any
wood product coming from an illegal source.

This will present challenges for suppliers of wood
products that rely on long and complex supply chains -
such as many Chinese plywood manufacturers.

Switch from tropical to temperate plywood
EU imports of tropical hardwood plywood have been
falling since the middle of 2010 (Chart 1). Between
January and June 2012, the EU imported 153,000 cu.m
of tropical hardwood plywood, 15% less than the same
period in 2011.

In the first half of 2012, tropical hardwood plywood
imports into the EU fell 33% from China (to 45,000
cu.m), 8% from Indonesia (to 40,000 cu.m) and 9%
from Malaysia (to 20,000 cu.m).

European domestic manufacturing of tropical
hardwood plywood C using imported African okoume
logs - has also fallen dramatically and is now
negligible. This follows implementation of a ban on
exports of okoume logs by Gabon in May 2010.

In contrast, EU imports of temperate hardwood
plywood increased dramatically between 2009 and
2011 (Chart 2).

In the first 6 months of 2012, imports were 1.01
million cu.m, little changed from the same period in
2012. Imports from China were up 21% at 493,000
cu.m, while imports from Russia were down 18% at
344,000 cu.m.

The recent switch from tropical hardwood to temperate
hardwood plywood in the EU market is the result of
various factors. These include relatively high and
volatile prices associated with tropical hardwood
plywood and lack of availability. These trends became
strongly apparent following the tsunami in Japan in
March 2011 which led to a large volume of tropical
hardwood plywood being diverted to reconstruction
work in Japan.

EU plywood imports from Indonesia were particularly
affected by shipment delays and large fluctuations in
container rates during this period.

Meanwhile Chinas ability to competitively produce
okoum plywood for the EU market has been impaired
due to imposition of anti-dumping duties on EU
imports of this product from China since 2004. The
duty levels imposed range from 6.5 % to 23.5 % for
four Chinese producers and 66.7 % for all other

However, availability of poplar and eucalyptus
plywood from China has increased rapidly. These
products have become increasingly important in
international plywood supply.

Although not offering equivalent durability, strength
and quality as tropical hardwood plywood products,
prices for Chinese hardwood plywood products are
extremely competitive (see table). The EU market has
increasingly accepted these products for a wide range
of utility applications requiring a lower level of
technical performance.

There is speculation that tropical hardwood plywood
from Indonesia and Malaysia may reclaim some
market share in the EU market during 2013. This is
partly because supply has improved over the last 12

Prices for South East Asian plywood remained more
consistent and have been less volatile than in the past.
In addition, moves to develop comprehensive legality
verification systems in these countries are expected to
boost competitiveness following implementation of

A notable trend in the EU hardwood plywood market
during 2011 was replacement of Indonesian film-faced
plywood with cheaper Russian birch plywood
products. However availability of Russian birch
plywood declined in 2012 as manufacturers struggled
to source adequate volumes of good quality logs.

This led to a particularly sharp fall in availability of
high quality 5x10ft Russian birch plywood. This
situation is expected to ease in January and February
2013 with the onset of large scale winter felling in

Slow plywood consumption in recent months
The market for plywood in the EU during the last
quarter of 2012 has been very challenging. Weak
construction sector activity meant that plywood
consumption was very slow. However production costs
for plywood manufacturers continued to rise. But with
supply generally in excess of demand, it is very
difficult to raise prices. Margins in the trade have been

Some Chinese suppliers of plywood to the EU are
seeking price increases of 2-3% to compensate for
rising production costs and strengthening of the yuan
against the US dollar. But these efforts have proved
unsuccessful so far.

Shipping lines attempted to force through significant
freight rate increases on the Asia-Europe route during
December 2012 in an effort to protect margins
following recent fuel price increases.

However, demand for container space on the route
remained low overall during the Christmas vacation
period and the recent rate increases are now expected
to be short-lived.

One result of low demand for container space is that
European importers are having little difficulty securing
stock. Importers can satisfy their immediate needs for
most plywood products quite easily and lead times
between ordering and delivery of new stock are short.
For example lead times for delivery of Indonesian
plywood to Europe currently average around 5 weeks.

Despite relatively high log prices in Malaysia,
Malaysian shippers of tropical hardwood plywood to
Europe have been reducing prices in recent months in
an effort to maintain market share. But while the price
differential in Europe between comparable Malaysian
and Chinese products has reduced in recent months, it
is still more than 10%.

Uncertainty created by EUTR
In addition to slow consumption, there is much
uncertainty in the EU plywood market concerning the
likely impact of the EU Timber Regulation. In the short
term, EUTR has led to very large bookings of product
from China to arrive prior to the Chinese New Year
festivities in February and just before the EUTR is due
to come into force.

These orders are well in excess of demand anticipated
in the first quarter of 2013. In contrast, forward orders
of both Chinese and tropical plywood for arrival after
the beginning of March 2013 have been very subdued.
The longer term impacts of EUTR are difficult to

There is still some uncertainty as to how effectively the
law will be enforced.

Many EU Member States have been slow to announce
which government departments will take responsibility
for enforcement and to set out details of monitoring
systems and sanctions.

The European Commission has yet to publish detailed
guidelines for EU importers. This fact, combined with
the high level of plywood import prior to the March
2013 deadline, suggest that it will take time for the full
effects of EUTR to become apparent.

Nevertheless, EUTR may well lead to major changes in
the EU wood products trade over the long term. This is
particularly true of the plywood sector which is
traditionally very dependent on imports from outside
the EU.

It is also a sector which relies heavily on hardwood
species from regions considered high risk of illegal
wood supply, including some tropical countries and

EUTR enforcement action in Europe may be weak in
the initial stages. But the personal liability imposed by
the law, and the risk to the reputation of operators that
fail to comply, suggest most importers will take the
new law seriously. It is possible many importers will
become more risk adverse than strictly necessary under
the terms of the EUTR.

Chinese plywood and EUTR
Some large EU importers have been working hard with
their Chinese suppliers to ensure that all plywood
imported from the country complies with EUTR
requirements. However, there is still scepticism in the
EU trade that Chinese manufacturers will be able to
secure robust documentary evidence of legality for
many plywood product lines.

This is due to the complexity of supply chains in
Chinas plywood manufacturing sector. It is also due to
lack of reliable systems to demonstrate legal origin in
many countries from which China imports logs for
plywood manufacture.

An article in the UK Timber Trades Journal in
December 2012 quotes a major UK plywood importer.
He suggests that due diligence work in advance of
EUTR has already ruled out 20% of the Chinese
factories with which his company deals. Many more
are expected to be added to the list as the process

Particularly affected will be Chinese plywood
manufactured from tropical species lacking FSC or
PEFC certification.

European importers are already identifying uncertified
wood from Papua New Guinea, the Solomon Islands
and most African nations as high risk.

European imports of uncertified Chinese softwood
plywood products, suspected of containing wood of
Russian origin, are also likely to be scrutinised closely.
Analysts suggest that many EU plywood buyers will be
only sourcing FSC or PEFC certified plywood after
March 2013.

On the other hand, EU importers are likely to be less
concerned about Chinese plywood manufactured using
only plantation-grown poplar and eucalyptus.

Environmental groups are keeping up the pressure and
raising the stakes for European importers engaged in
trade in Chinese plywood. They are sending out strong
signals that wood products from China will be first in
the firing line for EUTR scrutiny.

Malaysian and Indonesian measures to ensure
EUTR compliance

Indirect imports of tropical hardwood plywood via
transit processing countries like China may well suffer
22 ITTO TTM Report 17:1 1 C 15 January 2013
as a result of EUTR. However, the EUTR may again
favour direct imports of tropical hardwood plywood
from Malaysia and Indonesia. This is because of
simpler supply chains and moves to develop third party

Indonesia is progressing rapidly towards full
implementation of a Voluntary Partnership Agreement
(VPA) with the EU on illegal logging.

Under the terms of the VPA, all timber products
exported from Indonesia will comply with the
Indonesian mandatory chain of custody certification to
ensure legality of product.

Similarly, a large proportion of Malaysian production
is PEFC-certified. All these measures are expected to
make the EUTR due diligence process for Malaysian
and Indonesian plywood much simpler.

Alternatives to tropical and Chinese hardwood

The high perceived risks associated with sourcing
plywood from some tropical countries, or countries
with complex supply chains like China, is already
encouraging a search for replacement products. EU
importers have been making more enquiries about
radiata pine and eucalyptus plywood from plantations
in South America.

European panel manufacturers have also been
encouraged to develop new products that may be used
to replace tropical hardwood plywood in external

For example, the Ireland-based MDF manufacturer
Medite recently won the UK Timber Expo Innovation
award for their Tricoya MDF panels.

Tricoya utilises the latest advancements in acetylation
technology, which naturally alters the woods chemical
structure so that it is not affected by the effects of
water absorption. According to the manufacturers
claims, MDF may now be used even in highly exposed

* The market information above has been generously
provided by the Chinese Forest Products Index Mechanism


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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