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Japan Wood Products Prices

16-31th January 2013


Japan Wood Products Prices

Dollar Exchange Rates of  25th January 2013

Japan Yen 90.87

Reports From Japan

 

 Economy remains relatively weak
The Bank of Japan (BoJ) Monetary Policy Board held a meeting on January 21 and 22, and released its assessment of the Japanese economy. The following two main points are emphasized in the BoJ press release.

 Exports and industrial production have declined mainly due to the fact that overseas     economies remain in a deceleration phase.

 Business fixed investment in Japan has shown some weakness, but resilience has been observed in the non-manufacturing sector.


In contrast, public investment has continued to increase and housing investment has picked up. Private consumption has remained resilient and the decline in car sales, due to the ending of some measures to stimulate demand, has diminished.


Economic outlook from the Bank of Japan
Japan's economy is not expected to deteriorate any further. The economy is expected to return to a moderate recovery path as domestic demand remains resilient.


This will be achieved through government economic measures and through recovery of overseas demand as the major economies gradually recover.


Exports are expected to continue to fall but at a reduced pace in the short term. Eventually, says the BoJ, exports will pick up as overseas economies gradually strengthen.


Public investment is expected to continue trending upward supported by the effects of various economic measures and housing investment is expected to continue to pick up. Some improvement in domestic demand is anticipated.


Private sector fixed investment is projected to remain relatively weak for the time being, especially in the manufacturing sector, but to eventually follow a moderately upward trend partly due to investment related to disaster prevention and energy. Private consumption is expected to remain resilient.


As a reflection of these developments in demand, both at home and abroad, industrial output is projected to stop falling and then start recovering. However, there remains a high degree of uncertainty about the pace at which the global economy can improve.


For the BoJ statement see : http://www.boj.or.jp/en/mopo/gp_2013/gp1301a.pdf


Consumers remain cautious
The Japanese consumer confidence index dropped in December as consumers weigh the economic policies and proposals of the new government.


The consumer confidence survey shows the number of people who think prices will rise over the next 12 months (59.6 percent of respondents) remained unchanged from the previous month. The policies of the new Liberal Democratic Party government are yet to have an impact on consumer price expectations.


The survey also assessed sentiment on incomes and jobs, which fell to 39.2 in December 2012 only marginally changed for the 39.4 recorded in November 2012. A reading below 50 suggests consumer pessimism.


The quarterly survey by the Bank of Japan indicates that over 50% of those polled expect prices to be higher a year ahead however, about 40 % indicated that they expect prices to remain largely unchanged over the next 12 months.


Defending the weakening of the yen
As recent data is showing that Japan's exports fell more than expected, there have been more demands from the private sector for the government to take action to further weaken the yen.


Compared to the export performance in the same month a year earlier, Japan’s exports fell almost 6 percent last month driving the trade deficit to a record 7 trillion yen.

A weaker yen has the potential to boost exports but raises the cost of imports and Japan needs to import more energy resources to ensure a stable power supply since almost all the nuclear power plants in the country have been shut down for safety checks.


Economists in many countries have voiced concern that the deliberate weakening of the yen could spark a regional currency war. In response to this the head of the BoJ said the bank was not targeting a competitive devaluation but rather a devaluation to fight deflation.


Over the past 3 months the yen that has weakened about 8 percent against the US dollar and on the 25th January crossed the 90 yen to the dollar level. Some analysts expect the government and the BoJ to work together to push the yen to 100 to the dollar.
 

From the Japan Lumber Reports:
1. Housing starts projection for 2013
2. South Sea (tropical) log trade
3. Trends in the plywood market


Housing starts projection for 2013
The Japan Forest Products Journal made a survey last December on this year’s housing starts.


According to the replies from 15 major house builders, an average starts are 920,000 units. Incidentally, the projection for last year was 870,000 units so this year’s
starts would be 5.7% up from last year.


Regarding increase of consumption tax to 8% from current 5% from April next year, which is the most impacting factor this year, it is hard to foresee the impact because there are no definite measures yet of tax incentive for house purchase at this stage although many forecast increase of housing starts this year before the tax increase.


When the consumption tax was increased from 3% to 5% in April of 1997, housing starts in 1998 dropped by 28% compared to the starts in 1996, which were 1,630,000 units.


The general view of the housing industry is that orders would be up by 10% then the drop off after the tax increase would be 20%.

South Sea logs
Heavy rain continues in Malaysia, which hinders transportation of logs together with log production. Local plywood mills struggle to secure enough logs with declining inventories.


Export log prices have not climbed so sharply as India keeps log purchase
composedly but bullish mood continues.


Proposed prices on Sarawak meranti regular are about $260 per cbm FOB but actual prices are about $255. Meranti small prices are $215-220 and super small are $195-200.


Sabah also suffers foul weather and kapur prices are firm at about $363 and firming due to log shortage.


Ocean freight rate is also up by $1 per cbm since January 1. All those factors of higher FOB, increasing freight and weakening yen are cost push factors.


Log prices in Japan are gradually climbing as the log importers need to cover inflated cost by weak yen.


Meranti regular prices are 8,000 yen per koku CIF, 200-300 yen higher than December. Kapur regular prices are 11,200 yen, 300-400 yen up. Even if FOB prices remain unchanged, yen cost would be up by 400-500 yen.


Plywood market
The market for both domestic and imported plywood is firm. Shipment of domestic softwood plywood for precutting plants and major house builders was active in January and the manufacturers give priority to such direct users so that deliveries for wholesalers and retailers now take more than two weeks.


The manufacturers carry orders through to mid February so they have started allocating the volume for trading firms since mid January.


Secondary dealers buy from primary wholesalers at high prices in tight supply.

Current market prices of 12 mm 3 x6 (special type/F 4 star) are 780 yen per sheet delivered, 30 yen up from December. since January 21 the manufacturers started taking orders at 800 yen.


Long panel of 9 mm 3x10 prices are 1,200 yen, 20-30 yen up and thick panel of 24 mm 3x6 prices are 1,600-1,650 yen, 30-40 yen up.


Imported plywood market prices are rapidly climbing with weakening yen and sizable price hike by the largest plywood supplier in Malaysia, Shenya for January shipment.


Their proposal is 45,000 yen per cbm C&F on 3x6 JAS concrete forming panel, which is 4,000 yen higher than December price. Considering rapid progressing depreciation of the yen, yen based purchase may be safer.


Importers have started pushing the prices up in Japan market as future arrivals would cost much higher.


Current prices are 920 yen on 3x6 JAS concrete forming panel, 30-40 yen up from December. 1,070-1,100 yen on JAS 3x6 concrete forming for coating, 40-50 yen up. 970 yen on 12 mm structural panel, 50 yen up.


Trading firms say that those prices are not high enough to cover future arrivals so they need to go higher yet but gradual hike is preferable as the market may stall if the prices go up without supporting demand.
 


 


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  Plywood grades. Letter(s) on the left indicate face veneer(s), those on the right backing veneer(s). Veneer grade decreases in order B, BB, C, CC, etc. MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF         Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot  PHND             Pin hole no defect grade
Hoppus ton     1.8 cubic metres              Price has moved up or down

Source: ITTO'  Tropical Timber Market Report


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