Japan Wood Products Prices
1-15th Sep.  2004

Japan Wood Products Prices

Dollar Exchange Rates of  10th August  2004

Japan Yen 110 

Report From Japan   

Good housing starts  

According to a survey conducted by the Japan Forest Products Journal, major house builders had a good order book position in the first and second quarters of 2004. 

Touei Housing Corporation's first quarter orders were up 13% on the same quarter last year and Chuo Jutaku Co., Ltd. of Polus group reports 15% more orders. Companies report that first time buyers continue to be active and buyers in the plus fifties are also investing more in housing. 

Sumitomo Forestry, which specializes custom made houses, reported a 4% growth in business in the first quarter while for Mitsui Home, the results were up by 8.6%.

However, analysts say the prospects for the housing market for the second half year are uncertain, with many negative factors such as a possible increasing in housing loan interest and sharp competition between builders. Housing companies say they now need to watch closely the supply and demand of detached units built for sale to the first time buyers so as not to over-extend on building.

Tropical log prices weak in domestic market

Reflecting a downward trend in FOB prices in producing regions, tropical log prices in Japan are softening. Log importers are still not able to pass on the full landed costs to their customers in Japan and the buyers are now demanding big price reductions.

Late August FOB prices for Sarawak meranti regular logs for Japan were at US$158 per cubic metre. With ocean freight at US$33 per cubic metre, on a full load basis and exchange rate of Yen 110 per dollar, the landed cost equates to about Yen 6,400-6,450 per Koku. However actual trading prices in Japan are reported at Yen 6,200-6,300 which means the importers lose about Yen 200-250 per koku or around 3-4% of the CIF price.

Compared to prices in late July, the current prices are at Yen 6,300, down by Yen 100 per koku and the pressure from Japanese importers on producers will be for reduced prices, at least until the rain season starts in October - November.

The log importers are trying to minimise their losses but as long as the profitability of the plywood manufacturers remains tight it is hard for the importers to lift the log prices.

Compared to late July, the current FOB of about USUS$155 for Sarawak meranti regular is US$3-4 down. Small meranti FOB prices are US$130-133, about US$25 lower than regular grade logs. Super small FOB prices are about US$115-116 and both small and super small FOB prices are US$2-3 lower than late July. Small logs from Sabah are reportedly offered at lower prices, which dragged Sarawak small log prices down.

Reports indicate that ocean freight costs for Sarawak loadings are firm at about US$33.00-33.50 per cubic metre on full load basis. Other reports suggest that shipping companies are reluctant to send vessels to PNG and very few contracts are being made for PNG logs except for mersawa and some plantation logs. Mersawa FOB prices are at about US$160 and calophyllum logs are at about US$135. Due to poor weather, log production in PNG remains slow.

Environmental protection

The Ministry of Agriculture, Forestry and Fisheries is proposing an environmental tax to promote measures to prevent global warming and say the revenue will be used for forest protection.

Such a tax has been suggested in the past but this is the first time that details of a proposed tax have been clearly set out. Japan has agreed to a goal of a 6% reduction of emissions of greenhouse effect gases under the Kyoto Protocol. The plan is to account for 3.9% of the 6% by forest absorption of carbon dioxide.

Analysts say that, with the budget allocated for achieving reductions, by 2012 the goal seems unachievable. Japan has an annual budget of Yen 300 billion for global warming but only a small part of this budget is for forestry measures so an source of finance is required if the target for forest protection is to be achieved, hence the new tax.

Russian larch prices down

Russian larch log prices had been leading those of other species but, after four months of high prices at about USUS$115 per cubic metre they have fallen to around USUS$110 per cubic metre. The reason for this say the Japan Lumber report, is that plywood mills slowed purchases of larch logs since ample inventories had been built up. The other reason is that ocean freight costs have eased slightly. For the future traders doubt if prices will fall further as Russian suppliers are resisting any lower offers from Japanese buyers.

North American log import

The total volume of North American logs imported in the first half of the year was 1,970,000 cubic metres, 8.6% more than the same period last year. sawnwood imports from North America were reported at 2,080,000 cubic metres, 5.3% up.

For logs, Douglas fir imports increased by 17% and accounted for 79% of total American log imports. The increased interest in Douglas fir is attributed to the steady demand from large sawmills in Western Japan.  Hemlock log imports, used mainly by small inland sawmills, declined because of the difficulty in cost effectively delivering small volumes to numerous ports and because of increased ocean freight costs.

 For more information on the Japanese market please

see www.n-mokuzai.com

Source:ITTO