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Wood Products Prices in The UK & Holland

16-30th November 2006

Report from the UK

Strong pound hold prices unchanged
With the UK currency at its strongest level against the dollar for over two years and also firm in relation to the euro, timber product prices remained constant in pounds in late November. However, traders complained that margins were being further squeezed as costs continued to rise rapidly.

A positive year for the UK furniture industry
The year 2006 has been a good year for the furniture industry according to some analysts, with home sales and overseas orders improving and an optimistic forecast for the next three years. Furniture retailer ScS Upholstery reported that annual profits so far in 2006 were the same as last year. Meanwhile, UKs factory orders rebounded in November and export demand rose to its highest level in
11 years, a sign manufacturing in Europes second largest economy may expand for a fourth quarter.

Economists were increasingly worried about the state of the housing market. David Miles, chief UK economist at Morgan Stanley argued that the market might fall within the next three years, once house price rises came down below expectations. In the meantime, the Nationwide house price index to be released this week is expected to show that property inflation remains relatively stable. House builder Bovis said sales activity remained steady since its interim results in September.

The Confederation of British Industry issued a statement criticizing the governments tax regime as expensive and complex. It also warned that employers are less optimistic about their prospects than six months ago, as rising staff and energy costs significantly squeeze profit margins. The Builders Merchants Federation, in turn, reported a rise in sales in the third quarter of the year, but felt it was too early to say if the improvements were temporary.

Report from Netherlands

Political developments decide future of Dutch economy
The Netherlands was in political crossroads after the earlier general elections which took place on 22
November. The Christian Democrats (CDA) won the elections but VVD (liberals), the current coalition partner, lost seats, which meant that a new coalition with other parties, particularly the Socialist Party, would be needed. The coming weeks are therefore crucial for the country and the economy, and will test the willingness of parties to agree a coalition. According to some analysts, some parties could be more pragmatic and in favour of stimulating certain sectors like the building sector, while others could be more inclined towards social and conservation issues. The economy is nevertheless performing well and many hope for the continuation of the current policy for the benefit of the economy.

Timber market remains sluggish ahead of Christmas
The building sector continued to perform well but the demand for tropical timber was still sluggish ahead of the Christmas holidays. Analysts see it highly unlikely any change for the better before early January. With meagre domestic demand for meranti and other popular tropical species, importers were refraining from buying in Malaysia or elsewhere. However, sales prices were holding reasonably well despite some price reductions by some Dutch retailers to generate business and improve cash flow. Meanwhile, FOB mill prices remained basically firm as offers were limited. Exporters in Peninsular
Malaysia continued to face even more restricted raw material supply due to the rainy season and probably prefer to hold back material rather than to spoil the market with low prices and suffer losses.

VROM establishes Equivalence and Comparability body
The Dutch Ministry of Housing, Spatial Planning and Environment (VROM) has recently established the
College for Equivalence and Comparability (CvG), reported Houtwereld. CvG will compare various countrynorms and standards with the Dutch internal-directives (BRL). The review would include PEFC Finland, PEFC Germany, FSC Sweden, FSC Brazil, CSA Canada and MTCC Malaysia. According to some analysts, the move together with the fact that the Dutch Association of Timber Entrepreneurs (VVNH) will stop funding the Keurhout certification system in 2007 could eventually lead to the elimination of Keurhout. According to the analysts, there is an increasing interest to support other
certification schemes, in addition to FSC, that also deserve credit.

Okoume plywood prices rise as expected
Demand for plywood continued to be below that of earlier expectations, in parallel to the dull demand for tropical sawnwood. However, an expected increase in okoume plywood prices finally materialized, with prices surging from 4.6% to 11.3%. Stocks of okoume veneer and peeling logs in France remained low (equivalent to 5 working weeks) while factories reported committed plywood production till mid-January 2007.


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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