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Wood Products Prices in The UK & Holland

16-30th June 2008

Report from the UK

European buying for lumber very subdued
European forward buying of African hardwood sawn
lumber, particularly the major commercial redwoods such
as sapele and sipo, remains very subdued and has been
slowing further now with the onset of the summer holiday
season. There are reports that some buyers are using even
minor shipment delays as an excuse for canceling orders.
The market for some whitewood species such as ayous and
koto is a little better, while the European ban on the import
of Myanmar teak imposed in March 2008 has generated
some new interest in iroko for the boat building industry.

Overall FOB price levels are stable for most species,
although there are some reports of weakness in prices for
sipo and also for framire due to slow demand in the UK
and Ireland, the principal markets. Given current sluggish
buying, there are few reports of problems in forward
supply. The only issues mentioned being lack of supply of
good quality wawa sawn lumber from Ghana and of
dimension products in certain species such as makore,
which is now in demand in parts of Eastern Europe.

While FOB prices are stable, prices for onward sales to
European distributors and manufacturers of species which
are heavily stocked on the European continent, notably
sapele, remain under pressure.

European importers in no rush to buy Asian lumber despite rise in CIF prices
According to the German trade journal EUWID, South
East Asian shippers have been pushing up CIF prices on
offer in European markets for a wide range of products
over recent months. These trends reflect relatively low
availability in the Far East, rising freight rates and fuel
costs, as well as reasonable demand from other export
markets. Price rises are being resisted by many European
importers as they are concerned about the difficulties of
passing on the price increases to customers in the current
uncertain market environment.

Prices for standard bangkirai decking products from
Indonesia are now at around USD1250 per m³ CIF North
Sea port, up around USD100 compared to two months
ago. There has been limited purchasing at the higher price
levels as some importers have moved to fill gaps that have
opened up in stock during the spring and early summer
season. However, EUWID suggests that overall stock
levels of bangkirai decking products in the European
market are quite high compared to current levels of
demand with significant surpluses of older stock still
hanging around warehouses.

Indonesian shippers are also trying to push up prices for
meranti laminated scantlings with minimum raw density of
450 kg m³ on offer to European importers. These now
range from RM$6.50 to RM$7 compared to a range of
RM$6.20 to RM$6.50 two months ago. Malaysian
shippers have also been pushing up prices for meranti
sawn lumber. Delivery times for these products are
extending. However, as with decking products, underlying
consumption in the EU has been slow, so importers are in
no rush to enter the forward market.

Myanmar teak alternative
The UK TTJ journal reports that the recent European ban
on Myanmar teak imports is providing opportunities for
some new entrants into the EU market. UK Timber
Importer C. Leary and Co. is to exclusively market
Equatorial Teak from Sudan as an alternative. The African
product is produced by the Equatorial Teak Company and
is aimed at the marine decking industry. According to
Simon Kloos, Managing Director of C. Leary, boat
builders in the EU ¡®are experiencing an unprecedented
level of uncertainty cause by EU sanctions banning the
direct import of Burma teak¡¯. Responding to rising
concern about environmental issues, the Sudan teak will
be certified with Verified Progress certification leading to
FSC certification.

Germany¡¯s tropical wood imports plummet
An indication of the scale in the downturn in Germany¡¯s
tropical hardwood market this year is provided by the first
quarter 2008 trade data just published by GD Holz, the
German timber trade association (see below). Imports of
tropical logs fell by a massive 57% during the first quarter
of 2008 compared to the same period last year. Declining
log imports were recorded from all the major tropical
hardwood supply countries. Imports of tropical hardwood
sawn lumber fared a little better, but still fell by over 20%.

The biggest declines were recorded from Indonesia and
Gabon. There was also a dramatic decrease in Germany¡¯s
tropical sawn lumber imports trans-shipped through the
Netherlands during the review period. However,
Germany¡¯s direct imports of tropical sawn lumber from
Cameroon and Côte d¡¯Ivoire were up during the review
period. Germany¡¯s imports of planed and sanded tropical
sawnwood declined by a massive 64% during the review
period, with a huge drop in imports from Indonesia and
Brazil. Germany¡¯s imports of plywood from tropical
countries declined by 67% with imports from Brazil
falling to near zero. The decline in plywood imports from
China and Indonesia was much more modest. Glulam
imports also fell by over 50% during the review period.

European Community provide more details of illegal logging legislative proposal
Speaking at the Chatham House Illegal Logging Update
meeting in early June, John Bazill of the European
Commission (Directorate General Environment) provided
an overview of the current state of EU deliberations on
possible legislation designed to prevent imports of illegal
wood. Bazill noted that three legislative options had been
considered by the EC through a process of public
consultation and a formal impact assessment. These
options included: a requirement for border controls
requiring mandatory legality licensing of all wood
imports; an obligation placed on EU importers to prove
that wood is legal when challenged; and a law modeled on
the US Lacey Act that would allow prosecution of EU
importers if it can be shown that wood derives from illegal

Bazill noted that ¡®all discussed options have serious
drawbacks¡¯. Key objections to the options of universal
legality licensing and an obligation on wood importers to
prove that wood is legal are the massive amount of red
tape that would be required and a belief that such a law
would be disproportionate to the scale of the problem.
Objections to a Lacey-style Act in the EU included the
difficulty of establishing a chain of evidence to bring any
prosecutions and the unwillingness of EU courts to take
decisions based on the laws of a foreign country.

As a result, the EC is now considering another option of
directly imposing a requirement for due diligence on wood
trading companies in the EU. The details of the proposed
legislation are still being worked out but Bazill provided a
broad outline. The aim would not be for the regulatory
authorities to capture or monitor individual shipments to
ensure they are legal, but to ensure that EU trading
companies have effective management systems to reduce
the risk of trade in illegal wood. The legislation would
build on existing private sector initiatives (although not
mentioned directly, obvious examples are initiatives like
the WWF Global Forest and Trade Network, Tropical
Forest Trust, and national trade association procurement
policies like the Timber Trade Federation Responsible
Purchasing Policy). The product scope of the proposed
legislation is expected to be wider than the Forest Law
Enforcement Governance and Trade Voluntary Partnership
Agreement (FLEGT VPA) process (which only covers
logs, sawn, plywood and veneers) extending to further
processed products. There would be scope for companies
to use risk assessment as part of the due diligence process.
There would be formal recognition for FLEGT VPA
licenses in the legislation. For product for which these are
available, EU companies would need to take no further
action to demonstrate due diligence.

Bazill emphasized that ¡®no final decision has been taken¡¯
on this legislation. The EC Communication on additional
legislative options, originally scheduled for April 2008,
has been delayed and is now not expected until mid-July
2008. Bazill also emphasized that the Communication
itself will only amount to an EC proposal which must then
be considered by both the European Parliament and the
European Council. During this lengthy process, there are
likely to be major amendments to the proposal, or it might
even be rejected outright. On the other hand, Bazill
suggested that the process of formal public consultation on
this issue was now ended and that all EC Directorate
Generals are in broad agreement on the approach to be
adopted. Bazill also emphasized that the principle of
¡®comitology¡¯ is likely to apply in this instance, whereby
the primary legislation that is eventually passed would set
out a broad administrative framework, while the details of
implementation would be worked out through further
negotiation at national level and based on practical
experience on the ground.


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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