The panel products industry is complaining about new conditions being applied by Japan's Ministry of Land, Infrastructure and Transport in relation to the new rules on formaldehyde emission of building materials.

The Japan Lumber report is stating: " the Minister's certification is given on items, which do not have JAS mark but (are) suitable to JAS standards with the condition that the manufacturer is preparing an application for JAS qualification. In short, having JAS qualification for the plant is the condition to get the Minister's certification. However, under JIS rules, materials such as items using MDF and OSB can have the Minister's certification without such condition that the manufacturing plants have JIS authorization".

The trade is saying that now the JIS and JAS rules are not in conformity. Many groups in the industry are expressing dissatisfaction with the way this matter is being handled and fears that overseas manufacturers may consider such a condition as a trade barrier.

This issue was raised at the recently concluded ITTO Annual Market Discussion. Many in the tropical producing countries complain that they do not have sufficient information nor time to comply with the new regulations and that exports will be badly affected putting the wood-based panel sector under further financial stress.

Housing starts projection through 2010

A recent report from the Society for the Study of the Housing and Real Estate Market provides projections on the Japanese housing market up to 2010. It says, based on the current public housing loan system, new starts would be 1.11 million units in 2003, 1.12 million in 2004 and 1.05 million units for 2005 through 2010.

If the public housing loan system is changed to give more loans to low income families, new starts in 2003 could be 1.11 million units, 1.14 million in 2004 and 1.17 million units from 2005 to 2010.

March Plywood Imports

Total plywood arrivals in March were 298,000 cubic metres, 21.7% less than the same month a year ago. This is the first time monthly imports have been of less than 300,000 cubic in four years. The main reason for the low level of imports was the inactive buying of Indonesian plywood and non-JAS plywood because of the revision of the Building Standards Act and the new JAS regulations.

Indonesian plywood imports in March were sharply down to 151,500 cubic metres, 27.2% than a year ago. In addition to the delays in conforming with the new JAS regulations, Indonesian plywood mills are reportedly experiencing tough times securing logs due to tighter implementation on felling and a crack down on illegal logging activities.

Despite reduced imports by Japan, Apkindo, at its late April meting with Japanese importers indicated that it would be raising export plywood prices by US$20-30 per cubic metres due to the higher cost of production from higher log and adhesive costs. Their guide prices for JAS concrete formboard plywood were US$300-305 per cubic metre C&F with sheathing at US$280-290. Actual offers from individual suppliers are said to be just US$10 -20 higher.

Malaysian plywood imports in March were 117,800 cubic metres, 17% than a year ago and the first time imports have dropped below 120,000 cubic metres since December 1999. Malaysian mills have been much faster to conform to the new JAS regulations but purchases by Japan have been slow due to the depressed Japanese plywood market.

Imports of Chinese plywood were a modest 13,000 cubic metres, but up almost 20% compared to a year ago. The growth in Chinese plywood imports is slowing because buyers have reduced purchases of non-JAS sheathing.

Plywood and Veneer Mills in Japan

The Ministry of Agriculture, Forestry and Fisheries has recently surveyed the plywood and veneer sector and determined that the number of mills in 2002 was 306, 23 less than 2001 representing a , 7% decline. The rate of decline was about tha same for all types of mills such as veneer mills, standard plywood only mills, specialty plywood only mills and standard and specialty plywood mills.

The total employees was 13,942 in 2002, 8.4% less than 2001. The decline is the result of several factors: the depressed market, the growing number of substitutes and competition with imports.

Logs shipped to the remaining mills were 1.6% up at 4,724,000 cubic metres with increased consumption of domestic species. Domestic logs accounted for 279,000 cubic metres, 53.3% up on 2001. The use of softwood logs, in particular, increased by 129%. Russian log imports were up by almost 7% while tropical log imports slowed.

Production of standard plywood was 2,735,000 cubic metres, 1.3% down, specialty plywood production was 1,240,000 cubic metres, 12.4% down. Domestic production dropped because of slower housing starts and increased plywood imports in 2002 which were up 2.3% to 4,663,000 cubic metres.

Tropical Hardwood Logs

Plywood mills are reportedly not active in buying tropical hardwood logs because the plywood market is slow. The market in Japan is getting softer and Meranti prices have been falling in recent weeks. Meranti regular prices are at around yen 6,000 per koku CIF, yen 50 lower than a month ago and at the same level as of August last year.

Meranti small prices are yen 5,350-5,400 also yen 50 lower. Super small logs are yen 100 lower at yen 4,950- 5,000. In contrast to the weak Meranti market, the kapur and keruing market is very firm. The difference between Meranti and Kapur and Keruing FOB prices used to be about US$10 but is now getting wider and closer to US$20.

In early May, Sarawak kapur regular floaters were about US$160 per cubic metre FOB while keruing was about US$178-180. In Japan, kapur prices are yen 6,500 per koku CIF and keruing about yen 7,200. Some Japanese log importers says it is now hard to secure these species to meet the demand because of aggressive purchasing by India.

PNG's log market is weakening dragged down by softening Meranti prices. Taun and Calophyllum for plywood use are yen 4,800-4,900 yen per koku CIF, yen 50 yen.

Logs For Plywood Manufacturing

CIF Price	Yen per Koku
Meranti (Hill, Sarawak)
Medium Mixed	6,050
Meranti (Hill, Sarawak)
STD Mixed	6,100
Meranti (Hill, Sarawak)
Small Lot
(SM60%, SSM40%)	5,100
Taun, Calophyllum (PNG)
and others	4,950
Mix Light Hardwood
(PNG G3-G5 grade)	4,300
Okoume (Gabon)	6,800
Keruing (Sarawak)
Medium MQ & up	7,000
Kapur (Sarawak) Medium
MQ & up	6,600

Dollar Exchange Rates 25th April 2003

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