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Report
from
Europe
Europe offers little prospect of improved hardwood plywood demand
European consumption of tropical hardwood plywood
remained at low levels during the third quarter and there
now seems little prospect of any significant upturn in
forward buying before the end of the year.
The significant UK market for tropical hardwood plywood
is becoming increasingly oriented towards break bulk
shipments from China at a time when consumption is
limited and buying is more price focused. Despite
continuing concerns about quality, fitness for purpose and
environmental credentials, Chinese plywood is being
favoured in the UK because it offers a 20-30% price
advantage compared to Malaysian plywood, the principal
competitor.
After significant arrivals of Chinese product in recent
months and with construction sector activity still slow and
facing an uncertain future, forward buying of hardwood
plywood in the UK has been limited in September. A
particular concern for the future of the UK market is the
government Comprehensive Spending Review due to be
published in October which may well demand very
significant cutbacks in public sector spending on
construction and renovation activity.
European imports of hardwood plywood from Indonesia
are now restricted to high value specifications, with much
of the volume destined for continental Europe rather than
the UK. Rising prices for birch plywood from Russia over
recent months, a result of the forest fires that raged
through the country this summer, have helped boost
demand for film-faced Indonesian plywood in Europe.
European imports of hardwood plywood from Brazil,
formerly a major supplier, are currently running at
negligible levels. Brazilian hardwood plywood exports to
the whole of Europe averaged little more than 2000 cu.m
per month in the first half of 2010.
CIF Europe prices for Chinese hardwood plywood edged
higher over recent months in response to rising raw
material and labour costs in China and strengthening of the
Yuan on international exchange markets. Although there
are reports of a downturn in Chinese production in recent
weeks due to poor weather conditions, European agents
and importers report that supplies are sufficient to meet
continuing low levels of European consumption.
Anticipated increases in Chinese FOB prices may be offset
by slightly lower freight rates in coming weeks.
Meanwhile CIF Europe prices for Malaysian and
Indonesian hardwood plywood have remained broadly
steady in recent months, with a slight rising tendency
reported for some grades such as film-faced Indonesian
product. No significant supply problems are reported and
products are currently available for reasonably prompt
shipment.
Consumption of okoume plywood in the main European
markets of France, Netherlands, Italy and Spain, remains
very sluggish. This business has become increasingly
difficult during the course of 2010 with, on the one hand,
margins squeezed by rising raw material costs due to the
Gabon log export ban and, on the other, mounting
competitive pressure from lower priced alternatives such
as poplar combi plywood.
European demand for African sawnwood still subdued
European forward orders for African tropical sawnwood
have remained subdued during the third quarter. An
improvement in the Euro-Dollar exchange rate, which
decreased the competitiveness of African hardwoods
relative to Asian alternatives, reinforced the usual
slowdown over the summer vacation period. There is still
little sign of any significant improvement in orders at the
end of September. Many European importers continue to
reduce their stock holdings of African sawnwood in the
face of sluggish consumption and on-going supply
difficulties.
Following CIF Europe price rises for African hardwood
sawnwood in the first half of 2010, prices have remained
broadly stable over recent months. However, there are
some signals that the rise in prices for sapele sawnwood,
probably the most significant tropical joinery species
traded in Europe, may resume during the last quarter of the
year. This reflects low stocks both in Europe and in the
African supply pipeline which has resulted in long lead
times. New forward orders of sapele sawnwood are
unlikely now to be shipped prior to Christmas.
European demand for sipo sawnwood is currently very
subdued and FOB prices are stable. Demand for iroko
sawnwood is a little more buoyant which, against a
background of very limited availability, is encouraging
some exporters to push for higher prices.
The Gabon log export ban has led to a decrease in
availability of sawnwood of more special African species
such as padouk, ovangkol, and bubinga in the European
market. Significant volumes of these species were
formerly cut from Gabonese logs in European mills. These
species are likely to remain in limited supply until such
time as African mills respond by increasing levels of
processing for the relevant European niche markets.
In contrast to the situation with African sawnwood, there
are reports that weakening of the US dollar against the
Euro during the third quarter, combined with rising prices
for sapele sawnwood and low landed stock levels
encouraged a pick-up in European forward orders of
Malaysian meranti sawnwood during the third quarter.
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