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Wood Products Prices in The UK & Holland

16-31th January 2013

Report from Europe  

 
  EU Timber Regulation is major concern for European tropical wood trade
This is an unusual and uncertain time for the European tropical hardwood trade. Hanging over the trade is the imminent prospect of enforcement of the EU Timber Regulation (EUTR) on 3 March 2013 and this already seems to be having a significant impact on buying behaviour.

The EUTR imposes an obligation on all companies that ※first place§ timber on the EU market to implement a due diligence system which ensures a negligible risk of any derives from an illegal source.


It also makes importers legally liable and subject to sanctions ranging from fines to prison sentences if they place timber on the market which is subsequently shown to have been illegally harvested.


Direct importers of wood from tropical countries generally seem confident that they can cope with the new demands of EUTR. Most have been undertaking due diligence for years, either due to direct pressure from customers and investors or to maintain their good reputation, so the changes required are relatively minor.


Problems are greater for those importing products containing tropical hardwoods 每 such as plywood and flooring 每 from manufacturers in third countries.


EUTR reinforcing trend for small companies to stop direct imports of tropical hardwood
On the other hand, EUTR is expected to reinforce an existing trend in the European trade for smaller importers to withdraw from direct imports in tropical hardwood and to rely instead on indirect purchases from larger European importing companies.


These large importers are taking on the specialist role of due diligence on the part of smaller distributors in the EU, while also shouldering the financial risks associated with carrying large stock holdings of valuable tropical wood.


Some of these larger companies report reasonably good demand for tropical hardwood lumber in Europe 每 however it is difficult to know whether this is due to robust consumption, or simply due to a decline in n the number of European companies now dealing direct in tropical wood.


EU tropical wood imports fall again in 2012
Inventories of sawn tropical hardwood were run down across much of Europe during 2012 as consumption for most species remained low overall.


In the first 9 months of 2012, EU imports of tropical sawn hardwood were only 778,000 m3, 12% down on the previous year (Table). The latest quarterly data shows a consistent fall in EU-27 imports of tropical sawn hardwood during the course of 2012 (Chart 1).

The level of imports last year is now almost certain to be less than in 2009, the previous low point in the immediate aftermath of the financial crises. The biggest decline was in imports from Malaysia (-31%) and Brazil (-15%) as the EU has continued to refocus purchases of tropical rough sawn lumber on African countries, particularly Cameroon.


EU imports of tropical hardwood mouldings, sourced primarily from Brazil, Indonesia and Malaysia were also falling sharply last year (Chart 2). However imports of laminated tropical hardwood, mainly from Malaysia and Indonesia, were holding steady (Chart 3).

EU imports of tropical hardwood logs continue to fall, as the numbers of plywood and custom cutting mills engaged in processing these logs in Europe has declined further (Chart 4).


The decline has been universal across all the major supply countries. For many species, the cost of logs is now high relative to lumber making log imports increasingly unattractive to European buyers.


Nevertheless logs are readily available to those European companies wishing to buy and prices remain stable.

Some moves to restock African sawn hardwood in 2013
During the opening weeks of 2013 some large importers moved to replenish depleted stocks of key species of tropical sawn hardwood, notably African sapele.


They were encouraged by reports of lengthening delivery times from Africa and rising demand from other global markets which is expected to push prices higher during 2013.


Delivery periods for sapele lumber to the EU, typically around 10 weeks in the second half of 2012, are expected to double during 2013. Some mills in Africa are already now only taking sapele orders for the second half of this year.


The short supply of sapele lumber for European buyers is partly due to imminent enforcement of the EUTR. This is encouraging greater focus of EU buying on a more limited number of mainly larger exporting companies based in Africa which are better able to provide credible legality assurances.


At the same time demand for sapele in other areas of the world, notably the United States, has been more robust in recent months, further reducing availability to European buyers.


Shortages of sapele have encouraged greater European interest in sipo which at present is more readily available. Iroko is also reported by EU importers to be easier to source than sapele. However existing stocks of iroko in Europe are already considered sufficient in the face of quite subdued demand.


Fairly significant volumes of framire, which remains popular in the UK, arrived in Europe from the Ivory Coast late last year under delayed contracts. As a result stock levels are generally regarded as quite high relative to demand.


Introduction of the EUTR is now raising questions about the long-term viability of EU trade with the Ivory Coast which is generally considered less able than many other African supplying countries to meet stringent new requirements for legality verification.


On the other hand, companies in the Ivory Coast operating their own concessions, and which can more readily demonstrate legal origin than smaller trading companies, are apparently still receiving good orders from the EU.


Recent reports also suggest that the Ivory Coast and the EU may soon enter into formal discussions towards development of a Forest Law Enforcement Governance and Trade (FLEGT) Voluntary Partnership Agreement (VPA). If so, this would entail eventual development of legality licensing systems in the Ivory Coast facilitating continued trade with the EU.


EUTR provides impetus to marketing secondary species
Imminent implementation of EUTR also seems to be giving added impetus to the marketing of secondary and lesser-known tropical species supported by proof of legality and sustainability. For example, in the UK efforts are being made to boost interest in OLB/FSC certified movingui as an alternative to framire.


Rougier a French company is now promoting osanga (Pteleopsis hylodendron) for decking and other garden products. Large Belgium-based imported Vandecasteele is also now marketing movingui, fixed dimension iroko and South American guariuba for decking.


Not all these efforts to find substitutes are to the benefit of tropical wood. For example, there are renewed efforts to boost demand for plantation grown Eucalyptus Grandis lumber as a tropical wood substitute.


European demand for Malaysian meranti sawn lumber has remained low as prices have, in recent times, been uncompetitive in Europe compared to African alternatives.


Malaysian mills are now less reluctant to cut for the European market, particularly as there is reasonable demand from other regional markets in Asia and the Middle East.


Nevertheless standard sizes of meranti lumber are currently readily available for prompt shipment. Delivery times are longer for smaller dimension meranti lumber. Prices have been stable in recent months.


More robust market for laminated tropical hardwood
The market for laminated meranti window scantlings is generally more robust than the market for meranti lumber. The trend towards laminated wood at the expense of solid timber in the European window frame market has continued and is affecting tropical wood as much as other species.


This trend is most apparent in central Europe where laminated Malaysian and Indonesian hardwood has been widely accepted for many years. Acceptance of laminated wood is generally less widespread in the UK. European importers report that meranti laminates are now more readily available.


Supplies eased considerably during 2012 after shortfalls experienced in 2011. Surplus supplies of meranti window scantlings combined with lower freight rates are contributing to weakening European CIF prices.


European orders of tropical hardwood decking timbers in advance of the coming spring season are comparatively low. Consumption expectations are quite low as forecasts of European construction activity have been repeatedly downgraded in recent months.


In some parts of Europe there is also a hangover of unsold stock from last year. A few larger importers placed orders for Indonesia bangkirai decking profiles before the end of 2012, taking advantage of ready availability and prices which were low compared to previous seasons.


However expectations that prices might fall further encouraged some importers to hold back. Importers are also keen to avoid putting further downward pressure on prices for existing landed stocks.


On-going uncertainty in European teak market
The European market for natural forest teak 每 which remains a key component in the European yacht building industry 每 is going through a period of uncertainty. Expectations that the lifting of EU sanctions on importation of teak from Myanmar in May last year might increase availability have yet to be realised.


On the contrary European importers believe supply may be even more constrained in the future.


According to a recent article in superyachtnews.com, fears of supply shortfalls have arisen following the Myanmar Ministry of Forestry announcement in October last year that it will ban the export of raw teak from 2014.


The proposed ban will form part of Myanmar*s efforts to increase exports of higher-earning finished products. This is combined with enforced reduction in logging to preserve the country*s teak forests.


European importers quoted in the article suggest they are already seeing an impact in the form of rising prices as suppliers in India, Thailand, and Malaysia are stockpiling Myanmar logs in anticipation of shortfalls of finished wood when the ban is introduced.


European importers predict prices will rise even higher from 2014 because the legislation will enable Myanmar-based businesses to charge a marked up price for the labour involved in milling and finishing their teak, rather than simply selling the raw log at a much lower cost.


European importers also suggest in the article that the quality of natural forest teak available to European buyers has been falling in recent months.


There is a fear that this will become more of a problem if less efficient operations in Myanmar take over the role of processing teak from more modern mills in neighbouring countries.


One European teak trader commented that he is considering opening a mill in Myanmar itself to ensure good quality finishing. However he also suggested this is not an easy option due to political unrest and uncertainty over how the new regulations will pan out in practice.


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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