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Japan Wood Products Prices

16-28th February 2013


Japan Wood Products Prices

Dollar Exchange Rates of  21th February 2013

Japan Yen 93.41

Reports From Japan

 

 Economic outlook from the Bank of Japan
The Bank of Japan (BoJ) Monetary Policy Board met in mid February and released its assessment of the Japanese economy. The BoJ report can be found at: http://www.boj.or.jp/en/mopo/gp_2013/gp1302b.pdf. The following is a summary of the main features of the report.


It is the view of the BoJ that Japan's economy appears to have stopped weakening. However, the economies in the main countries with which Japan trades, except China, remain weak but are showing signs of bottoming out, says the report. While Japan’s exports continue to fall the pace of decline has been easing recently. Private sector fixed investment remains weak but investment by the non manufacturing sector is encouraging, says the BoJ.


Public investment continues to increase and housing starts have improved and this, along with the steady pace of private consumption, is fuelling optimism that perhaps the worst of the economic stagnation is over.


In the words of the BoJ: “reflecting on these developments in demand both at home and abroad, industrial production appears to have stopped decreasing”.


Japan's economy, says the BoJ report, is expected to level off and remain stable, eventually returning to a moderate recovery path as domestic demand improves due to the effects of various economic measures and as overseas economies begin to show positive signs of growth.


When overseas demand begins to strengthen Japan’s export performance will start to improve. In the short-term it will be domestic demand and public investment that supports the economy. Business investment, says the BoJ is projected to remain weak especially in the manufacturing sector.


Energy imports drive up trade deficit
The weaker yen has adversely affected Japan’s trade deficit which rose to a record US$17 billion in January 2013. The rise was not wholly unexpected as the weaker yen had a big impact on import bills plus the fact that January is, traditionally, a slow month for exports.


The impact of the weaker currency was most apparent for energy imports which have soared since the shutdown of almost all the nuclear reactors in the country. Power generation is now almost entirely dependant on oil and gas, both of which have to be imported. Recent data shows that imports of natural gas increased by around 12% and oil imports were up over 30%.


Japan’s export performance in January was encouraging, growing 6.5% from levels in 2012; however this was the first increase in eight months. This good news was tempered however by the 7% plus rise in the cost of imports.


Many observers expect the Japanese government to push to restart some nuclear reactors to cushion the impact of the weaker yen on energy import bills.


Weak yen, unexpected consequences for Japanese manufacturers overseas
The Trade and Industry Ministry is forecasting trade with China, the number one trading partner, should recover this year. In 2012 trade levels between the two neighbours fell for the first time in three years because of a territorial dispute and the slowdown in the Chinese economy.


The weaker yen also affected the trade deficit with China because Japan imports so much from the country. Much of the imports from China are of goods manufactured there by Japanese companies which fled Japan during the time the yen was so strong.


Because the yen has weakened, this ‘escape’ has the unexpected consequence of making imports from Japanese manufacturers located in China more expensive on the Japanese domestic market.

Trade news from the Japan Lumber Reports (JLR)
The Japan Lumber Reports (JLR), a subscription trade journal published every two weeks in English, is generously allowing the ITTO Tropical Timber Market Report to extract and reproduce news on the Japanese market.
Extracted from the Japan Lumber Reports:
Plywood supply in 2012
Imported South Sea plywood
South Sea logs


Plywood supply in 2012
Total plywood supply in 2012 was 6,074,400 cbms, 1.2% less than 2011 but total supply exceeded 6 million cbms for two straight years.


The market weakened since November 2011 by aftermath of heavy supply for restoration of earthquake and tsunami damage in March 2011 so that domestic softwood plywood manufacturers started production curtailment since mid 2012 to restore the market.


Meantime, the shipment remained rather high so that the production recovered in the second half of 2012.With bullish demand, imported plywood showed steady supply with share of import being 58% in 2012.


Total imported plywood was 3,525,900 cbms, 3.7% less than 2011 while domestic supply was 2,548,500 cbms, 2.5% more.


Overseas plywood suppliers have always demanded high prices but they have kept small price increase considering deflation in Japan so the buyers in Japan could keep buying.


Domestic softwood plywood production was 2,327,400 cbms, 5.9% more than 2011. The market had kept weak almost through 2012 due to heavy inventories but the shipments have kept high level since last April and the shipments recorded over 210 M cbms a month for three consecutive months since last October, supported by aggressive purchase by house builders and precutting plants.


The manufacturers increased the production to cope with active demand and the production has kept over 200 M cbms for three consecutive months since last October. With the shipment surpassing the production, the inventories have kept dropping.

Imported South Sea plywood
Prices of Japanese market and the suppliers’ proposals are firming. In particular, prices of concrete forming panel are sharply climbing in Japan.


Prices of 3x6 concrete forming and concrete forming panel for coating increased by 120 yen per sheet due to ongoing depreciation of the yen.


The prices in Japan went up since late January because of considerable depreciation of the yen and future contract prices with the suppliers are much higher than current
market prices. This causes speculative purchase supported by brisk demand and delayed shipment caused supply shortage.


Exchange rate of the yen dropped by 16% since mid November from 79 yen to 94 yen. 3x6 JAS concrete forming panel prices in mid November were 860-870 yen per sheet delivered but now they are 1,020 yen, 18% up. Prices of 3x6 concrete forming for coating are 1,150-1,160 yen, 100-130 yen higher than January. 12 mm structural panel prices are 1,020-1,050 yen, 70-100 yen higher than January.


Both floor base and standard panel are firm. Bullish floor manufacturers placed large orders but dollar based prices makes yen prices much higher due to rapid depreciation of the yen and floor manufacturers are not able to absorb cost increase.


Suppliers’ prices on 12 mm x 945mm x 1,840 mm are in last December were $670 per cbm C&F, $20 up.


The prices in Japan now are 1,280 yen per sheet delivered, 20 yen up from January. Thin panel prices of 2.4 mm are 370-380 yen per sheet (type 2/F 4 star). 3.7 mm are
about 480 yen (type one/F☆☆☆☆). 5.2 mm are about 590 yen (same as 3.7 mm).Both are 10-20 yen up from January.


South Sea logs
Log market in Japan has been firming since last month due to cost up by weak yen and the suppliers’ offer prices are also firming.


Current market prices in Japan are about 8,200 yen per koku CIF on Sarawak meranti regular, 400 yen higher than January. January arrived Sabah kapur regular log prices are about 12,200 yen. Log prices have to go higher yet which squeezes plywood mills’ profitability severely.


Mills are asking 10% higher prices on plywood but further hike is necessary.


Log producing regions are in rainy season. Sabah weather is particularly poor. Log production is down everywhere. Log prices are firm and inching up while demand in China is not so active and India buys necessary volume only as they are making,


inventory adjustment in India so there is no panic buying in limited supply.


Log inventories are way down in Malaysia and some plywood mill in Sarawak shut down because of shortage of logs.


Japanese buyers want to reduce FOB log prices to offset weak yen but on the contrary, log suppliers’ offers are about $5 up. India does not chase higher log prices.


Sarawak meranti regular prices are $255-260 per cbm FOB. Meranti small prices are $215-220 and super small are $195-200. Ocean freight is up by $1 per cbm since January, which pushes CIF cost up higher.

 


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  Plywood grades. Letter(s) on the left indicate face veneer(s), those on the right backing veneer(s). Veneer grade decreases in order B, BB, C, CC, etc. MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF         Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot  PHND             Pin hole no defect grade
Hoppus ton     1.8 cubic metres              Price has moved up or down

Source: ITTO'  Tropical Timber Market Report


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