Report from Holland  

Week 51 comes around  

The Dutch timber market, including the market for tropical hardwoods, is now affected by the Christmas mood, end-users have things other than tropical timber on their minds. 

This is week 51 of the trading year and all activities in the timber sector will come to a standstill. Business will resume again around January 10 but is unlikely to pick up any momentum straight away as the current depressed market situation cannot change overnight. 

Also on the minds of the builders especially is when are the first snows likely to appear as with snow and frost building activities come to standstill and the timber demand is affected.  

Analysts report that during the last few active trading days of the year - whether it was a large scale importer or a small trader - everyone commented much  the same way, there is ample time to tidy the office as the phone hardly rings. 

In such a market eagerness to get something sold remains strong, the more so the long holiday is about to begin. When buyers are not buyers are not eager because of the stagnant market the spin-off is that sales prices come under pressure.  

Rising dollar steadies prices  

Prices have been eroded for some time now driven particularly by the weak dollar versus the Euro which has seen for a month or more. Luckily this  week 51 there has been some slowing in the decline of the dollar and it is now around 1,33 US$ to a Euro.  Without this steadying of the dollar rate the pressure on the sales prices of Dark Red Meranti for example would have been even greater.  

Analysts are saying that, overall, stocks are simply too high still and importers want see these come down. 

The Meranti market in Holland has been so quiet over the past several weeks that, finally,  exporters in Peninsular Malaysia had little option but to ease the CNF price levels of the main item for the Dutch market, 3x5". Producers were apparently short on export orders and needed some cash flow in anticipation of upcoming Chinese New Year.  

There has not been a spectacular decline but, compared with the previously reported price for both Bukit and Seraya in 3x5" prices are down by about 1-2%. Not really spectacular and such a price correction was anticipated.  

The demand for Merbau in both Holland and Belgium remained quite strong. On the one hand, because exporters in Malaysia are hardly in the position to offer supplies due to the acute shortage of Merbau logs at sawmills and depleted stocks of sawn Merbau and, on the other hand by the apparent shortages of the alternatives Iroko and Afzel/Doussié.  Under these circumstances it is not surprising the CNF-Rotterdam price for Merbau has climbed further. 

Currency rate change alarm  

In November there was some speculation on the possible loosening of the pegging of the Malaysian currency (Ringgit) to the dollar. Currently the pegging means a fixed rate of US$ 1 = MYR 3,8.  

The sudden fall in the value of the dollar against major currencies triggered the. Some analysts say that the current currency rates creates a badly undervalued Ringgit however the speculation on a change in government policy has been ended. 

Looking at the value of foreign exchange in countries surrounding Malaysia the devaluation of the Malaysian currency is, say analysts,  still within acceptable levels and Malaysia's exports are benefiting such that, at the moment, a change is not anticipated.  

Malaysian authorities have reportedly said that they will be closely monitoring rates but, for the time being, no change is foreseen. This is an enormous relief for Dutch importers because there is still unshipped orders on the books and if the exchange rates were to change such purchases would become more expensive. 

Although markets are quiet, on the shipping front some traders say that they foresee an increase in container freight charges from both Kota Kinabalu and Port Kelang to Rotterdam in December.  

The supply situation in Peninsular is reportedly extremely tight and now Nemesu and Bukit are equally affected. The east coast states of Pahang, Kelantan and Terengganu have been affected by monsoon floods with several casualties reported and thousands of people having to be evacuated.  

This situation supply will likely continue for at least 2-3 months and thus, the quiet market in Holland is balanced by slow timber supply in Malaysia. As a result of the current heavy Monsoon rain in Malaysia it is not expected that any further fall in CNF Rotterdam price levels for Bukit and Seraya will occur immediately.