Japan Wood Products Prices

16-31th June  2005

Dollar Exchange Rates of  3th June  2005

Japan Yen 107.74

Report From Japan

Imported plywood and board  

The Japanese market for imported plywood and wood based panels remains dull. However, the industry is reporting that there are some signs of movement for selected items as enquiries from house builders and contractors have increased. Some wholesaler in Tokyo says buyers turn away when faced with higher asking prices but that buyers are careful to watch for products that are in short supply and will buy if prices are not too high.  

Reports indicated that the supply of logs to Indonesian mills continues to be tight as authorities in the country crack down on illegal harvesting of logs and as more mills cease operations.  

Plywood prices sentiment driven 

Market sentiment in Japan is reportedly different for various tropical plywood specifications. There is apparently active pursuit of low priced items which are in short supply, such as concrete formboard panel for coating as well as for structural panels. Demand has been such that there are few low priced items available at present. In contrast, prices for JAS concrete formboard 3x6 panels have been inching down because of a lack of demand, despite the recent inventory correction. The market prices are Yen 290-300 per sheet, delivered for thin 2.3 mm F 4star(second category) and Yen 430-440 for medium thick 3.7 mm F 4star(first category), both unchanged from May. 

Tropical log Prices 

The log prices are rising and the price gap between log importers and plywood mills remains wide. 

Tropical log prices have been moving up steadily but Japanese plywood mills that use imported tropical logs have been facing a stagnant plywood market. In the face of weak price levels for plywood the mills are unable to accept the higher log prices. 

The main driver of plywood sales is the housing market but housing starts in Japan are almost the same as last year and softwood plywood prices are particularly weak and this is holding down prices for tropical plywood. 

The Japan Lumber Report says that there is little hope for a recovery in plywood prices so the only option for the Japanese plywood makers is to lower production costs and one way to achieve this is to minimise the log cost. 

Late April log price negotiations between the importers and plywood mills were carried over into May and an interim agreement was finally made in the second half of May.  

The new price structures allow a variation depending on exchange rates and by volume but, as an indication, prices are about Yen 6,100-6,150 per koku CIF for Meranti Regular, which is about Yen 200-300 per koku higher than prices in early January. The price now being tabled by importers is for about Yen 6,400 to be discussed at the next round of negotiations.  

For plywood mills reportedly have adequate log inventories so that they do not need to chase the higher priced logs; they are patiently waiting for log FOB prices to ease but, as analysts say, the reality is that FOB are still firming.  

Although weather conditions in the log producing countries are favorable at present and log harvesting is unaffected, there is continuing concern on the part of log importers in Japan that new harvesting restrictions and the aggressive purchasing of logs by China and India will keep FOB prices firm. 

Meranti regular (SQ and up) FOB for Japan is currently at about US$164-166 per cubic metre. Kapur logs are about US$185-186 but the suppliers are now proposing more than US$190 for new orders. Keruing log prices remain high at US$210 and the India importers are still accepting this. 

Joinery lumber shortage 

FOB prices of tropical sawnwood is reportedly firming because of a shortage of logs in the sawmills in SE Asia, at the same time the weak yen has pushed costs in Japanese Yen higher by about 10%. 

However, domestic sawnwood demand remains quiet with no sign of recovery as the housing sector is quiet. Under these conditions importers are not in the market and the prospects for future arrivals is not bright so the Japan Lumber report is saying that it is possible that some items may be in short supply in a few months time. 

The wholesale price for Merkusii pine (laminated A) sawn are at Yen 90,000-93,000 yen per cubic metre,  unchanged from April. Agathis sawn (B and up) prices are also flat at Yen 94,000-95,000 while Chinese Laminated red pine sawn is at about Yen 85,000 per cubic metre.

 Logs For Plywood Manufacturing      

The Japanese media is reporting that the Land, Infrastructure and Transport Ministry is considering giving tax breaks to those spending on improving the quake resistance of there homes.  This proposal is reportedly part of the ministry's plan to make Japanese homes quake resistant.  

Last year the ministry sought a 10% cut in income tax and a 3% cut in residency tax for those who spend a minimum of Yen 2 mil. on improvements but these cuts were rejected. Now the ministry will propose a modified tax reduction to be in place in 2006.  

Sumitomo Crest buys Toyo Plywood  

Sumitomo Forestry will reportedly buy out Toyo Plywood from its parent company, Shoei Shoji and place the company as a subsidiary of Sumitomo Forestry Crest (SFCC), a wholly owned subsidiary of Sumitomo Forestry. Sumitomo Forestry plans to develop a nationwide timber building materials business in Japan using the sales network of it acquisition, Toyo Plywood. With the inclusion of Toyo Plywood sales, SFCC's annual sales will grow to nearly Yen 60 billion.  

Toyo Plywood was established in 1950 in Nagoya and the company grew its general building materials business, which included timber building materials and housing appliances manufacturing.  

Free Trade Agreement  

Japan and Malaysia have now reached agreement on a Free Trade Agreement (FTA). The framework agreement was reached last year but has now been finalised and will cover, amongst other things, agricultural and forest products. 

Except in the case of plywood, all duties on forest products will be removed as soon as the treaty goes into effect, which is expected to be by mid 2006.  

Negotiations on the details of tariff changes for plywood will continue after the Agreement comes into force. The FTA treaty will be reviewed periodically and, at the time of these reviews, the issue of plywood will be addressed further. 

According to the Japan Lumber Report, the Japanese and Malaysian authorities intend to further discuss the issue of plywood tariffs as there is a need to review the various tariff proposals from Japan and harmonise these with the current export duty and quota system in Malaysia. 

Negotiation on this key issue will likely be restarted in earnest when the FTA is reviewed in five years time so, until agreement is reached on a revision, an import duty of 6-10% will be applied on imported hardwood plywood.  

Japan and Indonesia have now agreed to start FTA negotiations and the indications from the Japan Lumber Report are that Indonesia will ask Japan to introduce a single plywood tariff to replace the existing multiple tariff rates which range from 6 to 10% depending on species.  

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