Wood Products Prices in The UK & Holland

16-31th August 2005

Report  from  the  UK

Weakest retail sales levels since 1983

As the summer holidays come to an end, sales over the past three months are reported at their weakest since 1983 with poor sales prices. The feeling in the market is that prospects of any improvement in the coming months are low.  The DIY (do‑it‑yourself) sector is being hit particularly hard after five years of growth. Furthermore, B&Q, UK’s largest DIY retailer, is facing competition from an improved Sainsbury’s Homebase. 

The UK economy slowing down

Analysts blame the slow down in the housing market, record oil prices and more awareness of consumer debt. There remains the uncertainty about the future movement of the interest rates with inflation rising due mainly to surging oil prices. In July, mortgage lending saw the smallest increase since June 2002 while credit card borrowing scored the lowest total in four years. 

Slow down in trade orders for hardwoods

the horizon is unemployment, which has risen for the sixth month in a row, the longest stretch of rises for 13 years.  

Overall, the UK economy is slowing down leaving no space for price rises and causing reluctance on the part of importers to hold much stock. The Central Bank forecast that the UK economy would expand 2% this year, the slowest pace since 2002. 

House building plans in southern counties

The UK has announced plans to build a very large number of houses in the southern counties, most of which are to be targeted as low cost 'affordable' housing. There is controversy over these proposals much on the basis that the South is already overcrowded and that building will have to be on previously preserved green belt sites. 

Log Prices in the UK

Sawnwood Prices in the UK

*When last available  

Plywood and MDF in the UK

*When last available 

Report  from  Holland

Dutch tropical hardwood-market in a nutshell

One of the handicaps that the timber-sector currently faces in Holland is the long spread of the summer vacations. Starting early July, the holiday season continues until the end of August. The country is split up in several areas, each with its own time frame to celebrate vacation. Obviously, this disrupts business considerably. Meanwhile, the timber market is extremely quiet. Sector actors such as importers, joineries and agents all complain that the market is not active for tropical hardwoods but also for softwoods and panels. 

Sawnwood import prices rising

Despite the sluggish market, the CNF Rotterdam price levels are rising. A number of reasons have contributed to the price rise:

·   A reflection of the scarce supply and tough pricing of logs that millers have to pay, compounded by the declining log quality with lower recovery.

·   The continuous upward trend in ocean freight, which is due not only to higher oil prices but also to higher demand for container-space. This prompted carriers to introduce the so-called high‑season surcharge.

·   The dropping of the seven‑year‑old peg of the Malaysian ringgit to the US dollar, which forced exporters to adjust 1% up the CNF Rotterdam prices. Currency-experts had expected that the Malaysian ringgit would revalue more drastically after the de-pegging. But, the recent strong devaluation of the Indonesian rupiah and  rising oil prices let the ringgit remaining fairly close to pegged level, much to the relieve of importers. 

Traders’ hopes are placed on September

Importers are confronted by higher import prices and a long‑standing depressed market. However, some analysts foresee a tendency that gradually might move sales prices in an upward direction. Sales prices might be still far off from replacement value but it seems that hard‑selling strategies such as low sales prices of euro 540 per m³ (and below) for 3x5” sawnwood or free delivery to buyer’s yard seem history now. Analysts believe that soon companies will not be able to continue selling without making profit or without proper cost‑price calculation. 

In contrast, other analysts doubt that the market will pick up steam during September due to the fact that the economic situation in Holland remains precarious. Holland’s consumer confidence dropped from -23 in July to -28 in August, according to the Central Bureau of Statistics (CBS), indicating that consumers are not prepared to spend or invest and they would rather postpone. The sentiment is exacerbated by soaring energy costs and planned increases in health insurance for 2006. These sentiments are throwing a shadow on the timber trade. With September normally a busy month, some analysts opine that if market remains dull again, the chances for a market recovery in the rest of the year are very low, taking into account the holiday breaks in mid‑autumn and Christmas. All traders’ hopes are placed on September. 

Sawnwood prices in Holland 

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