Wood Products Prices in The UK & Holland

1-15th September 2005

Report from the UK 

Higher fuel costs leading to inflation

Hurricane Katrina has far reaching knock‑on effects in economies outside the USA, owing to the fact that damage caused to the US oil refining industries, has pushed petrol and diesel prices in the UK at a time when prices were already rising due to world demand. The UK is particularly hard hit due to the very high tax on petrol, the highest in Europe. A litre of petrol now costs at least £1 (£4.50 a gallon). 

Oil price increases would probably cause inflation to creep higher in September, after the August figure rose 2.4%, the highest level since current records began eight years ago. House prices rose unexpectedly by 1.6% in August according to the Halifax Bank of Scotland. The average house price in August was £166,000. With higher inflation, further calls for interest rate cuts seem unlikely to be met as inflation is at a higher level than the target set by the Chancellor of the Exchequer. 

Consumer spending keeps declining

The timber trade remains pessimistic about the future as its products are all very dependant on transport costs from source to site. B&Q, the DIY chain, is considering closing 22 of its stores, including up to six mega stores. Growth is predicted to be lower while borrowing will be much higher than forecast for 2005. Some economists point to possibly higher taxes next year. 

General spending continues to decline as seen in the annual reports of a number of key companies in the last few weeks. However, house building activity seems to be holding up with new orders at a reasonable level, but overall the economy continues to be fragile. 

Log Prices in the UK

Sawnwood Prices in the UK

*When last available 

Plywood and MDF in the UK

*When last available 

Report from the Netherlands

The Dutch economy at crossroads
Next week, the Dutch Government will present its annual budget and expectations for 2006. The preceding weeks have been characterized by mixed statements: some groups praise the Government’s achievements amid difficult times, whereas others and the opposition voice strong discontent. Last year the Government devised strict measures and budget-cuts to revitalize the economy. However, the cost of living and unemployment have risen compounded by mounting energy costs. Analysts wonder what additional measures the Government will take to address the economy’s current challenges and the public discontent. The Government has announced that levies on fuel will be frozen next year. 

According to the Central Bureau of Statistics (CBS) the economic growth in 2005 is slower than last year. However, the Minister of Finance foresees some progress since interest rates are at a historic low. He expects that the profitability of many companies will improve in the current year and the next. Some observers believe that progress might be affected by a planned new system of health insurance seen as costlier and not beneficial to employment generation and the economy in general. 

Tax-deduction abolition could affect building sector

The Government has reserved some 2.5 billion euro for subsidies for low earners and has announced some tax reductions (part of the property tax shall disappear). Nevertheless, this could be in contravention of the European Commission warning that the Netherlands should abolish tax deduction of mortgage interest. Currently, the interest paid on mortgage (to certain limits) is deductible from income tax. This deduction applies for the so‑called first house where the family normally lives. If the family also owns a mortgaged house elsewhere in the country or abroad (e.g. recreational purpose) that interest is not deductible. Abolishing such a ‘tax‑deducting measure’, say some analysts, could adversely affect the housing market. That certainly would not benefit the timber market that is still hoping for a boost in the building sector to reactivate demand. 

The timber market reactivates partially

Although the holidays are over now and some activities are seen again in the timber sector, it is generally felt that the trade in meranti and merbau products is still far from active. Enquiries for these products remain subdued. But some business activities have been observed in items that are not widely in stock such as 2.1/2x6”, 1.3/4x12” and some 4” sawnwood sizes. There are increased inquiries for MTCC certified material across the market, prompting several importers to take positions and place some forward orders. Some observers think that demand for certified Meranti could further increase if Malaysia supplied FSC‑labelled material. 

The demand for merbau sawnwood has waned slightly as importers argue that current price levels seem too high. However, exporters maintain their price positions as supply in Peninsular Malaysia seems to be declining and the Netherlands (despite the current slow demand) is still seen as a major market for graded sawn timber, particularly in the dark red meranti (DRM) group. 

Sawnwood prices in Holland

1 ton of 50 Cu.ft. = 1.416 m³

US Dollar Exchange Rates
As of 7th September 2005

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