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Dollar Exchange Rates of 7th October 2005 Japan Yen 113.77
Prices for Southeast Asian logs stay firm Spot
prices of Southeast Asian logs remain high due to favourable purchasing by
China, India and other countries despite few inquiries from Japan. Locally
sawn Southeast Asian timber products arrived in Japan in summer but
shipments were not smooth and were stocked in ports. Production cost for
Malaysian lauan sawn timber is expected to surge further in view of the
impeding expiry of the preferential tariff rate in October and high oil
prices. Southern
Chinese softwood products are not unduly influenced by a stronger yuan so
far. Meanwhile, the China Forestry Bureau announced that it would enhance
illegal logging regulations. The impact of this on future supply is
difficult to discern. Mixed performance by major exporters According
to the Japan Plywood Manufacturers’ Association, import of plywood
(regular plywood, special plywood, blockboards, etc.) of 357,000 m3
in July was the lowest this year, 20% decline compared to July 2004.
Plywood imports have in fact been decreasing in the past four months.
Imports from Indonesia plummeted 47% to 122,000 m3 due to log
shortages and a dull Japanese market, extending the declining trend for
ten straight months. In contrast, plywood imports from Malaysia, the major
source of plywood for Japan, expanded over 10% to 190,000 m3,
stretching the upward trend to seven months in a row. Plywood imports from
China, the third largest supplier, recovered in July, increasing by 12% to
33,000 m3. Steady growth in softwood plywood production The
production of softwood plywood has been gradually growing in recent years.
The average monthly production of softwood plywood was 115,000 m3
in 2002, 156,000 m3 in 2003, 179,000 m3 in 2004, and
184,000 m3 for the period Jan.-July in 2005. Although Seihoku,
Japan’s largest plywood manufacturer, decreased production since April
2005 in anticipation of an oversupply, overall softwood plywood production
is still increasing. It has become difficult to cut production as more
manufacturers shift to softwood plywood. Interest rates remain at zero In
its monthly assessment, the Bank of Japan (BoJ) maintained its moderately
optimistic view of the economy, predicting continuing expansion in
domestic and external demand and a stabilisation of prices before the end
of the year The BoJ left the monetary policy unchanged, keeping overnight
interest rates at zero. The BoJ predicts that consumer prices would begin
rising from the first quarter of 2006, giving rise to the possibility of
adjusting the ultra‑loose policy and raising interest rates. Log prices rising amid a weaker yen Southeast Asian log market in Japan is struggling with
high FOB US$ prices, soaring oil prices and a weakening yen. During price
negotiations in late September, log importers proposed prices without
profit but plywood mills refused. At the end, parties settled at 100-300
yen per koku for meranti regular, higher than late August prices. Although
prices were unsatisfactory for importers, market analysts think that
prices in Japan are gradually firming. As the yen eases to over 114 yen per US dollar, log
price negotiations are stalling again. If the yen weakened further to
115-116 yen, CIF prices for meranti regular would jump up to 7,300 yen per
koku (koku=0.278 m3). Plywood mills, which rely on south sea
logs, strongly demand lower FOB dollar prices. Normally at this time of
year, FOB prices should loosen as log production increases during the dry
season but FOB prices have remained firm this year. The reason is active
buying from China, India, Vietnam as well as from local plywood
manufacturers in Southeast Asian countries but limited supply remains to
be the underlying factor. Forest authorities in Southeast Asian continue
to inspect logging activities and harvesting has not been as smooth as in
previous years. Wooden housing starts share at 44% Total starts in August were
109,199 units, down from 115,343 units in July, the fourth straight month
that housing starts exceeds 100,000 units. The main drivers were rental
units and condominiums built for sale. However, starts of privately owned
detached units declined by 11% compared with the same month a year ago,
the twelfth consecutive month of decline. This certainly is impacting
demand for wood building materials and is resulting in current depressed
plywood market. Starts of condominiums and rental units increased for five
months in a row but detached units built for sale dropped by 1.4% to
12,261 units. It seems that detached units built for sales are stabilizing
at about 12,000 units a month. 2x4 units were the highest this year with
8,695 units. Seasonally adjusted annual starts are 1.271 million units. In
terms of built material, wood based units were 47,943 in August,
accounting for almost 44% of the units. August and September Wholesale Prices
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