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Japan Wood Products Prices

01-15th February 2013


Japan Wood Products Prices

Dollar Exchange Rates of  11th February 2013

Japan Yen 94.32

Reports From Japan

 

Negative GDP growth fuels new stimulus measures
Japan’s fourth quarter 2012 GDP data was released on February 14th 2013 showing the economy shrank by 0.1 percent. This disappointing result is fuelling the ruling party’s case for more monetary stimulus to end deflation. The 2012 annualized GDP was worse than expected at minus 0.4 percent.


With three quarters of 2012 recording negative growth the government seems even more determined to push for a weaker yen to reverse the negative growth and achieve positive economic output in the first quarter of 2013.


Japanese industrial output has been falling for the past six months, dragged down by the euro crisis and by the island dispute with China which has negatively affected trade between the two countries.


The fourth quarter decline in GDP growth was a surprise to most analysts who had been forecasting an improvement after the two previous quarter declines.


The monetary and fiscal stimulus measures introduced by the new government are expected to result in a recovery in 2013.


As further monetary easing is expected the yen continues to weaken against major currencies. This apparent deliberate weakening of the yen has stirred an international debate on whether the Japanese government was simply printing money to drive the yen lower to boost export competitiveness.


In mid February the slide of the yen eased but a comment by a possible candidate for the job of governor of the Bank of Japan that an exchange rate from 90-100 per US dollar would be reasonable target, drove the yen weaker.


Stock market strength drives up consumer confidence
The Japanese Cabinet Office recently released the results of its consumer survey. The survey, which is used to compile the consumer confidence index, showed an improvement in sentiment in January 2013 with the index rising for the first time in five months.


The consumer confidence index for, what the survey identifies as, ‘general households’ increased to 43.3 in January 2013 compared to the level of 39.2 in December 2012.


The survey, conducted in mid January, also indicated that the Japanese public expects inflation to rise in the coming months.


Analysts point out that the improvement in sentiment, while still below the 50 point (neutral level), is the result of the weakening of the yen to drive up exports, this has resulted in a surge in the Japanese stock market.


Put together, consumers seem to interpret the stock market improvement as positive for job security.

Increased consumer spending gives rise to optimism
The Japanese government has revised upwards its forecast for private consumption for the early part of 2013. In November and December 2012 consumer spending remained stable.


Reports suggest that car sales in October levelled out and were seen improving in November and December 2012 such that domestic car production started to recover.


However the Cabinet Office report says the risk to the Japanese economy from negative developments in overseas economies could still affect the sustainability of growth. To maintain the recovery of the Japanese economy analysts say the government needs to address deregulation and possible participation in the Trans-Pacific Partnership (TPP) free trade agreement.


Japanese businesses want the government to join the TTP, allowing exporters to compete more effectively with overseas rivals however; there is strong opposition to the TTP from the politically powerful agricultural sector in Japan which fears a big increase in imports of low cost agricultural products.


Despite some recovery, 2012 housing starts remain one of the lowest since 1965
December 2012 starts were 75,944 units, 10% more than December 2011.Condominium starts were higher with more than 10,000 units being made available for three consecutive months. Wood framed housing starts totalled 43,552 in December 2012, 7.4% up on levels in 2011.


While there has been some recovery in housing starts in Japan, the level in 2012 is the sixth lowest level of housing starts since 1965.


Impact of weaker yen
The new government in Japan has introduced economic measures which triggered a plunge in the yen dollar exchange rate. The yen has dropped by about 19% from 75 yen to the US dollar to over 90 yen to the US dollar in four months.


This devaluation of the yen pushes up the costs of all Japan’s imports and is affecting the timber sector. The demand for new housing in Japan is firm and this is driving demand for wood products. Currently, imported European redwood laminated beams are in short supply and market prices are rising rapidly.


Wholesale prices of whitewood laminated posts were around yen 1,700 -1,750 per piece in early February and analysts expect these to rise to yen 1,850 per piece in March.
 

Extracted from the Japan Lumber Reports:
1. Domestic logs and lumber
2. Plywood


1. Domestic logs and lumber

Log market in Northern Japan and Tokyo region continues bearish. Log production has been high but sawmills are not able to increase the production because logs are frozen solid.


In normal years, this is demand slow season so slower lumber output poses no problem but after European lumber prices climbed by weakening yen, there are active demand for lumber of domestic species such as KD cedar post and stud.


Therefore lumber prices are firming but log prices are weakening, which is abnormal pattern. Post cutting cedar log prices in Tochigi and Fukushima prefecture, north of Tokyo are down by 500 yen from January.


Log price drop in winter is nothing unusual but a degree of drop is large this winter. Compared to the same period of last year, Fukushima prices are 1,000 yen lower.
Meanwhile, lumber prices are escalating. In Tokyo market, 105 mm post and stud prices are over 50,000 yen, 5,000 yen higher than the bottom price last year so sawmills want to increase the production but cannot saw frozen logs so they are not able to take advantage of low log prices.


2. Plywood
Demand for plywood continues brisk but in Northern Japan and Japan Sea side had much heavier snow this winter so that surface transportation is hampered since last December.


Also rough sea in Japan Sea bothers inland freighters’ trip from Northern Japan to Western Japan. In Western Japan, inventories of manufacturers and distributors are way down due to robust orders by house builders and pre-cutting plants.


Under this situation, in Tokyo market, delivery time from the manufacturers to distributors became uncertain up until late January so that the supply got short at retail level. Therefore, securing the volume becomes priority matter rather than the prices.


The manufacturers, which carry heavy order files, are cautiously increasing the sales prices little by little. In fact, shipment volume has been more than mills’ production for more than six months now. December production was 202 M cbms while the shipment was 211 M cbms.


Current prices are780-800 yen per sheet delivered on 12 mm 3x6 panel, 30 yen up from January. 1,520-1,650 yen on 24 mm thick panel.


Import plywood market is also vigorous with the prices ascending. FOB export prices have been climbing since late December but the prices in Japan did not react so the major importers decided to push the prices up in mid January then the market prices took off sharply.


Regardless of higher prices, it is hard to source the volume in the market and the dealers are frantically looking for panels in demand.

2011 and 2012 furniture imports
The source and value of Japan’s 2011 and 2012 imports of Office Furniture (HS 9403.30), Kitchen Furniture (HS 9403.40) and Bedroom Furniture (HS 9403.50) are shown below. The data are for 2012 and 2011 and represent imports by Japan from main suppliers in each year.


Total imports of Office Furniture by Japan totalled yen 2,157 mil. in 2012 up 19% from levels in 2011. The main suppliers were China (38%), Indonesia (6.5%), Malaysia (5.2%) and Taiwan P.o.C (4.3%). Asian suppliers dominated the market. Of EU suppliers to the Japanese Office Furniture market, Germany led the way supplying yen 98 mil. in 2012, just 4.5% of total imports of Office Furniture.


The Kitchen Furniture market in Japan is huge and imports account for a significant market share. China, Vietnam, Philippines and Indonesia are major suppliers. Germany and Italy contribute together around 5% of total imports and other EU suppliers include Denmark, France and Sweden.


The largest supplier of Kitchen Furniture to the Japanese market is Vietnam (2011, yen 3,075 mil. and 2012 yen 3,325 mil.) China, Philippines, and Indonesia each provide around yen 1500 mil. and together account for some yen 5,282 mil. or around 53% of the total imports of Kitchen Furniture.


The value of Japan’s imports of Bedroom Furniture in both 2011 and 2012 was approximately twice that of the value of Kitchen Furniture imports and some eight times that of Office Furniture imports.


Manufacturers in Vietnam supplied around 34% of all of Japan’s Bedroom Furniture imports in 2011 and in 2012. After Vietnam the main suppliers of Bedroom Furniture to the Japanese market in 2012 were China (yen 1,922 mil.), Indonesia (yen 1,744 mil.), and Philippines (yen 1,616 mil.)


 


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  Plywood grades. Letter(s) on the left indicate face veneer(s), those on the right backing veneer(s). Veneer grade decreases in order B, BB, C, CC, etc. MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF         Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot  PHND             Pin hole no defect grade
Hoppus ton     1.8 cubic metres              Price has moved up or down

Source: ITTO'  Tropical Timber Market Report


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