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Report
from
Europe, the UK
and
Russia
Europe crawls out of recession
The Financial Times (FT) reports that ¡°the worst recession
to hit continental Europe since the 1930s ended formally
in the three months to September, but with less than a
bang than expected.¡±
Drawing on Eurostat data, the FT notes that GDP in the
16-country euro-zone grew 0.4% in the third quarter
compared with the previous 3 months. That was the first
positive growth reported since early 2008.
Germany returned to its role as Europe¡¯s economic
powerhouse, reporting a 0.7% expansion, boosted by
investment spending and exports. Italy also performed
strongly with GDP rising 0.6% in the third quarter.
But the overall euro-zone rebound was marred by a much
weaker than expected performance by France, which
reported a GDP rise of 0.3% - the same as the previous
quarter. Euro-zone prospects also remain blighted by
Spain, hit badly by its property market collapse.
The FT warns that the pace of recovery is likely to be
slow. Quoting Jorg Kramer, chief economist at
Commerzbank in Frankfurt, it suggests that ¡°the euro-zone
is driving ahead with the handbrake on¡±. So far, recovery
has been dependent on temporary factors ¨C less aggressive
de-stocking by industry and emergency stimulus measures.
It is too early to assume that growth will be sustained.
After a while, the recovery could run out of steam if
household spending does not pick up. Consumer spending
remains weak across the euro-zone and prospects for any
strengthening are gloomy given the current state of the
labour market. Meanwhile the strengthening euro, which is
undermining exports, and weakness in the banking sector
are other obstacles to a rapid rebound.
On the other hand, the UK economy was still in recession
at the end of the third quarter of 2009. The UK is now in
its longest recession since records began in 1955. Here
too, the latest economic data suggests that any recovery is
likely to be sluggish.
Consumer spending is currently bolstered by a reduced
value added tax (VAT) rate, which forms part of the
government¡¯s package of stimulus measures, but may well
be hit when the rate is returned to pre-recession levels in
January.
Continuing job losses are also damaging consumer
confidence. While companies are rebuilding stocks, lack
of confidence in end-user demand is feeding through into
only cautious buying.
Despite promising signs that property prices may have
stabilised in the summer months, the UK housing market
still looks very fragile. Both mortgage approvals and
private housing orders continued to fall in August, the
latest month for which this data is available. The outlook
therefore is for only very sluggish growth in the first half
of 2010.
Tentative restocking of plywood
The emergence of gaps in stockholdings and a fear of
future shortfalls in supply have encouraged some tentative
moves by UK plywood importers to restock in recent
weeks.
However, uncertainty over future demand prospects,
combined with concerns over freight rate increases and the
inconsistency of the pound-dollar exchange rate, mean that
the mood remains extremely cautious. The UK tropical
hardwood plywood market is now very much dominated
by Malaysian and Chinese material. Low price
expectations, falling availability of raw material and
environmental concerns have generally forced out
Indonesian shippers.
Brazilian shippers have also been unable to meet current
market prices, particularly as mills in Brazil have also
been hit by the strength of the real against the US dollar.
Generally slow consumption and uncertain market
prospects have meant that efforts by Malaysian shippers to
edge up their prices to better reflect rising costs and low
supply have been met with resistance by UK importers.
Nevertheless, expectations are that UK CIF dollar prices
for Malaysian BB/CC WBP plywood for December 2009
may be 5% higher than in September 2009. Chinese
plywood shippers are also generally looking to push up
prices due to rising costs and log supply problems.
Changes in ply sector
UK trade in tropical hardwood plywood is increasingly
concentrated in the hands of a limited number of larger
importers and merchants. This, combined with the fact that
during the recession a much higher proportion of new
building work in the UK is now dependent on publicsector
finance, is adding to the pressure on suppliers to
demonstrate that products are FSC or PEFC certified.
Many large importers are tightening their certification
requirements. For example B&Q, the UK¡¯s largest DIY
retailer, announced in September that it will only buy
FSC-certified tropical hardwood plywood (B&Q¡¯s tropical
hardwood throughout plywood is manufactured in Acre,
western Brazil).
Similarly, International Plywood, one of the UK¡¯s largest
importers, recently reported that over the last 5 years, their
sales of certified products went from zero to 20% of
turnover. In 2009, this figure is expected to be as high as
35% and it won¡¯t be long before all their softwood product
range is certified.
Mislabelling of Chinese plywood
Controversy surrounding quality issues and mislabelling
continue to plague imports of Chinese combi-plywood into
the UK. Most recently, a large volume of Chinese
hardwood-faced poplar plywood was impounded in the
Port of Belfast on suspicion of falsification of CE
marking.
According to the UK trade press, Belfast City Council¡¯s
environmental health department has impounded up to 80
containers of BB/CC plywood, ranging from 5.5-18mm
thickness, and ordered the remarking of product. The
department said its investigations in China and Europe led
to concerns that the CE2+ stamp on pallets had been
falsified. Product has now been remarked CE4+ and
invoices and documentation changed accordingly so that
the product can only be sold on for non-structural
applications.
In an effort to overcome quality problems associated with
Chinese plywood products, and to differentiate the good
from the bad, the UK notified body BM TRADA
Certification recently launched the Q-Mark certification
system.
This system, which goes beyond CE Marking, has been set
up as a direct response to a loss of confidence in the
quality of products from Chinese plywood manufacturers
and the appearance of CE-Marks on inferior products.
Q-Marking shows that products are fully compliant with
European Construction Products Directive (CPD)
requirements for structural applications. All boards must
be individually marked and any mills found to be noncompliant
with any of the requirements will be suspended
immediately. The plywood importer RKL is hoping to be
the first UK company to source Chinese plywood under
the scheme. The first shipment of Q-Marked products is
scheduled to arrive in the UK during November.
More competition for tropical plywood
The UK Timber Trade Journal, in its latest special feature
on the UK panel products sector, highlights some major
emerging challenges to the market position of tropical
hardwood plywood in the UK. For example:
Ireland-based Coillte Panel Products now has a joint
development agreement with Accoya modified wood
creator Titan Wood to commercialise modified MDF
panels to extend their application into shop-fitting,
exterior, facades, garden furniture and even decking.
The 4-year old JOSB Done Campaign, supported by the
Wood Panel Industries Federation, the manufacturers
Norbord and Smartply, and resin supplier Huntsman, is
having a significant effect on attitudes in the UK building
sector.
According to the JOSB campaign organisers, their
research suggests that 78% of UK builders and merchants
would ¡°opt for OSB over plywood¡± and for those who
don¡¯t choose OSB over plywood ¡°it was a question of not
knowing enough about OSB to make an informed choice¡±.
Smartply is now promoting Site Protect OSB coated prefinished
panels which are replacing tropical hardwood
plywood in the hoarding sector.
Weyerhauser is increasing its efforts to promote ¡°Tropical
Replacement Panel¡± manufactured from Uruguayan
plantation eucalyptus in the UK market. The company
claims that the top-end 100% eucalyptus appearance grade
plywood compares favourably with tropical BB/CC
tropical hardwood plywood from Malaysia and Indonesia.
While Chinese plywood has been beset with quality
problems, large UK importers like International Plywood
are now working closely with a limited number of better
quality mills in China to better ensure they get a consistent
product.
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