Update from the UK 

UK Kitchen Market 

The good performance of the building sector in the UK, high levels of optimism among consumers and low interest rates all contributed to the growth of the kitchen furniture market in the past three years, in terms of both quantity and quality. Kit kitchens are still very popular, but there has been an increase in the market for high priced made to order kitchens as well.  

British production of kitchen furniture was worth Euro 1,456 million in 2003 and in the same year domestic demand recorded an increase of 3.1% in real terms compared to the previous year.  

Compared to the other leading kitchen furniture producers in the EU the UK producers have a very low propensity to export (4%), but the UK market also has a low dependency on imports, the imports/consumption ratio being just 8%. 

British exports of kitchen furniture fell by 11% in 2003. At a value of Euro 56 million, this is the lowest value for recent years. France is still the leading customer for UK kitchen, followed by Ireland (increasing), the United States and the Netherlands. 

In 2003, imports of kitchen furniture, after the record growth of over 40% in 2002, increased by only 6% to total Euro 126 million.Most of this growth was generated by Germany (whose share of the UK market rose from Euro 30 million to Euro 57 million) and Italy (from Euro 30 million to Euro 44 million).  

After a slowdown in the mid-90's, German firms have gradually made a come-back in the UK market. Belgium exporters are also doing well taking up the third position in the ranking in 2003 with exports of Euro 5 million.  

In the United Kingdom kitchen furniture is distributed mainly by furniture chains (29%), kitchen specialists (26%) and DIY chains (13%). Sizeable sales are also made through the builder merchants channel (21%).  

In 2003 kitchen specialists saw a slight drop in kitchen sales (around 3.6%). The kitchen specialists operate mainly in the upper end market and they market imported kitchens and this market accounts for about 25% of the market value.  

China targets the UK 

The UK, third largest consumer of furniture in Europe after Germany and Italy, seems to be a main interest for Chinese exporters.  

According to the UK magazine 'Cabinet Maker', Singways, one of the largest furniture retailers in China with more than 60 branches and franchising outlets in over 20 countries, will open its first franchise store in London this October.  

This opening is part of a plan for a bigger presence in the country in 2005. The new 4,580 square feet store is the first one in Northern Europe and will run a contemporary product range.  

Office Furniture Distribution 

In the United Kingdom the sales of office furniture through the direct channel are losing ground, (down rom 50% to 25%), in favour of the large retail outlets. This has meant a reduction by around 20% in the showroom space for office furniture over the last five .  

On the other hand the space for large distributors has increased with those specializing in office furniture increasing space. Reflecting further changes in this market, mail order companies recorded a noticeable increase in product floor space from 1% to 6% in the same time period.  

The UK in perspective 

The United Kingdom is in fifth position in the ranking of the seven major industrial economies (which are, in order of furniture production, the United States, Italy, Germany, Japan, the UK, Canada and France). Together these countries produce 59% in value of the world furniture trade.  

The world furniture trade basically involves 60 countries. The leading importers are the United States, Germany, the United Kingdom, France and Japan. The major exporters are Italy, China, Germany, Canada and Poland. 

In the 1995-2003 period there was a very large increase in the furniture byf the United States (from US$6.5 billion to US$18.7 billion in current dollars) and that of the United Kingdom (from US$1.7 billion to US$5.3 billion in current dollars) as well.  

A look at RTA furniture 

In 2003 the RTA (ready-to-assemble) furniture market in the United Kingdom was worth Euro 1,762 million at factory prices, representing a 23% share in value of the household furniture market. The highest figures are reached for categories such as storage furniture (for kitchens and others), where the share is nearly 50%.  

Roughly 55% of this market in the UK is met by domestic company production and 45% by imports.  

The top 10 companies control around 41% of the British RTA furniture market. Among these the share of RTA kitchen furniture and home office furniture is higher than the European average.  

BOE Warning 

The Bank of England has warned that inflation and employment levels may fluctuate more over the next decade as a result of periodic shocks to the economy, such as soaring oil prices.  

The Bank also said the UK economy may now be in a soft patch after the recent levels of rapid growth however, he did not rule out further interest rate increases. 

Unemployment in the UK is at the lowest level for 20 years at 4.2% and UK GDP rose by 0.9% in the second quarter and was up 3.6% on a year ago. Household spending was also up (+3.2%) on a year ago but is beginning to slow.  While the DIY sector remains buoyant furniture production is reported as having slowed recently. 

Log Prices in the UK 

 

 

UK Sawnwood Prices  

 

 

Plywood and MDF in the UK  

 

Report from Holland  

Data supports trend 

As mentioned in previous reports the Dutch timber market - certainly the market for Asian hardwoods reacted very positively during early spring on indicators that a slight recovery of the economy was likely. Indeed at this time some of the Dutch joineries had more work and they portrayed an optimistic mood in the first half of the year.  This positive buying mood in Holland at the beginning of the year has been verified by the statistical data that in the Malaysian trade magazine Maskayu. The data shows that towards the end of 2003 and into early 2004 exports to Holland of graded sawn timber grew by 6,8% from January through to April 2004 in comparison with the same time in 2003.  

However this growth did not continue. The Meranti-market in Holland stalled just before the summer vacation period started and when the holidays were over in early September, Meranti sales were really depressed.  The optimism, say analysts, "burst like a pierced balloon". 

Why? well there is still a certain amount of work for the joinery mills  - although many have a  very tough time chasing orders - but they are having to operate smart as everyone is very cost conscious nowadays and once more the pricing of Meranti CNF Rotterdam is under pressure.  

At the beginning of the year Meranti prices rose quite fast over a relatively time due to the positive market prospects but the price increases got ahead of the market demand so when realism of the true economic situation emerged the market caved in.  People simply postponed buying or decided to shop around for the best bargains and then only when they really needed the wood. 

Sentiment a powerful driver 

A boost to consumer confidence and demand for wood was the rationale behind a government plan for the building of 450,000 new houses over the next 8 years. This plan has, however, been seen as un-implementable as the current cost of a new house (for rental investment or purchase) is out of reach of most families. Even at low interest rates most people do not want to take a risk and buy at such high prices and are rather stay put and waiting.

 This scenario feeds into the timber markets. In the Meranti trade a wait and see attitude now predominates as does an attitude of "go for cheap" which is giving the softwood market (Scandinavian white wood) a boost seen even since the beginning of the second quarter this year.  

Analysts warning

Analysts are warning, however, of a serious risk for the market if exporters were to, all of a sudden, lower Meranti prices in reaction to the weak demand. Fortunately, say analysts, Meranti Bukit seems as if it can sustain current price levels in the market. In the case of Seraya, this timber did see a bit of a dip for a short while after summer vacation period but basically seem as if they can be held mainly because DRM (Seraya/Nemesu/Bukit) in Peninsular Malaysia is not in abundant supply.  

Analysts say that should DRM price levels CNF Rotterdam slide there is a risk of a major undermining of the market in Holland. 

Currently the market in Holland is very sensitive to sentiment and traders are having to play the market with the utmost care as demand is below expectations. In addition, because of a more positive buying situation at the beginning of the year, in part driven by news from exporters that timber availability in Peninsular Malaysia was a problem, importers now have fairly sizeable stocks.  

The stock position in Holland is not in tandem with the current depressed demand. As a result of this and in the face of weak demand some traders in Holland are a bit panicky as stock holdings eat up money. This is putting tremendous pressure on prices and once one trader buckles because of a need for cash flow and tries to off-load some stocks at low prices the flood gates can open and price wars can start.  

Market shaken by discounts  

Analysts say that this is exactly what is happening here at the moment. Somebody shook up the market by offering stock at very sharp prices and immediately the modest steady trend of sales prices for DRM that had seen achieved in the spring collapsed. Like an avalanche, drop a tiny snowball and when it tumbles down the bigger it gets.  

It is reported that someone in Holland offered DRM at a price of EUR 650 per cubic metre well down from the steady level of EUR 670 for 3x5" DRM.  In no time, the bottom fell out f the market as more and more importers and traders tried to get a piece of the collapsing demand even at still lower prices.

The latest rumour is that a Rotterdam based importer has already lowered the sales price for DRM 3x5 Bukit to EUR 580 cubic metre, which is well below the current replacement cost. What this means that it is today cheaper to buy DRM on the Dutch local market than in Malaysia!  

In the end these quick low priced sales fail to generate more purchases because end-users are not daft either and postpone their purchases as much as possible thinking "next week cheaper still".  

A truly unhealthy situation but one which no-one can resist especially with only roughly 2 more active trading months to go in the year as around December 17 activities in the timber sector usually come to a halt as everyone prepares for Christmas. 

The changes in the market have had less impact on Merbau for which demand is steady and prices are firm. But also for Merbau a warning is coming from analysts to the effect that the idea that prices will continue upwards is dangerous, as it is becoming more and more difficult to manage the high CNF levels, which are rapidly approaching a ceiling.

Competitors building strength 

As can be seen in the review of prices given below below, Sapelli is competitive priced and prices for Sapupira have been running up particularly as it can be purchased with an FSC-certificate.  

The price as mentioned in the below is for Sapupira, without the FSC label. Sapupira is enjoying a gradually wider acceptance because of the FSC-certificate but the fact remains that Sapupira is perceived in the market as having a disadvantageous processing defect problem requiring greater attention during cross-cutting and ripping. Additional attention is said to be required to get the best recovery from the lumber.  

African suppliers of redwoods notably African Mahogany were said to be eager to get some sales in the Dutch market so prices got a bit 'easier'. But, according to the latest information the slightly lower prices may only be temporary, as there is an indication that Sipo prices are on the rise. Iroko remains as difficult to get as in earlier months and is in short supply and there is little chance that this will change any time soon.