Wood Products Prices in The UK & Holland

16-31th October 2004

News from the UK 

The National Institute of Economics and Social Research in the UK claims that taxes will need to be increased by about Sterling 10 billion annually if government spending is not cut back or if the economy grows at double the current rate.   

There is concern on the part of consumers that the current economic situation is unsustainable and this is reflected in lower mortgage approvals have fallen by almost 30 percent in 4 months compared to the same period last year. House prices have fallen according to Nationwide, the big UK house loan company and while some commentators are predicting a 25% drop in house prices Nationwide is looking at a % % decline over the next 2 years  

The particular requirements of the UK hardwood market is now said to be creating some problems for importers.  In the past importers would specify what they wanted from the producer and would even be prepared to pay a slight premium to get their specific requirements filled. Now however,  many producers are no longer willing to accommodate the special UK specifications as the demand for tropical timber in the UK has shrunk significantly over the past 10 years.   

The UK endusers of tropical hardwoods need to realise, say analysts, that the vast majority of hardwood production is not cut to length and to select and better grades (or the equivalent).  

Log Prices in the UK

UK Sawnwood Prices 

Plywood and MDF in the UK

The IWPA bulletin 

The latest bulletin from the IWPA reports that they are Lobbying the US House, Senate and White House on the Foreign Appropriations Bill. The IWPA says "The current version of the Senate Foreign Appropriations bill contains language that would amend the Lacey Act to make it unlawful to import, transport, or sell any timber product that was acquired in violation of a foreign law".  

While on the surface the language in the proposed amendment may have unintended consequences.  

In other news the IWPA is reporting that "the Office of the US Trade Representative has updated its warning list for products that may be removed from GSP duty-free status. 

Plywood from Brazil with the HTS number of 4412.19.40 is apparently in jeopardy of losing GSP status. 

With more news on plywood the IWPA has announced that its popular industry standard, "IHPA Grade" Procurement Standard for Imported Hardwood Plywood" was recently translated into Chinese

 Until recently, the standard was only available in English, however, China's rapid increase in plywood export led to the decision to  translate the IWPA standard. For more on these stories see www.iwpawood.org
 

Report from Holland  

Unions on the move 

Observers are saying that it looks as if the labour unions and the government in Holland are headed for a clash. As long ago as the so-called 'spring-summit' that the social partners hold every year in Holland the seeds of a conflict were there. Now, with the Government set on introducing measures that may bring an end to early retirement (which is seen as inevitably leading to lower incomes all round) income the tension is growing.  On top of this local analysts point to higher local taxes and the higher cost of gas and electricity as fueling the protests.  

A recent march in Rotterdam, organised by the unions in mid September, attracted some 30,000 people. In October another demonstration was organised by the unions, this time in Amsterdam, and the crowd was said to be at least 200,000. In addition, strikes are now more intensified. Early this week the steel sector saw strike action, last week the police and more action is likely as long as the unions and the Government are not negotiating. The unions aim at total withdrawal of the government's drastic.  

Seen in the light of this social unrest and the continuing economic crisis that has Holland in its grip it is not surprising that consumer confidence is low and that trading in timber and other commodities is slow. 

The Meranti trade in Holland has been severely depressed for many weeks already and analysts see little hope for a quick recovery. On the contrary; with winter just ahead, analysts fear that the current quiet spell will linger on for quite some time, perhaps even until spring.  

Christmas around the corner 

Businesses Holland are counting down the 6 weeks to Christmas when holidays will bring to an end any trading. Those involved in the timber business will be looking back with dissatisfaction at a year that began with a promise of recovery but which was not sustained. Almost everyone is quoting poor results, as demand is simply not there. 

Although some joinery plants are said to have work, many have experienced a tough time this year because the building sector did not pick up. Simply put, the willingness of the consumer to spend money is just not there and the housing market is very depressed. Those people offering their house for sale will probably have to wait much longer than the usual few months before concluding a sale even though the mortgage (house loan) rate is still coming down.  

Exchange rate jolts 

For a number of reasons the exchange rate of the dollar has been sliding again. Currently the rate is between 1,27 and 1,28 for one Euro. The weaker dollar in combination with weak sales and the urgency for some traders to get something sold is fuelling the price war.  

A drop in the value of the dollar by say 5 cents translates into, roughly, a change of euro 25 per cubic metre. This means that assuming the current price for Meranti Bukit CNF Rotterdam is USD 1130 per ton the computation works out as follows:

(1130 x 0,70634) / 1,22 = EUR 654 per m3 CNF imperial measurement

(1130 x 0,70634) / 1,27 = EUR 628 per m3 CNF imperial measurement  

Those importers who have stocks see their losses growing with such developments as they had purchased at a higher dollar exchange rate, unless the landed stock is older than last February when the dollar was also at a 1,28 low. 

As the above illustrates, the sales price for the most popular Meranti size in Holland (3x5) remains under pressure and further drops were reported this week. Of course there are still sales done but negotiations take very long time nowadays and traders are squeezed by the buyers who must also be cost-conscious and they know, all to well, that traders have to move some timber. Once a serious inquiry is launched everybody rushes to offer the best deal.  

Although producers in Malaysia see the very quiet overseas market and that purchases through Rotterdam by their biggest continental timber trading partners are next to nothing, they have not buckled. As analysts say, "the desks of importers are not bombarded with offers and despite the slow sales we see that the prices hold very firm CNF Rotterdam".  

Merbau has fortunately escaped from the price erosion cycle in the Dutch market. This timber is in such short supply in both unsold position by exporters and in unsold position/stock by importers that, in contrast to Meranti, Merbau is seeing almost daily price increases.                 

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