News from the UK  

Transport costs are raising concern again and this concern, along with the problem of availability means that importers are either having to pay more or carry higher stocks.  The large contractors are now not prepared to wait will orders are shipped.  

Industrial output prices rose last month lifting the annual rate of producer price inflation to 3.5%, the highest for nine years.  The increase in oil prices have pushed up all energy costs and kiln drying companies are under pressure. 

The UK economy is beginning to weaken even though growth is said to be steady, the growth is largely because of public sector spending which could be cut back because of the growing budget deficit. 

By the end of this month the building sector will be stopping purchases prior to the traditional 3 weeks holiday from the middle of December until the end of the first week of January.  

The biggest problem facing the government is the pensions crisis which because of tax changes back in 1997 could cost the country some Sterling 10 billion which would double the current deficit.  

Log Prices in the UK 

  

UK Sawnwood Prices  

  

Plywood and MDF in the UK  

  

Report from Holland 

Agreement reached 

In previous reports mention was made that labour unions and the government in Holland have had and this has become more apparent since the spring when there seemed to be even more of a divergence of views. Union unrest and calls for strikes have been rare in recent years in the country but analysts say these are more visible since the drastic economic measures announced by the Government in September. 

Through negotiations, however, November started with an agreement signed by the Unions and the Government. Important issues like pre-pensioning, the so-called 'course of life-arrangement', wage-increase etc was outlined and each side claimed success.

 With this agreement sealed, union unrest has dissipated and the government has confidence to move ahead with its goal of bringing down the enormous costs of social welfare and health-care. It can also try and get the economy back on track and on the road out of recession. 

 The issue of working more years is still a hot topic because of the growing amount of old people the argument is that productivity will be increased by keeping people at work longer and the state pension liability will be reduced.

 The Government now faces the task of boosting productivity in a stagnating economy with a high unemployment rate and a worrying high (increasing) amount of bankruptcies. A positive sign has been that recent studies suggest that the Dutch economy is showing modest signs of recovery and a growth rate higher than expected.  

Quiet trading conditions 

The Dutch market for Dark Red Meranti (DRM) remained very quiet over the past 14 days. Actually, this is a prolongation of the quiet spell that was signaled since the summer holiday period which began back in July. Landed stocks remain high say traders and currently the stock position is simply not in step with demand.  

With the Christmas season fast approaching some traders are very eager to realise some sales before the market completely silent from mid December through to January 10. With the Euro exchange rate to the US Dollar in the region of 1,30 (and with fears of a rate soon a settling at near 1,3090, which would be the lowest level ever since the launch of the Euro) currency rates play an important role in pulling prices down further.  

Pressure on prices 

The pressure on the sales prices remains and with the current poor demand from endusers it is generally expected that the situation of heavy discounts and a hollowing out of trade-margins and even selling below cost, will continue.  

The low prices for the Dutch main size of 3x5" in DRM Bukit/Seraya makes it very tough to get other hardwoods sold. Sapelli, for instance, is purchased in Euro so there is loss or gain in currency terms and besides, the gross CNF cost of Sapelli is higher than its Asian competitor.  

Some analysts are of the opinion that the quiet spell will continue for several more months as there is can be no increase in housing starts which indicates that timber consumption will not increase for the time being.  

The weak demand that defines the market is resulting in reduced buying interest on the part of Dutch importers and exporters in Malaysia are feeling this. This prolonged quiet spell and the declining demand from Dutch importers (Holland is the biggest market for graded PHND DRM) has not yet led importers into drastic price cuts.  

Infact, the slowed demand may suit exporters at the moment because the supply in Malaysia is tight and has been made tighter because the monsoon has started.  

However turnover must be generated and business must go on. Despite the difficulties on the supply-side, analysts see that while Rotterdam CNF prices remain quite steady there are some trimmings be made here and there.  

Merbau prices, however, are still on the way up due to the constant for certain sizes and the short supply; nevertheless some traders managed to secure some stocks over the past weeks so that some trade in Merbau is still possible.