Wood Products Prices in The UK & Holland

16-30th November 2004

News from the UK 

The UK Chancellor of the Exchequer (finance minister) will deliver what many believe will be his last budget statement and few analysts expect it to be very upbeat. With Christmas holidays around the corner consumers are expected to spend less than last year, but some major finance analysts thinks the drop in spending will be small.  

Courts, the home furnishings company, is going into receivership after a drastic fall in sales.  

The Confederation of British Industry (CBI) is saying that which ever party wins the next election (due next year) will have to either raise taxes or make deep cuts in government spending to control the deficit. 

The number of house loans approved in October was the lowest since January 2000 according to the Bank of England. Economists say that the five interest rate rises since November 2003 seems to be having an effect, but the housing market does not appear to be heading for a crash.  

In spite of the mild comments from the BOE, the latest numbers from Nationwide, the home Loan Company, make grim reading for those wanting to sell houses because the buyers are just not there. Surveyors say this has led to a sharp decline in sales which have dropped to a nine year low.  

This if sustained will have a serious impact on the timber trade. On the other hand it is one of the governments' aims to build more affordable homes. 

Over the past year the inward flow of investment to the UK was higher than the previous year but the majority was in the service sector. The labour market remains buoyant although manufacturing jobs continue to ebb away.  

Log Prices in the UK 

UK Sawnwood Prices 

Plywood and MDF in the UK  

Report from Holland  

A correction 

In the previous report there was an error unfortunately: item g) should have read that the price indication for Merbau KD 3x5" is roughly US.$ 1270 per ton. The price that was stated referred to 7/4x12" a size that is commonly used for stair steps and such wide boards are considerably more expensive than 3" scantlings. Sorry for the mix up.  

Results better than expected 

Although producer sentiment in Holland was positive in October, November brought with it a dampening of sentiment and analysts say most of this was attributed to the higher costs of production.

Thanks to the better than expected export results, the overall growth of the economy of 1,4% is better than expected but the situation in the domestic market is not so healthy. Measures of consumer confidence are reporting a further weakening of confidence as people are reluctant to spend in this uncertain situation. Inflation, due to higher energy costs, rose slightly in November but economists say this is not too worrying as lower spending and fierce competition for the lower demand keeps a cap on price increases. 

The unemployment rate, while high, is stable and some say that the good export activity could help bring down unemployment but such statements when only supported by only tiny improvements are not enough to impress the general consumer. 

Generally there is a wait and see attitude, many expect next year to bring further price increases making life more expensive. The recent cuts in government spending will certainly be felt next year. As always there is the risk that the low US dollar and high euro is not favourable for the expansion of exports. 

Weak housing sector  

The Dutch housing and building sectors are unlikely to see much improvement in the short term say the timber companies whose business is closely linked with the fortunes of the housing sector. The consensus is that next year will remain very tough. Forecasts are for fewer houses to be completed this year and next and the indications are that the number of building permits is down.  

A construction  project in Amsterdam has temporarily been stopped for environmental reason, because the site is amidst a protected nature-area for birds. This means a delay in erecting 9,000-9,500 houses.  

Although the current bank interest and mortgage rate is attractively low in Holland and shows signs of falling further, the news is that there has been no increase in the number or value of mortgages. Most of the business for mortgage companies is in re-mortgaging. 

Because of the weak housing and construction demand, timber consumption and especially the domestic demand for hardwoods such as Meranti is going to remain unexciting. Demand is at a complete standstill but is just so weak and thanks to the cheap US dollar and a the slow demand traders are reporting that there is still a downward pressure on sales prices. Also of concern is the fact that landed stockholdings in the common size 3x5" are not coming down so, as a result, importers are not eager for fresh purchases from exporters in Malaysia. 

Meranti market alive but flat 

Despite the low interest for fresh purchases of dark red meranti (DRM), exporters in Malaysia have kept prices steady. The price for DRM in various PHND-specifications CNF Rotterdam has held up remarkably well, whereas the prices of some non-PHND items have even increased due to acute shortage in supply. 

This involves, for instance, Nemesu over the whole range of specifications and also Seraya/Heavy Majau in 2.1/2x6" which is imported for the production of solid doors.  

Merbau enjoys good demand, despite the high price but the supply, say analysts, remains extremely difficult. Most exporters are totally sold out in Merbau and in the event that export offers are made it is for only limited volumes and exporters are already quoting "for shipments end second quarter 2005".

Most of the current offers in Merbau are for high priced wide boards in 7/4": offers for scantlings  in 2.1/2x3.1/2 or door sizes 2.1/2x6" seem to  have vanished. Sawmills in Malaysia have little access to Merbau logs so the production is likely to remain very low for the time being. 

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