Wood Products Prices in The UK & Holland

1-15th January 2005

News from the UK 

The New Year always begins with the trade having great expectations but with an election not far away the hardwood trade is not looking forward to very much growth in the first half of the year, the hope is that prices remain steady.  

If there is the expected strengthening of the US dollar the trade is hoping that freight rates will cool down.  Now the thought is that insurance rates will be going up soon.  

The Bank of England has held interest rates unchanged as the news is that house prices have eased. This will hit furniture makers who are already coming under pressure, not only from Asian competition but also from Eastern European suppliers. 

The Timber Trade Federation voluntary promotion levy is now expected to start at the end of March. The premium is 0.2 percent of sales and it is to be hoped that this will raise sufficient funds to continue the good promotion efforts undertaken in recent years.  

Log Prices in the UK 

UK Sawnwood Prices  

Plywood and MDF in the UK  

Report from Holland  

A mild winter 

The first working week after the long Christmas and New Year holiday in Holland leave is behind us but there are few signs of life in the trade. The market for Meranti and Merbau began the New Year just where it left off at the end of 2004. 

Up until now the winter in Holland has not been an issue for the building sector as there has not been any serious long-term period of heavy frost or snow. Nevertheless, the consumption and demand for timber if far from active. In addition, if Meranti is asked for then traders say then it is Bukit that is wanted rather than Seraya. For some reason Seraya has been a bit out of favour with some Dutch traders for quite some time now. This phenomenon can be seen in the current development of the pricing of the various items. Where prices for Bukit have remained quite stable in the past weeks, the price (CNF Rotterdam) for Seraya in 3x5" PHND has been easing for a while.  

The current market in Holland for many species, such as Dark Red Meranti (DRM), still reflects the overall depressed sentiment of most Dutchman as well as the interpretation of the current economic situation.  

Although some in government circles are saying that the economic indicators are improving and that they see light at the end of the long, dark tunnel, the general public has a totally different perception. Across the country consumer confidence is still declining.  

Consumer sentiment 

Consumers, say local analysts, seem to be very uncertain about their financial future the more so since the earnings for workers this year will probably drop. At the same time the cost of essentials such as medical care, energy cost (electricity/gas), local taxes (property tax and other), government levies etc will be substantially higher this year. 

As an indication of the serious economic state there are reports that the President of the Central Bank suggested that the public should spend their savings generously as this would boost the economy. Analysts say that this idea was met with disapproval from the man in the street.  

The feeling is that with so much uncertainty whose causes are not easily attacked why should people spend more especially as unemployment is still high and apparently worsening. 

Consumers will tell that the bad years started late Summer 2000 and everyone is now looking for a reprieve so who knows what the spring may bring since the government is still emphasizing that house building-activity must be stepped up to meet with the shortage of houses. This will mean finding ways to stimulate and step up building activity and increase the number of willing buyers.  

The average price of a house increased slightly during 2004 (up with 2,5%) but the good thing is that the mortgage rate fell and is coming down again. In the first weeks of January a few banks lowered the mortgage rate and this is of primary concern to those thinking of buying.  

On the business front the country cannot run away from the fact that small entrepreneurs are facing tough times and this is spilling over into the economy.  Figures show that in 1989 some 40,100 people were classified as hovering around the poverty. Sadly, this level grew to 47600 in 2000 and local analysts say it is probably now even more because of the long recession.

Log shortages the issue  

Contrary to stagnation in the Meranti market, traders say that Merbau is still enjoying a fair demand. Timber for the stairs (7/4x10" and 7/4x12") is sought and demand for 2.1/2x6" is still strong.  

It will not come as a surprise that, as a result of the acute shortage in Merbau logs, delays in execution of orders by some Malaysian suppliers, the extremely difficult supply and availability of Iroko and Afzelia Doussié (alternatives), this trend is likely to continue.  

The price for Merbau has firmed but, luckily for traders, this has been offset a bit by the weaker dollar. During the Christmas period the euro/dollar rate tested a level of 1,36 and above but eased to 1,30 then gradually moved to 1,3211 due mainly to the fact that crude oil prices seem on the increase again. 

Changing the peg  

There are so many negative sounds about the US economy and now rumours are circulating again in Malaysia that changes in the current pegging (US$ 1 = MYR 3,8) are in the air and that the peg may be revised in few months time.  

What the change will be nobody can tell, will it be a link with the euro? a revision of the dollar peg to 3,40?  What ever the change it will certainly have an impact on timber prices and the industry in Holland. After all, Holland is the second largest buyer of graded sawn timber from Peninsular Malaysia.  

The volumes are substantial and at any one time with a fair amount of timber unshipped in forward position, once a revision of the peg takes place there will be some serious readjustments to do.  

Chinese New Year 

However, back to to-day, traders are of the opinion that the current difficult log supply situation in Peninsular Malaysia and the resultant firm pricing of timbers such as Nemesu, Bukit and Merbau will last for a while. The more so since sawmills are now preparing for the annual Chinese New Year (February 9 onwards) holidays so that mill production will virtually stop during February and possibly even for part of March.  

For certain items some exporters are already slowing offers notably for Selangan Batu, Mengkulang and Gerutu which are hardly offered. Bangkirai and Selangan Batu are still in seasonal demand in Holland but traders foresee a slowing of supplies, especially as mills in Indonesia will be working to meet the demand for timber in the tsunami hit areas.  

The very popular 25mm 27mm and 28x145mm sizes for the Dutch market are hard to come by in Sabah say traders since log stocks are said to be low in Sabah. Under these circumstances, to some extent, the Dutch market will be looking for anti-slip timbers from Brazilian sources. A complex beginning to the year it seems. 

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