Wood Products Prices in The UK & Holland

16-30th April 2005

Update on the UK 

UK is Italy's number one customer  

The latest data from Cosmit/Federlegno-Arredo on the foreign trade in furniture for  2004 was made available during the April 2005 International Milan Furniture Fair. This revealed that the United Kingdom imports of Italian furniture rose 7.7% confirming the UK's position as Italy's number one customer for furniture. 

For 2004, UK imports of Italian furniture (excluding furniture for vehicles) amounted to Euro 1.14 billion in value. Italy accounts for a 21% share of total UK imports of furniture, followed by China (13.6%), Germany (8.9%), Poland (5.0%). 

Other important supply countries are Denmark, Malaysia, the Czech Republic, France, Spain, Indonesia and Thailand, but with much lower import shares.  According to the CSIL World Furniture Outlook 2005, the real growth of furniture consumption in the United Kingdom is expected to be 2% yearly, in both 2005 and 2006. 

Maintaining the edge 

A leading UK magazine "Cabinet Maker" is carrying out a review of leading domestic furniture stores, in order to check their  level of service, quality of choice, layout impact and quality/price ratio.  Five stores are visited each month, keeping in mind the growing competition at the retail level no UK furniture retailer can afford to rest on their laurels and take their customers for granted. 

Upholstered furniture demand 

According to a recent CSIL survey "The World Market for Upholstered Furniture" almost 80% of world consumption of upholstery takes place in ten large markets. The United Kingdom is the number two consumer country after the United States, while it is ranking third amongst major importing countries and fourth among upholstery manufacturing country.  

The UK is ranked only 17th among exporting countries. Almost 51% of domestic production of upholstered furniture goes to Ireland, whereas much smaller shares (less than 10%) go to the Netherlands, Germany, France, the United States, Belgium, Spain Italy, Greece and Sweden.

According to CSIL, the real growth of upholstered furniture consumption in the United Kingdom is expected to be around 2% in 2005 and again 2% in 2006.  

Elections and inflation 

This time next week the UK will have a new government and although the UK Labour party is expected to win its majority in parliament is expected to be cut. The upcoming election on May 5th has delayed the Bank of England interest rate decision but odds are on a further increase by 0.25% as the housing market has not cooled as much as desired and there are signs of inflation. 

Already house repossessions have increased by 25% in the first 3 months of 2005 as more people find they have over committed with housing loans. In November 2003 interest rates were3.5% and now they are at 4.75% with another increase likely soon.  

Economists say the economy is 'on a knife edge' with all economic indicators moving into negative territory and consumer spending slowing down.

Log Prices in the UK 

UK Sawnwood Prices  

Plywood and MDF in the UK 

Report from Holland  

No Spring boost to trade  

Traders are saying that while the calendar clearly shows that spring has arrived the Dutch timber trade, and in particular the sector involved with the trade in Dark Red Meranti, seems still to be in hibernation. The sector is extremely quiet.

This situation is reportedly the case nation wide, not restricted to certain areas/provinces. Joinery mills are said to have too few orders on the books and have little work in progress so few are buying and if there are purchases these are really hand to mouth orders.  

Traders observe that, unfortunately, this quiet spell in the Meranti market in Holland has extended for many, many months and traders don't foresee a quick recovery. Also, with several public holidays in May most fear that in the coming month there is little chance of a recovery. In fact an increasing number of traders believe that the Meranti-market will remain in the doldrums until at least end of August, that is until the summer vacation period is over.  

Stocks still high 

The landed stock position in the main size 3x5" kept at facilities of timber receiving companies is not coming down quickly enough and is currently more than sufficient to last through the next few months now that demand is so terribly depressed.  

The 'price discounting war' that has battered the Meranti market in Holland continues as traders remain as eager as before to get some parcels sold what-ever. Some are very pushy and willing to reduce the prices at the last minute by an additional 1-2%.  Not at all a healthy for business in the longer term.  

There is no favourable catalyst in sight to break this negative downward spiral. The economic factors remain a blur and there are simply too many negatives in the local daily news;  house prices coming down, Holland's economic growth rate to be re-adjusted downward, the economy in Germany said on the verge of recession, the number of jobless still increasing, no willingness to spend/invest and painfully high energy cost that disrupt chances of some economic improvement - just a few things that feed negative sentiments. 

Supply problems weigh on producers  

As a result of the poor market conditions Dutch importers are not active in buying Meranti especially in the important bulk-item namely 3x5". Analysts report that there is still some interest in 2.1/2x3.1/2, 4x5, 7/4x12" but those items are hard to get because in Malaysia the supply situation is far from easy. This can be measured by the fact that Dutch importers receive little or no spontaneous offers for these items from exporters in Peninsular Malaysia nor Sabah.  

With hardly any timber of Indonesian origin going to Malaysia these days millers have considerably less volume to rely upon.  Indonesian timber was either sold as Indonesian Bukit, as Indonesian Seraya, as so-called DUC, or it was sold as a mixed parcel including some Malaysian sourced timber.

Nowadays exporters have access to only Malaysian raw materials so volumes are well down since the Malaysian authorities have reduced the size of concessions and the allowable cut.  Also those logs that are available tend to be of smaller diameter than in the past so mill recoveries are reduced.

The effect of this is that the log prices have increased and it is this and higher production costs that has pushed up FOB prices. 

Now that sawmills can only produce lower volumes of Dark red Meranti they are careful when buying logs looking for the best quality to keep recovery rates up. As a consequence, when they have good logs (PHND) of Bukit and Seraya they concentrate on producing mainly 3x5". Since the overall output of 3x5" PHND Bukit and Seraya from mills in Peninsular is not huge at the moment, due to log-shortage and since exporters expect prices to go up further, they try to build up stocks of important Dutch sizes. This will pay off if indeed there is a  recovery in the Dutch market later this year.  

The situation regarding Merbau supplies is even more difficult and the current availability CNF Rotterdam is practically nil with many exporters have nothing to offer to the Dutch market. An occasional parcel in 7/4x6 or 7/4x10 pops up occasionally but the well sought after 2.1/2"-items in Merbau for both Holland and Belgium are not available.  

Because of the tough log supply situation in Malaysia traders expect Meranti prices for most Dutch sizes to hold very firm or increase slightly. In the case of Merbau this saw another price increase recently and  traders say prices are reaching the danger-zone where business will grind to a halt as importers stop buying and alternative timbers will grab the market. 

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