International Plywood and Veneer Prices 

16-30th September 2005

International Plywood and Veneer Prices

INDONESIA 

Doubled fuel prices in Indonesia

Indonesia has raised fuel prices by an average of 120% on 1 October amid protests. One litre unleaded petrol rose from 2,450 Rupiah (US$0.24) to 4,500 (US$0.44) while 1 litre kerosene rose from Rp700 (US$0.07) to 2,000 (US$0.20). 

The price hike was designed to cut Indonesia's massive fuel subsidy bill (US$14 billion a year, about a third of central government expenditure) and help balance its budget. Although Indonesia is the only Asian member of OPEC, it is a net importer of oil, which means it spends millions each day to import oil products to feed soaring domestic demand.

 The fuel price increases are expected to have a knock-on effect on the price of everything from commodities to processed products, including timber products. Production costs in Indonesian plywood mills are being pushed up by soaring diesel oil prices which have made the use of power generators expensive. 

The government has promised to pay Rp100,000 (US$10) to each of the more than 15 million poor households with an individual monthly income of less than Rp175,000 (US$ 17.5) as compensation for the fuel price increase. The money will be disbursed through post offices and branches of Bank Rakyat Indonesia (BRI) across the country. 

US waives 8% duty on Indonesian plywood

The US government has granted Indonesian plywood (HS 4412.13.40) a waiver for duty-free treatment under the Generalized System of Preferences (GSP) as of July 2005. This cover plywood of wood sheets, each ply not exceeding 6mm thickness, with at least one outer ply of tropical wood. This product had previously been subjected to an 8% duty. 

21mm filmed plywood hit by substitution

EUWID has reported that demand in Europe has remained comparatively subdued in recent weeks. A number of importers supplemented their range of Indonesian plywood with Chinese substitute products with some individual importers even halting the Indonesian plywood business.  As a result, Indonesian plywood grades continued to be substituted with Chinese products in recent weeks.  Hardest hit were 21mm filmed plywood grades.  In this market segment, Central European buyers are now using primarily Chinese products.  Chinese film/wire‑mesh plywood is also increasingly being contemplated as an alternative to Indonesian products.  However, opinion about the usability of Chinese 4mm filmed plywood vary due to quality concerns. 

Indonesian exporters focusing on other markets

The availability of Indonesian plywood grades, particularly of high qualities or specialities, remains tight in Europe. Several Indonesian manufacturers are reported to be focusing on other more interesting markets while some companies have even given up doing business with Europe.  At the same time, further reduction in Indonesian production capacities was affecting availability.  Production had ceased not only at a number of small mills but also larger plants with a capacity of more than 20,000 m³ per year. However, Indonesian manufacturers still have large stocks of all major grades for buyers to resort to. 

BRAZIL  

Hurricane Katrina blows Brazilian exports up

Concerns over short-term supply shortages in the aftermath of Hurricane Katrina prompted some US wood products importers to fulfill immediate needs with imports. As a result, new contracts with Brazilian exporters have increased, causing a rise in price of pine plywood, the main exported product of the Brazilian forest sector. Prices have climbed by 20-21% despite the 8% import duty in effect in the USA. 

Brazil accounts for 40% of the plywood used in civil construction in the Eastern US region affected by the hurricane. Reconstruction work is forecast to begin in October‑November, but high demand has already pushed the prices of the Brazilian plywood up. The price hikes have initially benefited Brazilian companies with significant plywood stocks stored in ports and warehouses in the USA. 

According to the Brazilian Association of Mechanically-Processed Wood (ABIMCI), the forecast of plywood sales to the USA was increased as a result, from 800,000 m³ to 1 million m³ in 2005, as compared with a total 971,200 m³ exported in 2004. 

The high demand has taken many Brazilian timber companies by surprise that had drastically reduced production level, laid-off staff and even closed some operations in the past few months due to rising raw-material costs and the strength of the Brazilian currency. This has reduced the sector’s capacity to respond to the short-term demand and new orders from the USA. 

Compensados Guararapes Co, Brazil’s largest pine plywood exporter, has already committed to the USA all of its future plywood production (60,000 m³ per month) for 2005. As the price is paid at delivery time, Brazilian exporters expect to benefit from the price increases. Masisa do Brasil, a Chilean company located in Southern Brazil which exports OSB for packing and civil construction, has seen a price increase of US$7 per m³ to US$280/m³. 

Recent estimates have pointed out that the forests damaged by Katrina in the States of Mississippi, Louisiana and Alabama cover an area of 12.85 million ha (about 5.4 billion m³), equivalent to two years of harvesting (60% softwoods). Part of this volume will likely affect the domestic and exports supply and demand balance of forest products. 

ITC evaluates import duty on Brazilian plywood

The US Department of Commerce’s International Trade Commission (ITC) launched an evaluation of the generalised system of preferences (GSP) affecting the import duties on Brazilian softwood plywood which have been levied 8% since 2 July 2005 alongside import restrictions on other products in mid‑August 2005. The evaluation will determine the potential impact of waiving the 8% import duty on the US plywood industry. 

The ITC carried out a public hearing on this subject on 29 September 2005. A final report will be submitted to the US Trade Representative by 10 November and a public release is expected later this year. 

Rising prices for elliotis pine plywood

Prices for Brazilian elliotis pine plywood have increased substantially during recent weeks.  Customers in the USA and Europe are now quoting much higher prices than at the end of August. Prices for grades certified for the US market, in particular, climbed at short notice. FOB prices for 18mm CDX, the most important grade sold in the USA, was quoted at US$340 per m³, up from around US$235 per m³.  

Prices for 20mm C+/C for Europe were raised to US$305-310 per m³ up from US$275‑280 per m³. Grades delivered to Europe sell on average US$10‑15 below the US price. Brazilian manufacturers are unlikely to make price concessions during upcoming negotiations with European buyers due to the price difference between USA and Europe. Brazilian manufacturers are refusing to supply at lower prices as earnings are still strained by rising costs and a strong Brazilian real. 

Plywood substitution continues in Europe

As Chinese plywood continues to replace tropical plywood in Europe, the product range of Chinese filmed plywood grades has diversified.  Filmed poplar plywood, which replaces Brazilian and Indonesian products, is still the most important filmed plywood grade. Since last year, filmed combi-plywood from Brazil has lost ground in Europe. 

The substitution of Indonesian filmed plywood has gathered pace this year.  In general, the price difference between Indonesian film/wire‑mesh plywood and Chinese substitute products is comparatively small.  Accordingly, there are other reasons for the substitution of Indonesian products with Chinese wire‑mesh plywood.  One buying motive is better transport logistics provided by Chinese container shipping compared with the shipping of bulk loads prevailing in Indonesia.   

Importers had increasingly switched to low-priced Chinese products last summer, due to rising prices for Central European producers. Prices of US$360‑370 per m³ CNF were quoted most recently for 21mm film/film poplar plywood, filmed with 120gr. per m² western phenol films. Similar grades filmed with 200 gr. phenol films made in China or Korea remained on average US$15-20 per m³ below that level. 

Plywood mills still producing below capacity

Despite recent price gains, Brazilian plywood mills’ earnings are reported to remain under strain, due to the strengthening of the Brazilian real and rising log and glue costs. Consequently, many manufacturers are reported to be producing at 60%‑70% capacity in recent months. In spite of the recent price increases, several buyers have indicated that most mills have not increased production waiting to see how demand and prices develop. Increasing production capacity would take time. 

Personnel lay-off of in Mato Grosso

In the State of Mato Grosso, the crisis faced by the solid wood sector, a consequence among others of the government’s crackdown on illegal logging (Curupira Operation), has been accentuated by the suspension of the Authorizations for Transportation of Forest Products (ATPF's) by IBAMA. This has prompted the lay‑off of hundreds of employees, mostly in the Northern region of the State, in the past few months. According to a recent appraisal by CIPEM (Centre of Wood Producers and Exporters of Mato Grosso), 50% of the solid wood producers have reduced their industrial operations. 

Curupira operation affects wood exports in July

As a result of the arrest of illegal loggers and intervention on illegal sawmills (Curupira Operation) in Mato Grosso in June 2005, the exports of wood product fell 25% in July 2005 in comparison with July 2004 (down 15% in comparison with June 2005). The sector is the third most important in Mato Grosso in export value terms and accounts for over 60% of exporting companies. Last year, 100 out of the 273 exporters were lumber companies. 

Wood products exports are forecast to continue declining in Mato Grosso based on recent trends, although exports of solid wood products reached US$ 111.6 million in the year to June as compared to US$104.7 million in the same period of 2004. Mato Grosso was the fourth largest wood products-exporting State in 2004 (up from fifth in 2003) after Paraná and Santa Catarina (in Southern Brazil) and Pará (in the Amazon region). 

MALAYSIA  

Dull Japanese market reins in prices

Malaysian plywood mills are attempting to raise export prices due to rising log prices but actual settled prices are weakening because of the stagnant Japanese plywood market. 

GHANA 

The above prices are for full sized panels, falling sizes minus 15%. Thickness below 1mm would attract a 5% premium. 

Grade AB/BB would attract a premium of 5%. BB/BB would be 5% less, C/CC 10% less and CC/CC 15% less. 

PERU

Peru sees steady growth in wood exports

Peruvian wood and wood products exports continue to grow and are expected to exceed US$150 millions in 2005. By July 2005, wood exports reached US$ 96.152 millions, up 33% from 2004. The Peruvian forestry sector works under the forestry concession scheme which promotes sustainable forest management. The government and the private sector are working together to combat illegal logging. 

HS 4407240000 (mahogany and virola sawnwood) was the leading export category in the year to July, accounting for 40% of total exports, up 48% from the same period in 2004. HS 4407290000 (other sawnwood like Spanish cedar, Peruvian walnut, etc.) ranked second, with 14% of the exports. HS 4409201000 (blanks and friezes of hardwoods such as cumaru, masaranduba, ipe, cabre uva, jatoba, etc.) was in third place with 11% of the exports, up 59%.  

The increased FOB value for plywood in 2005 was mainly a consequence of oil price hikes. Plywood and veneer entrepreneurs have been forced to adjust prices. This has affected their price competitiveness in the international market.  

The USA (44% of the total exports) is still the main market, followed by Mexico (33%), China (9%), Italy (2%) and Hong Kong S.A.R. (2%). 

Domestic Plywood and Veneer Prices

 BRAZIL 

MALAYSIA 

PERU 

Other Panel Product Prices

 BRAZIL  

MALAYSIA 

Oversupply chips off prices

The chipboard market in Malaysia is currently experiencing some oversupply. As a result, prices for the common chipboard grades fell to lows not seen for a long time. Chipboards in Malaysia are mainly used for the manufacture of case goods, office furniture, speaker boxes, packaging boxes and others. Case goods and office furniture account for a high percentage of total consumption. 

Around 600,000 m³ of chipboard is consumed annually by Malaysian manufacturers. Local production is estimated at around one million m³ per year with some 300,000 m³ in annual capacity coming on stream. 

Neighbouring Thailand is also experiencing a significant increase in installed chipboard capacity. In view of its proximity, chipboards from Thailand are also entering the Malaysian market, contributing to the current deterioration of chipboard prices. Ample supply is also seen in Thailand and Indonesia. 

PERU 

Prices of Added Value Products

MALAYSIA  

Rising timber exports to Gulf countries

Bernama news reported that by the end of this year, export of timber products from Malaysia to the Gulf Cooperation Council countries (GCC, Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Bahrain and Oman) is expected to reach US$272.7 million, up 13% from 2004. 

According to the Dubai-office of the Malaysian Timber Council (MTC), exports to GCC countries accounted for 73% of Malaysia's total timber exports to West Asia including Yemen, Syria, Jordan and other smaller markets in 2004. The biggest GCC market for Malaysian timber products in 2004 was the UAE (US$130.2 million, up 38% from 2003), followed by Saudi Arabia (US$59.3 million), Kuwait (US$29.3 million), Bahrain (US$12.6 million), Qatar (US$6.7 million, up 27%) and Oman (US$3.2 million). 

Based on the first quarter figures of 2005, MTC projects that timber exports to West Asia could climb 18% from US$333.7 million in 2004 to US$393.4 million in 2005. The sharpest increase in demand for Malaysian timber products was seen in Jordan, where the value of exports jumped 96% to US$39.8 million in 2004 from US$20.3 million in 2003.  

Malaysia exported a total of US$5.2 billion worth of timber products worldwide in 2004. Figures for the first half of 2005 showed a 14% increase compared with the same period last year. According to the Malaysian Timber Industry Board (MTIB), exports are set to surpass the total recorded last year. 

GHANA

Grade 2 less 5%, Grade 3 less 10%. 

PERU 

Abbreviations