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International Log Prices Malaysian
mills confronted with scarce logs The continuing shortage of raw logs has pushed prices to new highs this
year. This is further fuelled
by demands from China and, particularly, India, which is fast becoming a
major buyer of Malaysian raw logs. Buyers for the local sawn-timber and
plywood industries are viewing the market with renewed caution. In addition to the high prices of raw logs, local mills are confronted
with higher internal transportation charges. Freight charges between
Peninsular Malaysia and East Malaysia are higher than those to foreign
destinations such as China. Sellers of raw logs in East Malaysia who
traditionally prefer to sell to profitable external markets such as Japan
are not giving buyers in Peninsular Malaysia much choice in alleviating the
current situation. In
search of supplies from Siberia and Myanmar As a result, organized efforts are being taken to import raw logs from
Siberia via traders in China who are more conversant with that source. More
recently, traders from Peninsular Malaysia have paid several visits to
Myanmar as a possible source for raw logs. These traders were impressed by
Myanmar Timber Enterprise¡¯s bidding and tendering systems which provided a
very much needed price stability factor in the market. Moreover, these
traders viewed prices of raw logs from Myanmar and Siberia as more
competitive than those from East Malaysia, even on a CIF basis.
INDONESIA No
let up in tight log supplies The
monsoon season is now imminent in Malaysian and Indonesian production
regions. This and continuing strong demand from China and India are putting
pressure on log prices, a situation unlikely to ease in the near future. The
situation seems to affect prices of main trading species such as meranti/seraya,
keruing, kempas, merbau and balau. Harvesting
remains particularly constrained in Indonesia, with many mills reporting
serious problems in log procurement. Hardwoodmarkets report that log
supplies in 2005 are around 40% lower from 2004 levels due to tighter
controls on illegal logging. Legal operations are reported to be hampered by
increased bureaucracy, with some authorities in charge with overseeing
harvesting operations having overlapping functions. FRANCOPHONE
WEST AFRICA Marginal
gains in log prices There
are no significant changes in the overall log price situation through
October. While European buying for logs remains very dull, the West African
log market is actively supported by strong buying activities from China and
India. However, log prices have
not risen in tandem with recent price increases for Far East species as
expected as China and India are less demanding in quality than Continental
buyers in Germany, Netherlands and France. West African producers are able
to accept stable prices in return for continuity and high volume. Sapele
demand remains very weak with discounted prices for any orders for prompt
shipment. Demand for iroko is also sluggish as European buyers regard the
price as too high. There are reports of unsold stocks from D.R. of Congo and
Gabon in France. Khaya prices
have held but demand from the UK has fallen. Demand for ayous from customary
Italian buyers has similarly eased. In
contrast, prices for okan (African greenheart or edoum), now popular as an
alternative to the scarce ekki, is on the rise while those for belli are
moving up due to demand from India. Okan log prices have appreciated by
US$30 per m3. Despite
the dull market, producers expect some price changes through next month as
new contracts for sapele and iroko are negotiated. Dull EU demand neutralises tight log
supply African
log supply is tight due to ongoing rainy season in the main supply regions
north of the Equator in Ghana, Côte d¡¯Ivoire, Cameroon, CAR and
northern parts of Congo. However,
tight supply continues to be balanced by weak EU demand, particularly for
sapele.
SNBG to
abandon setting of okoume prices The
Government of Gabon has confirmed that, as from 1 January 2006, the state
selling organization SNBG will relinquish the monopoly on sales of okoume
and ozigo. Prices will no
longer be controlled and there will be no guaranteed prices for producers.
The
SNBG will be replaced with or changed into an organization controlling
okoume and other red timbers. The new organization will probably cover
grading and other technical issues, and will require an increasing
percentage of logs to be processed domestically in return for an allowed
volume of export logs. It is planned that by 2012, domestic log processing
must be 75% with only 25% allowed for exports. The new organization will
levy a fee for its control services. In addition, a scheme allocating log
quotas only to producers owning and operating processing mills will be
introduced from 31 December 2005. Logging permits will no longer be
allocated but auctioned. New
regulations may dampen okoume prices Some
producers fear that the new regulations could close out smaller operators
and destabilise the prices for okoume and ozigo in the long term.
There is concern that export prices may fall due to competition of
okoume from the Republic of Congo and pressure from large buyers once the
fixed price regime is abolished. As reported earlier in the MIS, the
Republic of Congo exported between 15,000 and 30,000 m3 of okume
logs every month while there were virtually no exports from Equatorial
Guinea. Gabon¡¯s okoume log exports have been gradually declining in recent
years.
Spain steps up imports of tropical
products The
federation of Spanish timber importers (AEIM) reported continued growth in
intra-EU trade. In particular, imports of tropical timber from other
European countries show a hefty increase.
Spain¡¯s imports of tropical logs expanded 8.5% to 30,805 m3
in the first quarter of 2005. Total
imports from Africa gained almost 3% to 31,401 m3 with imports
from the Republic of Congo rising over 23% to 8,377 m3 and those
from Gabon climbing 62% to 7,474 m3. In contrast, imports from
West and Central Africa declined with imports from Cameroon dropping 14% to
5,842 m3 and those from the CAR contracting 16% to 5,708 m3.
Imports from Equatorial Guinea also slipped 30% to 3,391 m3.
Imports from other European countries surged 51% to 6,371 m3,
clearly showing that the expansion in Spanish tropical log imports
originated from within Europe. For
tropical sawnwood, Spain¡¯s imports rose 31% to 96,585 m3 and
69% in value to euro 49.8 million. Imports from Cameroon surged 45% to
34,565 m3, consolidating its position as Spain¡¯s major
supplier. Côte d¡¯Ivoire is second with a 55% export increase to
36,536 m3. Imports
from Republic of Congo rose 12% to 6,153 m3 while those from
other European countries climbed 167% to 7,517 m3. However,
imports from Brazil declined 20% to 15,829 m3. MYANMAR Upbeat
market for teak The
Myanmar Timber Enterprise (MTE) sealed tender was held on 28 October (last
Friday of the month) while the open tender will be held on 31 October (last
Monday of the month). Although
October prices have not been released yet, the teak market looks very
attractive. Current spot prices are US$80 to US$120 per Hoppus ton higher than the price list (Hoppus ton = 1.8 m3).
This means a buyer has to pay about US$100 more than the MTE price list for
teak logs from 2nd Class area (i.e. from Zigon, Thayawaddy, Kawlin, Momeik,
Lashio, Taunggyi, Pyin Oo Lwin, North Bago or Katha areas). Some quality
logs can fetch even up to US$150 extra.
Hoppus
ton = 1.8 m3; All grades, except SG-3, assorted and domestic, are
length 8¡¯ x girth 5¡¯ and up. SG-3 is girth 4¡¯ and up while assorted
and domestic are girth 4¡¯ and up. SG-3 grade is higher than SG-4, but
smaller in girth so prices are usually lower. Mixed
trends for pyinkado and gurjan The
two main species available
for export in substantially
large quantities are pyinkado (Xylia dolabriformis Benth.) and gurjan
(Dipterocarpus spp., known
as keruing in Malaysia and Indonesia). Spot
prices are in US$ per Hoppus ton but re-sale prices can be quite
flexible and depend on individual sellers. This
year's harvest of pyinkado is just coming out of the forest. Supply is much
less than demand and buyers say that there is more buying interest on
pyinkadoe as they cannot get enough supply of merbau (Intsia palembanica
Miq.) from Indonesia. Following the latest price increase this month,
MTE base prices are at US$380-400 depending on source area. A hike of US$60
was made in October above the April 2005 prices. Presently, quoted spot
prices by various sellers are around US$470. Logs with girth smaller than 6
feet are offered at about US$450 while prices for logs with girth over 7
feet may go up to US$500. Since prices were increased last week, these will
take some time to stabilise. A clearer picture will emerge only in December
when the logs start arriving in Yangon. The market for gurjan (keruing) is not very competitive and, therefore, logs from the previous year's harvest are selling at around US$320, depending on freshness and specifications. There is a substantial quantity from last year's harvest available in Yangon. The trucking season for logs from the forest is ongoing and, as more fresh logs arrive, sellers with stock obtained from MTE are hoping for better prices. MTE base prices since April 2005 are US$285 to US$310 depending on source area. No subsequent revision on prices for gurjan has been made by the MTE thus far. PAPUA
NEW GUINEA
RUSSIA Russia
may cease exporting roundwood In a recent meeting of the lumber industry in the
central Russian region of Kostroma, Prime Minister Mikhail Fradkov indicated
that Russia could not continue exporting roundwood. With a quarter of global
forest reserves, Russia exports 12 million m3 of roundwood to
Finland alone every year while Russia annually imports lumber and paper
products worth $3 billion from its Scandinavian neighbour. Mr. Fradkov said cutting-edge technology and foreign
experience should be used to drive the Russian lumber industry forward.
"Russia has enough raw materials and skilled workers. Those are our
competitive advantages", Mr. Fradkov added. However, the Premier
recognized that these advantages had not been used to the full extent and
suggested that foreign partners could help solve problems facing the
industry. Contribution to economy
relatively modest Forests account for 75% of Russia's territory, with
1,139 million hectares stretching from the Pacific coast to the Baltic Sea.
However, forests products have not contributed to the Russian economy to the
same extent as oil and gas. According to Valery Roshchupkin, head of the
Federal Forestry Agency of the Natural Resources Ministry, a major obstacle
is the inefficiency of forestry agencies. Tree felling has reached only 21%
of its capacity. Russia currently fells 170 million m3 out of the
possible 550 million m3. Due to shortage of machinery and
production capacity, Russia principally exports roundwood. According to
unofficial data, over half of exported timber is felled illegally. The state
is beginning a campaign against illegal felling, using satellites to monitor
forests. Domestic
Log Prices BRAZIL BB offers credit line for forest plantation
Banco
do Brasil (BB), the State bank, has granted BRL 84.5 million (around US$37
million) for forest plantation projects aimed at timber production during
the first nine months of the year through its BB Florestal Program.
The grants are 87% higher than planned for this year. The Program aims at the establishment of 150,000 ha of planted forests
nationwide by 2009. A total of 2,700 loans were granted in 13 Brazilian
States, notably in São Paulo (BRL 42.5 million) and Rio Grande do Sul
(BRL 19.9 million). The main beneficiaries of the loans are small and
medium-sized landowners. Planted forests in Brazil supply the production of
a wide range of wood products such as paper, charcoal and plywood, which are
all facing growing demand. New forestry inventory for Brazil proposed Representatives
of relevant Brazilian institutions and forest specialists from several
countries held a workshop this month in Paran¨¢ State to discuss a proposal
for a National Forest Inventory of Brazil. The discussions at the workshop
highlighted the need for the national forest inventory for
decision‑making concerning the forest sector development. A task force
of six working groups was created to prepare the basis for the National
Forest Inventory. The main topics are: institutional structure;
classification and identification of the vegetation; forests and
biodiversity; landscape and social economy; and information systems. These
topics will be taken into account in the formulation of the proposal to be
completed by July 2006. According
to the Ministry of Environment (MMA) Brazil holds the world¡¯s second
largest forest area of 550 million km2. Forest inventories have
been carried out in some Brazilian States, including Rio Grande do Sul,
Santa Catarina, São Paulo and Minas Gerais.
PENINSULAR
MALAYSIA
GHANA
International Sawnwood Prices FRANCOPHONE
WEST AFRICA Sawnwood
prices hover on amid low demand Similarly
to logs, sawnwood prices remained basically unchanged in October due largely
to the low demand from European buyers. Both sapele and iroko price trends
are weak, particularly for prompt shipments.
S. Africans
substituting meranti with okume There
is increased interest from major South African buyers who are switching log
sourcing to West Africa from Malaysia where lumber prices have risen quite
sharply and availability is less certain due to log shortages. Producers expect that okoume and other West African red
timbers will replace the more expensive meranti. One large South African
joinery manufacturer is said to be committed to a joint venture with an
okoume mill and changing completely to okoume. Others are negotiating
long-term contracts with Gabonese mills for regular shipments of substantial
volumes.
Producers
have been expecting the usual autumn upturn in EU demand which has not
materialised so far and the market remains very sluggish. Market analysts
believe this is largely due to falling consumer confidence and spending and
reluctance to invest in new construction and property renovation. Major
factors in the current market situation include concern over the effects of
price deregulation on Gabon okoume and ozigo, balanced by the emergence of
India as a substantial buyer and the new interest from South African timber
companies in importing lumber from West Africa.
BRAZIL Lumber exporters losing competitiveness The
continuous US dollar slide in relation to the real has affected wood
products exports and the lumber segment has lost competitiveness, affecting
sales and industry targets. Some
lumber exporters in the State of Mato Grosso face a serious business crisis.
A major producer with a monthly export capacity of 30 containers reduced
shipments to only 20 containers in September. Another, which exported US$2.5
million of high value-added timber products to Europe, Canada and the US in
2004, has had its production level impaired in 2005 while some of the
personnel has been dismissed. Nevertheless,
some companies have managed to renegotiate better prices with customers this
year through new business contracts, partially recovering their losses.
MALAYSIA Sustained export demand aids millers as domestic construction cools off Continued demand for sawn-timber from South Korea and Japan has given
saw-millers a very much needed relief as the Malaysian construction business
continues to cool down. This may be too little, too late for a number of
saw-millers. Unofficial sources claimed that at least 40% of saw-millers in
Peninsular Malaysia have ceased operations in the last two years. The repatriation of foreign laborers, especially those from Indonesia,
has caused the construction industry to contract further. However, exporters
of both sawn-timber and plywood in Peninsular Malaysia are facing additional
erosion of their profit margins over increasing port charges.
GHANA Air-dry FAS 25-100mm x 150mm and up x 2.4m and up.
PERU Loreto
industries pin hopes for ACE8 renewal Regino Lopez,
president of the Association of Timber Industries of Loreto (AIMAL), says
that its Association is looking forward to the renewal of the Agreement of
Economic Complementation No. 8 (ACE8) between Peru and Mexico. The Agreement
eliminates or reduces to zero the tariffs of some products traded between
the countries, including timber. Timber is Loreto¡¯s main export product
and generates 80% of direct and indirect employment. The Agreement is
extremely important to Loreto, affirmed Mr. Lopez, since Mexico is the
country¡¯s second largest trade partner. Initial discussions between the
parties have reached agreement on the need to extend the ACE8 for 5 more
years but plywood producers in Mexico were proposing the exclusion of timber
from the ACE8 on account of their higher production costs. The renewal of
the ACE8 is scheduled on 21 November. Amazon River ebbs to lowest level in 36 years The Amazon River
reached a water level of 106.5 m.o.s.l. in Iquitos in early October, a
36‑year low. The loss of water level in the Amazon and its affluent
rivers, which has become more frequent in the last decade, has reduced
fluvial transport and elevated freight prices since ships cannot call on
some ports due to the risk of running aground. The drought is particularly
affecting the timber industry, the most important activity in Loreto,
affecting the speed and cost of the timber supply as transport from/to mills
is mainly fluvial. The drought has
also affected the regular flow of timber shipments to Brazil¡¯s Atlantic
coast ports en route to the North American and EU markets. Some Loreto
exporters have been compelled to the costly option of trucking timber loads
to Lima¡¯s Callao Port (1,000 km south) to be shipped to Mexico and the
USA. Loreto exported US$20.6 million worth of timber products during the
first nine months of this year, up almost 3% from last year but lower than
expected due to the low river level. One of the factors
contributing to the delay of rains in the Amazons is the hurricanes that
have moved the rain system towards the northern part of the continent.
Studies of the National Service of Meteorology and Hydrology (SENAMHI)
indicate that rains must arrive in late October for the situation to
normalize.
Domestic
Sawnwood Prices BRAZIL
MALAYSIA Ongoing surge in Malaysian sawnwood
exports Malaysia
exports of sawnwood to Japan surged 7% to 65,400 m3 in the year
to July. Malaysia has overtaken Indonesia as imports from this country fell
sharply 29% to 59,200 m3 during the same period.
GHANA
PERU
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Abbreviations
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Source:ITTO'
Tropical Timber Market Report
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