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Report
from the UK
Positive outlook for rising construction orders
The Council of British Industry (CBI) research shows that small and medium-sized manufacturers¡¯ export
orders are expected to grow over the next four months at the fastest rate for a decade. Furniture retailer MFI
informed that interested third parties were eyeing its retail business as it battles to turn round its fortune amid
tough trading. MFI has seen sales drop by 19% in 2005 and expects sales for the first half of 2006 to fall further.
The TTJ reports figures from National Statistics showing that construction orders increased during the last year and
continue to look positive for the future. Private housing rose 4% while public housing and housing association
orders were up by 12% in 2005. However, water shortage in south England is causing considerable problems to
many businesses, not least the building sector, as pressure grows to reduce the number of houses to be built
in the area until infrastructure is improved. Roger Bootle,
Managing Director of Capital Economics, said that the housing market is on a knife-edge. Lower interest rates
would give it a further boost while higher rates would have adverse effects.
In other news, unemployment is on the rise again with one in four companies (one in three in the public sector)
predicting a cut in jobs, according to the chartered Institute of Personnel and Development. The number of
people out of work is the highest since 2002. In addition, UK inflation surged in April. The official Consumer
Price Index (CPI) rose to 2% while the headline Retail Price Index (RPI), which includes mortgage interest
payments, increased to 2.6%. This has caused companies to scale back on investment.
Report
from Netherlands
Prices hit new records as offers fizzle out
Replenishment of stocks remains problematic in the Netherlands, putting added pressure on prices. Amid
limited CNF Rotterdam quantity offers and restricted unsold forward positions by Malaysian exporters, the
FOB mill price of dark red meranti (DRM) jumped recently to above 4,000 ringgit per ton of 50 ft2, a record
high for the Dutch market. This pushed CNF Rotterdam prices from $1480 to $1,600 per ton but, soon after that,
exporters did not come with more offers. Prices for DRM KD PHND 4x5¡±, for which offers continued to be rare,
were quoted at $1,800 per ton CNF Rotterdam. Availability of large scantlings in random lengths 8ft and
up also remains limited, affecting recovery items such as shorts and strips.
Demand stays strong in spite of record prices
Now that prices for meranti reach record-high levels, traders and end-users look for substitutes from Africa
(sipo/utile, sapele). The greater focus on sapele is moving prices up both free delivered and CNF Dutch port,
narrowing the gap with meranti prices. Nonetheless, meranti is a long and well established species, normally
imported kiln-dried in good volumes and regarded as having good working/machining qualities and being fairly
durable. These conditions keep demand for meranti strong in spite of record high prices. However, some analysts
think that, as in previous occasions, there will be a point at which buyers start objecting further price hikes. At the
moment, nobody can predict when this turning point will be. Last year, for instance, the relatively brief revival of
the market lasted till early June. The current situation looks comparatively more favourable and lasting. With
active orders from end-users and joinery manufacturers, importers do not seem to feel much resistance yet in
current trading negotiations with Dutch clients. It is more a matter of whether traders can meet the species and
quantities required.
Dutch importers seek supplies in Belgium
The rapid depletion of stock positions and the lack of adequate fresh offers have prompted importers to seek in
Belgium certain sizes common in both markets, such as 2 1/2x3 1/2, 2 1/2x5 and 2 1/2x6¡±. In Belgium, where the
quality is slightly higher (non-PHND), local traders are now finding it extremely difficult to source fresh supplies
of these sizes of seraya and nemesu non-PHND and not at the prices previously seen of around $1,240 per ton
CNF. As Dutch importers are prepared to bid $1,480 for 2.1/2¡±
material in PHND, whatever volume of nemesu or seraya logs that Malaysian sawmillers can obtain is processed
and sold as ¡°Dutch items¡±.
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