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Report
from the UK
China may be weaker competitor in EU plywood markets
EU imports of Chinese plywood have risen dramatically
over the last two years, driven by highly competitive
pricing. However, European importers report that supply
problems have been mounting and prices rising from
China in recent months.
Some causes of tightening supply and rising prices for
Chinese plywood may be short-term. For example, the
glues used for plywood manufacturing react badly to cold
and damp conditions that prevail in China during the
winter months, so there is less product of a quality suitable
for export to the European market. In addition, the recent
strengthening of the Chinese yuan against the dollar has
been eroding China¡¯s price competitiveness on the
European market.
But EU importers also suggest that there are structural
changes underway implying a slowdown in the rate of
growth of European imports of plywood from China. The
Chinese government has progressively removed export
credits available to plywood manufacturers, removing one
significant source of competitive advantage. At the same
time labor, energy and raw material costs have been rising.
Furthermore, with numerous smaller plywood
manufacturers, often with limited market knowledge,
trying to sell product into the European market, there have
been many questions raised over the quality of supply.
There is a feeling amongst European importers that
Chinese plywood supply is likely now to consolidate
around a few of the larger exporting companies that are
well informed of European market requirements and that
can guarantee a high quality reliable service.
Malaysia is likely to be a major beneficiary of emerging
supply problems from China. Malaysia¡¯s share of the
European hardwood plywood market has been rising,
boosted by supply problems in Indonesia. Malaysia has
also benefited in the European market from its ability to
supply significant volumes of FSC and Malaysian Timber
Certification Council (MTCC) certified plywood products.
The large distributors and merchants, which account for
around 20% of all plywood sales in the leading UK
market, are now very committed to sourcing certified
product. This reflects the UK government¡¯s timber
procurement policy and the merchant¡¯s desire to gain
access to high profile projects, notably the developments
for the London Olympics.
Malaysian shippers are now supplying significant volumes
of FSC certified plywood into the UK combining a New
Zealand radiata pine core with a tropical hardwood face.
Although this product is not as durable as tropical
hardwood plywood throughout, it is being supplied as a
¡°CE2+¡± product, meaning it is tested and fit for structural
use. It therefore meets the requirements for a large
proportion of UK applications. A large section of the UK
hardwood plywood market now seems content to accept
the lower performance associated with a softwood core.
Availability of MTCC certified plywood from Malaysia
has also been improving in recent times and can be
obtained by European importers on payment of a small
premium of perhaps 2% on the uncertified price.
However, it would be premature to predict any significant
reduction in the volume of Chinese plywood imported into
the EU. The price advantages of Chinese plywood remain
significant, while Chinese manufacturers are
demonstrating a willingness and ability to adapt to
European market demands. UK delivered prices for
Chinese tropical hardwood plywood are still 15%-20%
cheaper than comparable Malaysian product. And at least
one area of uncertainty hanging over the European trade in
Chinese plywood market has been lifted in recent weeks.
The European Commission has announced it does not
intend to extend duties on imports of Chinese plywood.
According to the EC Directorate General for Trade, the
original request by the European Plywood Industry
Federation (FEIC) for a widening of the duties to cover
other tropical hardwood species in addition to okoume had
been withdrawn allowing the EC¡¯s investigation to be
terminated.
Chinese plywood manufacturers are also beginning to
respond to Europe¡¯s emerging demand for
environmentally certified product. A few operators are
now offering small volumes of FSC certified plywood
from China.
Indonesian plywood has suffered significantly in the EU
market from its inability to compete on price with China
or to offer significant volumes of ¡°legally verified¡±
product to the larger distributors at prices comparable to
Malaysia. This fact has been compounded by tightening
log supplies in Indonesia and the imposition of a 7% GSP
duty on Indonesian plywood in the EU market. Malaysian
shippers are only subject to a 3.5% duty.
Brazil remains an important player in the European
hardwood plywood sector, offering comparable products
to Malaysia at similar prices. However Brazil, like
Indonesia, has suffered severely from Chinese
competition. Furthermore, the Brazilian hardwood
plywood sector has been beset in recent times by dramatic
rises in production costs and a strengthening currency
which has undermined export competitiveness.
Importers and plywood traders report that underlying
consumption of tropical hardwood plywood in the
European market has remained sluggish at the start of
2008, a reflection of slowing activity in the construction
sector in several key markets, including the UK and
Germany.
Meanwhile, after a period of tight supply in the first half
of 2007, stocks of okoume plywood on the European
continent gradually improved during the second half of
last year. This reflected an improvement in the log supply
situation at a time when European consumption was
easing, particularly in the Netherlands and France. Traders
report that the European market for okoume plywood is
now reasonably well balanced and prices are stable.
Nevertheless there are uncertainties, particularly over the
long term availability of okoume logs to European
manufacturers. While those manufacturers with their own
forest concessions can be reasonably confident about
future log supplies, those that have to compete for logs on
the open market with Chinese buyers have been
struggling.
Another factor that will impact on Europe¡¯s hardwood
plywood market during 2008 is a rise in regional
production capacity for birch plywood. Investments in this
new capacity followed on from short-falls in European
supply of birch plywood during 2006 and 2007. A lot of
inward investment has focused on western Russia and has
flowed both from domestic manufacturers and from
European companies. For example, the Moscow-based
Sveza group, one of the largest plywood producers in
Russia, has announced its intent to increase production
capacity during 2008. Despite these investments, there are
already signs that supply of birch plywood to key buyers
in the European shuttering, automotive and packaging
industries will fall short of demand during 2008.
German window sector growth to slow
According to the Germany-based trade journal EUWID,
sales revenue in the German building industry is expected
to grow by 3% during 2008. Much of this growth will
come from the commercial sector, particularly factories
and workshops. Public sector construction is also expected
to grow strongly this year. However, judging from the
numbers of building permits issued in 2007, residential
construction is likely to remain static at a low level.
Slow activity in the residential sector is feeding through
into the German window manufacturing sector, a key
niche market for tropical hardwoods. According to
EUWID, German window manufacturers have
significantly reduced production over recent weeks, some
working only a three or four day week. A 2007 market
study by the German window industry association VFF
indicates that sales of German manufacturers into the
residential sector were down by over 10%. This was only
partially off-set by some gains made in the commercial
sector. Most German window manufacturers forecast at
best a static, and probably a slight weakening, of the
market during 2008.
European wood flooring sales show marginal rise
The European Federation of the Parquet Industry (FEP)
reports that sales of wood flooring in the FEP countries
increased by 4% during 2007, driven mainly by production
increases in central and eastern Europe. Sales are
estimated to have reached over 120 million m2 last year.
FEP is cautiously optimistic of continuing growth in 2008,
although FEP also point to increasing competition in the
market as construction sector activity is slowing across the
continent. Wood flooring manufacturers will have to work
hard to build sales by taking an increasing share of a
tightening market. Manufacturers must also cope with
increases in raw material costs at a time when it is difficult
to squeeze higher prices out of the market.
Of the various wood flooring products, engineered wood
flooring has been performing well, solidifying its position
as market leader. Solid and mosaic flooring have been
struggling but FEP point to ¡°some small but positive
indicators [that] give cause for hope in a better future¡±.
FEP is seeking to boost consumption of wood flooring
through its ¡°Living on Wood/Real Wood¡± project which
now boasts a membership of 45 companies. The aim is to
ensure that wood flooring becomes an essential component
of interior design rather than just an auxiliary construction
item.
Meanwhile, the European Commission agreed in
December 2007 that the co-existence phase for CEmarking
of wood flooring under the harmonized standard
NS-EN 14342 ¡°Wood flooring - Characteristics,
evaluation of conformity and marking¡± would be extended
for another year. Therefore the CE Mark for wood flooring
will not become obligatory until 1 March 2009. CE marks
may be applied to wood flooring sold in the EU during the
co-existence phase, but it is not obligatory. The
postponement is designed to give wood flooring
manufacturers more time to satisfy the CE marking
regulations. According to NS-EN 14342, in order to CEmark
wood flooring, a manufacture must have
documented conformity to an internal production control
system and must perform an initial type testing.
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