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Report
from Europe
and the UK
Sapele prices under pressure in the EU
Prices for existing landed stocks of sapele sawn lumber in
the EU are now under significant pressure. Although
underlying levels of consumption are still holding up
reasonably well, despite the gloomy economic news,
importers are nervous about future prospects. Many are
also holding high stocks of sapele sawn lumber ¨C partly a
hangover from last year when a lot of product was not
shipped on time due to transport difficulties. A significant
volume arrived earlier this year which is now a
depreciating asset sitting in importers¡¯ yards.
Those importers that also deal in softwood products face
serious financial difficulties as softwood demand has
declined rapidly this year, softwood prices have
plummeted and stocks have mushroomed. There are
reports that some importers on the continent are now
sitting on softwood stocks in excess of 100,000 m3. Under
such precarious economic conditions, European importers
are now extremely reluctant to enter the forward market
for hardwood sawn lumber and are happy to fill any gaps
that may appear using stocks through cross-trading with
other importers.
With European forward markets so slow, there are reports
that African sawmillers are starting to reduce FOB prices
for sapele. Nevertheless, conditions of relatively tight
supply in Africa and continuing good demand from Asian
markets imply that forward prices are unlikely to fall
sharply. In any case, the decline in FOB prices for
European importers is being partly off-set by increases in
freight rates in response to high fuel costs. Meanwhile
prices for other species of African sawn lumber have been
holding up reasonably well with relatively slow
consumption balanced by generally tight supply.
Prices for meranti sawn lumber have remained stable and
are still competitive in the EU market due to the relatively
weak dollar rate. With supply tight and consistent demand
from alternative markets, Malaysian shippers have seen no
reason to give ground on prices to the European market
despite slow forward buying.
Prices for Brazilian sawn lumber in the EU market are also
holding steady, although the reality is that volumes
available to European buyers are currently very restricted.
This is a consequence of Brazilian government efforts to
tighten control over the hardwood industry ¨C delaying
approval of forest management plans - following reports
of an increase in the rate of Amazonian deforestation in
Brazil at the second half of last year.
Expectations are that forward demand for tropical
hardwood sawn lumber in Europe will slow virtually to a
halt over the summer vacation period starting from the
beginning of July. Forward demand is also expected to
remain sluggish at least until the fourth of the year,
perhaps into 2009.
EU plywood market weakens
The UK plywood market is becoming increasingly
difficult. Buying by the large UK merchant groups has
fallen in response to a significant decline in house-starts
and residential sales. Elsewhere in Europe, the German
plywood market is now extremely slow, although there are
reports that the French and Netherlands markets are
holding up reasonably well.
Although Chinese plywood products have taken a larger
share of the European market in recent times, the
competitive edge of Chinese exporters has been blunted
this year by the removal government subsidies and as fuel
and labor costs have risen dramatically in China.
Malaysian exporters are the main beneficiaries of China¡¯s
reduced competitiveness, particularly owing to Malaysia¡¯s
lower GSP rate. Malaysian exporters are also becoming
the suppliers of choice for many of the EU¡¯s larger
distributors due to their ability to supply significant
quantities of MTCC and FSC certified plywood product.
An increasing proportion of Malaysian plywood imported
into the EU comprises a hardwood face over an FSCcertified
radiata pine core. There are also reports of
Malaysian plywood manufacturers promoting new
plywood products to European buyers which combine a
tropical hardwood face with a palm core. While there is
always likely to be niche demand for 100% tropical
hardwood tropical hardwood plywood for the most
demanding external applications, these new ¡®green¡¯
products have obvious attraction in the EU market for less
demanding applications such as temporary site hoardings.
The government crackdown on Amazonian forestry
operations has meant that availability of Brazilian tropical
hardwood plywood to European importers is currently
very restricted. Deliveries of Brazilian elliotis pine
plywood are reported to be inconsistent and often subject
to delay. European demand for elliotis pine plywood is
expected to fall for the rest of the year as the EU¡¯s dutyfree
softwood plywood quota has now been filled.
French plywood cartel exposed
According to a recent report in the TTJ, six French
plywood manufacturers have been fined a total of EUR8
million for engaging in a price fixing cartel which lasted
for 17 years. UPM escaped a fine after it blew the whistle
on the cartel, described by the French competition
authority Conseil de la Concurrence as ¡®very serious¡¯ and
damaging to the economy. Almost 70% of tropical
hardwood plywood sales in France are thought to have
affected by the price fixing. Companies fined are Jean
Thebault, Plysorol, Rougier Panneaux, Etablissements A
Mathe, Etablissements Guy Joubert, and Etablissements
Allin. The Conseil¡¯s investigation focused mainly on
gaboon plywood, with the plywood companies found to
have set up a common price scale which served as a basis
for fixing the prices of their different products based on
the price of a standard panel. The practice continued
between 1987 and 2004.
UK sets new standard for construction products
The UK¡¯s Building Research Establishment (BRE) is
developing a new Standard for the Responsible Sourcing
of Construction Products ¨C known as BS 6001: 2008 ¨C due
to be launched in August 2008. The standard aims to level
the playing field between construction products. By
increasing scrutiny of the environmental impact of the
supply chains of competing products, the standard has
potential to boost market prospects for wood.
Impetus for development of the standard comes from
expansion of the BRE¡¯s Environmental Assessment
Method (BREEAM) for buildings. A representative of
BRE speaking to the UK¡¯s TTJ notes that ¡®the timber
industry has almost a 20 year head-start when it comes to
supply chain certification and we acknowledged this by
providing credits under BREEAM for certified
timber¡Our recent consultation [focused] on a proposed
new standard to cover responsible sourcing in every area
of construction products¡±.
The standard encompasses the social, economic and
environmental impacts of construction materials sourcing.
It addresses aspects such as stakeholder engagement, labor
practices and the environmental stewardship shown by the
supply chains serving the different materials sectors
upstream of the manufacturer.
The standard is intended to form the core of a Responsibly
Sourced Materials certification scheme. The framework
will incorporate existing certification schemes and other
industry initiatives to avoid adding additional
administrative burdens of auditing and verification. It will
provide a basis for addressing the Responsible Sourcing of
Materials at both sector and company levels. More details:
http://www.bre.co.uk/responsiblesourcing/page.jsp?id=12
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