Tropical Timber Market Report

Wood and wood product exports from Southeast Asia continue to perform well, but the raging Covid-19 pandemic in the region is disrupting production activities and logistics. Various countries are putting plans in place to carry forward this momentum into the future. ITTO tells us more about the happenings around the world.

Malaysia

Furniture manufacturers ask again that factory operations be allowed

Malaysia continues to see an upward trend in the rate of Covid-19 infections with 17,045 recorded in one day in late July, the highest ever in a day since the pandemic hit the nation. The cumulative total infected stood at 1,013,438 in late July. 

Lockdown in various forms is current in different parts of the country.

Furniture manufacturing has been hit by the impact of the lockdown regulations and the Malaysian Furniture Council (MFC) continues to appeal to the government to allow the resumption of operations in the timber and furniture industry.

An article in the Star newspaper reports the MFC President, Khoo Yeow Chong, as saying that since the implementation of the Full Movement Control Order (lockdown) and overall Phase 1 of the National Recovery Plan beginning 1 June, the timber industry has suffered losses in excess of RM6 billion. 

The furniture industry alone has lost more than RM1.6 billion in output so far and the figure is still rising.

Khoo is quoted as saying that because exporters are failing to meet overseas contracts buyers have been forced to turn to alternative suppliers and at the same time are demanding compensation from their Malaysia suppliers for breach of contract. 

He added that the current lockdown has severely affected the upstream and downstream sectors and disrupted the entire supply chain.

The MFC has appealed to the government for a lifting of the most severe restrictions in States which have a low infection rates and specifically asked that workers who have been fully vaccinated to be allowed to return to work.

 

Sabah REDD+ preparations

The Sabah Forestry Department and the Faculty of Tropical Forestry, Universiti Malaysia Sabah (UMS) signed a memorandum of Understanding to develop a procedure for Sabah’s forest aboveground carbon density mapping so as to benefit from REDD Plus forest carbon projects in Sabah.

The MoU will also support the development of the EU REDD-Plus Project Monitoring, Reporting and Verification (MRV) System.

The EU REDD-Plus is an eight-year project funded by the European Union aimed at contributing to the sustainable and low carbon development in the State of Sabah and is currently being implemented in three demonstration sites in Kg. Gana, Kota Marudu, Kinabatangan and the Kinabalu Eco-linc area.

 

Roadmap for a sustainable furniture supply chain

The PEFC website reports that PEFC has initiated a four-year initiative with the ASEAN Furniture Industry Council (AFIC) to improve sustainability throughout the furniture supply chain in ASEAN member countries.

The PEFC website says the roadmap that AFIC and PEFC have put together includes the following goals: 

•Raise awareness on the importance of sustainably sourced forest and tree-based materials which subsequently boost demand for certified materials.

•Build capacity in the wood-based supply chain to facilitate members and companies to reach sustainability goals.

•Support companies who want to demonstrate legal and sustainable sourcing with PEFC certification.

•Improve knowledge sharing between PEFC and AIFC members.

•Build visibility for AFIC and PEFC.

 

In addition, the roadmap calls for the creation of an ASEAN Furniture Sustainability Award to recognise companies that demonstrate a commitment to sustainable practices, including sourcing.

 

Strong plywood exports to the US

Sarawak Timber Industry Development Corporation (STIDC) figures show that Sarawak earned about RM1.05 billion from the export of 527,550 cubic metres of plywood in first half of 2021 against RM1.12 billion in the same period in 2020.

The statistics also show that the US has emerged as a new market for Sarawak plywood. This is a welcome development as exports to Japan have been falling for the past years. The US is now the fourth ranked importer of Sarawak plywood, a jump from 12th in 2019.

In the first six months of 2021 the US paid about RM49.8 million (FOB) for 21,043 cubic metres of plywood from Sarawak, about half of which was shipped in June. Taiwan is the third largest importer (32,334 cubic metres) overtaking South Korea. Japan remains as the largest importer of Sarawak plywood.

 

Indonesia

Indonesian Ambassador visits UK timber companies

In a bid to encourage UK timber importers to increase their purchase of wood products from Indonesia a delegation from the Embassy in the UK led by Indonesian Ambassador, Desra Percaya, recently visited a number of timber companies in the country.

During the visits the Ambassador said there is an opportunity to gain from the UK-Indonesia FLEGT-VPA and ensure that high-quality timbers remain firmly established in UK industry’s supply chain.

 

Green Deal and Fit for 55 climate package

The European Union Ambassador to Indonesia, Vincent Piket, in speaking with the press explained the European Green Deal and the Fit for 55 Climate package. 

In July this year, the European Commission adopted a package of proposals to make the EU's climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55 percent by 2030, compared to 1990 levels.

Achieving these emission reductions in the next decade is crucial to Europe becoming the world's first climate neutral continent by 2050 and making the European Green Deal a reality.

The Commission presented the legislative tools to deliver on the targets agreed in the European Climate Law and fundamentally transform the economy and society for a fair, green and prosperous future.

The Ambassador said this would not affect trade with Indonesia or the Comprehensive Economic Partnership Agreement (CEPA) free trade negotiations with Indonesia. But mentioned it is possible that there will be additional regulations to prevent the entry into the EU of products that damage the environment.

 

Indonesian ‘Suar’ furniture a hit in Canada

The Indonesian Consul General in Toronto, Leonard F Hutabarat, was present at the inauguration of a showroom featuring Indonesian wooden furniture especially suar wood (also known as trembesi wood).

Suar wood is the Indonesian variety of Albizia saman, a tree native to South America. It was introduced to Indonesia in the mid-19th century by the Portuguese as a plantation tree. Fast growing tree by nature, it has spread throughout the region and is used for wood slab furniture.

The Canadian importers and showroom owner said that Indonesia has abundant suar wood and skilled workers to manufacture quality products. According to his assessment suar wood furniture is in demand in Canada and the US.

In related news Indonesian teak products find a ready market in Germany according to Indonesian Ambassador to Germany, Arif Havas Oegroseno.

Products from Indonesia teak plantations are subject to the Indonesia Timber Legality Verification System (SLVK) recognised by the European Union.

The teak, which is produced sustainably, legally and socially responsibly has advantages over teak from other Southeast Asian countries, which in recent years is thought to have suffered a reputational decline due to allegations of over exploitation of forest land and environmental damage due to land clearing for teak plantations said Oegroseno.

He also pointed out that the commitment of Indonesia to the FLEGT control system is expected to satisfy European Union consumers that Indonesian wood products are produced legally.

 

Transparency in carbon projects

Indonesian Environment and Forestry Minister, Siti Nurbaya, says efforts to trace collaboration among a number of carbon projects in which local governments are engaged are aimed at ensuring that the national greenhouse gas inventory remains transparent and credible. 

Local governments are legally required to report the greenhouse gas inventory in each of their territories to the Minister in her capacity as the country’s national focal point to the UNFCCC.

The Minister stressed that local governments engaged in carbon projects are obliged to immediately report to her as well as to the Minister of Home Affairs primarily on the legal basis for their engagement with carbon projects in their territories.

In addition, Minister Nurbaya pointed out that the local governments engaged in carbon projects are also to report on policy measures taken, the extent of the management area, the scope of activities, methodologies and the targets.

 

Economic recovery moving in right direction

State-owned Enterprises (SOE) Minister, Erick Thohir, has commented that Indonesia's economic recovery is moving in the right direction since economic growth reached seven percent in the second quarter of this year.

He argued that this was the result of strong exports, improving household consumption and investment. However, the Minister warned everyone must be aware that the delta variant has a high infection rate and this represents a considerable risk.

 

Recovery of exports to US

Indonesia's furniture and craft exports recorded positive growth especially to the US market rising 35 percent in the first half of 2021.

The chairman of the Indonesia's Furniture and Craft Industry Association's (HIMKI), Abdul Sobur, said during the first half of 2021exports of furniture and crafts were valued at US$1.687 billion, a 35 percent increase year-on-year.

The main market was the US (50%) followed by Japan (7%), the Netherlands (5%) Germany (4%), Belgium (4%), Australia (3.6%) and the UK (3%).

Meanwhile, the Director of Production Forest Business in the Ministry of Environment and Forestry (KLHK) reported that exports of forest and wood products in the first quarter of 2021 increased to US$3.045 billion compared to the US$2.731 billion in 2020. In the second quarter of 2021 exports increased 70 percent year-on-year.

 

Plantation and natural forest log production rises

The performance of the forestry and wood processing sectors in the first and second quarters of 2021 improved compared to the same periods in 2020. There was an increase in log production, processed wood production, NTFP production and export earnings.

Production of logs from both natural forests and plantation forests in the second quarter of 2020 was 11.56 million cubic metres and this rose to 12.8 million cubic metres in the second quarter of 2021. Processed wood production in the first quarter of 2021 increased by six percent compared to 2020 and in the second quarter it was the same as last year.

To accelerate the growth of the forestry sub-sector the government implemented several policies including relaxation of fiscal policy, acceleration of the implementation of the Job Creation Law and facilitation of financing for timber legality certification for MSMEs in forest products and community forest industries.

 

India’s decision on MDF dumping welcomed

Minister of Trade, Muhammad Lutfi, has expressed his appreciation of the India Government’s decision to reject the proposed anti-dumping import duty on imports of plain medium density fibreboard with a thickness of less than six mm from Indonesia.

The Indian Directorate General of Trade Remedies (DGTR) had considered a US$22.47-258.42/cubic metre duty on Indonesian MDF products after it determined that there were material losses in the Indian MDF Board domestic industry.

Based on data from the Central Statistics Agency, Indonesia's MDF exports to India slowed over the past five years. The highest export of the Indonesian MDF to India was in 2016 when shipments were worth US$8 million, this drooped to a little over US$2 million in 2020.

 

Opportunities for greater trade with the UK

Indonesia can intensify trade relations with the UK by improving the ease of doing business (EODB) and reducing trade barriers according to the Head of the Research Center for Indonesian Policy Studies (CIPS), Felippa Ann Amanta.

In a press release, Amanta said that opportunities exist for better trade relations between Indonesia and the UK through the Developing Country Trading Scheme (DCTS) and the Joint Economic and Trade Committee (JETCO) that was mutually agreed upon.

The Developing Countries Trade Scheme or DCTS recently launched by the UK after Brexit, boosts the prospects of Indonesia, which had inked the JETCO with the UK, to bolster trade between both nations.

Citing the Trade Ministry’s data, Amanta pointed to the low level of trade between Indonesia and the UK which was only US$2.2 billion in 2020. Amanta believes that Indonesia had huge opportunities to export a wide range of products to the UK.

 

Myanmar

Exports of wood products suspended

The government procedures for monitoring exports of wood products were suspended by Forest Department after the government announced the closure of government departments from in response to the recent surge in corona infections across the country. 

The result of this action is that timber exports are stalled. The Myanma Timber Enterprise has not resumed the tender sale of logs.

The Myanmar Port Authority (MPA) issued a statement saying port operations will continue handling incoming international shipments.

 

Political turmoil and third wave of Covid-19 severely impacting the economy

Mariam Sherman, World Bank Country Director for Myanmar, Cambodia and Lao PDR said in a statement “The loss of jobs and income and heightened health and food security risks are compounding the welfare challenges faced by the poorest and most vulnerable, including those that were already hit hardest by the pandemic last year,”

The statement continues “Myanmar’s ongoing political turmoil and a rapidly-rising third wave of Covid-19 cases are severely impacting an economy that had already been weakened by the pandemic in 2020.

The economy is expected to contract around 18 percent in Myanmar’s 2021 Fiscal Year (October 2020 to September 2021) with damaging implications for lives, livelihoods, poverty and future growth, according to the latest World Bank’s Myanmar Economic Monitor.

An 18 percent contraction, coming on top of weak growth in FY2020, would mean that the country’s economy is around 30 percent smaller than it would have been in the absence of Covid-19 and the military takeover of February 2021”.

 

India

Inflation heats up

The Ministry of Commerce and Industry has reported the official Wholesale Price Index (WPI) for ‘All Commodities’ (Base: 2011-12=100) for June increased to 133.5 from 132.7 in May 2021.

The annual rate of inflation, based on the monthly WPI was, year-on-year, 12.07 percent in June 2021. The higher rate of inflation in June was primarily due to effect of a low year-on-year base prices.

The index for manufactured products accounts for 64 percent of the index increased. Out of the 22 groups of manufactured products tracked 11 groups saw price increases with eight seeing declines. 

The balance remained unchanged. Price increases were recorded for wood and of products of wood and cork, but a price decline was reported for veneers.

 

Home sales remain sluggish

Home sales in the second quarter (April to June 2021) fell sharply as potential buyers delayed investments. Sales in Delhi NCR, Mumbai, Bangalore and Pune were especially badly hit.

Overall, sales were down over 50 percent compared to the previous quarter and it was in the Tier II and III cities that the steepest declines were seen.

However, enquiries from potential buyers improved in June as the rate of corona infections dropped allowing some lock-down measures to be lifted. Analysts anticipate a higher rate of sales in the three months after June supported by stable interest rates and subsidies on stamp duty and registration charges.

Building companies have been kept afloat during the pandemic by government initiatives in loan restructuring and tax rebates. This support has helped builders complete ongoing projects but with an unsold housing stock and weak demand house prices are under pressure.

 

Tree planting festival

Every year in the first week of July a week-long celebration, Van Mahotsav, is observed. One event is the planting of tree saplings and the Union Environment Minister, Prakash Javadekar, urged people to plant more and more trees to create a healthy environment.

Van Mahotsav, was first launced by a botanist who organised the first Indian national tree plantation week in 1947. In 1950, the plantation drive was declared as a national activity by the then Minister of Food and Agriculture Kanaiyalal Maneklal Munshi. Later in the same year, Munshi moved the event to the first week of July and renamed it Van Mahotsav.

Deforestation in the country has led to a 16 percent loss in forest cover over the last decade and Van Mahotsav plays a crucial role in raising public awareness.

 

Record exports

Data from the Ministry of Commerce indicates that Indian exports have gradually grown after the first wave of the Covid-19 disrupted global trade. 

Exports reached a record high of US$35.2 billion in July this year, the highest monthly figure in the country’s history. July 2021 exports increased of 48 percent compared to July 2020 and by over 30 percent compared to pre-pandemic July 2019.

Strong export demand has boosted domestic production and the economy is showing signs of recovery. The recovery in manufacturing has resulted in rising demand for labour which is a welcome development after the massive job losses during the second wave of the Covid-19 pandemic.

 

Vietnam

Punitive tariffs avoided

The Office of the US Trade Representative has said it had determined that no tariff action against Vietnam was warranted after its Central Bank agreed with the US Treasury not to manipulate its currency for an export advantage.

The statement reads: “The Office of the United States Trade Representative today issued a formal determination in the Vietnam Currency Section 301 investigation reflecting the agreement reached earlier this week between the Department of the Treasury and the State Bank of Vietnam.

The determination finds that the Treasury-SBV agreement provides a satisfactory resolution of the matter subject to investigation and accordingly that no trade action is warranted at this time. USTR, in coordination with Treasury, will monitor Vietnam’s implementation going forward.

 

Brazil, the largest supplier of eucalypts to Vietnam

In June 2021 Vietnam's eucalypts imports were estimated at 25,200 cubic metres worth US$5 million, down 0.8 percent in volume and 0.4 percent in value compared to May 2021.

However, compared to June 2020 imports were three times higher. In the first six months of 2021 imports of wood of this species reached 137,800 cubic metres worth US$29.2 million, up 99 percent in volume and 96 percent in value over the same period in 2020.

Eucalypt import from all sources in the first five months of this year accounted for around 58 percent of total timber imports by volume.

Brazil topped the list of eucalypt suppliers by shipping to Vietnam 39,700 cu.m worth US$10.6 million, up 58 percent in volume and 52 percent in value over the same period in 2020.

 

Value of eucalypts imports 2019-2021

According to Vietnam’s General Department of Customs, Vietnam's eucalypts imports in the first five months of 2021 reached 112,600 cubic metres worth US$24.2 million, up 77 percent in volume and 75 percent in value over the same period in 2020.

 

Eucalypts products

In the first five months of 2021 imports of eucalypts logs reached 79,100 cubic metre worth US$13 million, up 80 percent in volume and 86 percent in value over the same period in 2020.

Imports of eucalypts sawnwood reached 33,253 cubic metre, worth US$11.1 million, up 753 percent in volume and 68 percent in value over the same period in 2020.

 

Imports from Southeast Asia on rise

According to Vietnam’s General Department of Customs imports of wood products from Southeast Asian countries in May 2021 reached 74,500 cubic metres with a value of US$25.79 million, down 29 percent in volume and 21 percent in value compared to April 2021, but up almost 100 percent in volume and 186 percent in value over the same period in 2020.

In the first five months of 2021, imports of wood products from Southeast Asia reached 452,200 cubic metres valued at US$135.65 million a year-on-year rise in volume and value.

 

Key suppliers in Southeast Asia

In the first five months of 2021, imports of wood from Thailand reached 280,550 cubic metres with a value of US$63.75 million, up 79 percent in volume and 101 percent in value over the same period in 2020.

Wood products imported from Thailand are mainly fibreboard and particleboard, accounting for 98 percent of the total imports. In the first five months of 2021, imports of fibreboard from Thailand increased by 90 percent in volume and 107 percent in value over the same period in 2020 while imports of particleboard increased by 50 percent in volume and 83 percent in value.

In the first five months of 2021, imports of wood products from Laos reached 64,5500 cubic metres with a value of US$38.42 million, up 85 percent in volume and 89 percent in value over the same period in 2020.

Around 80 percent of the total wood products imported from Laos in the first five months of 2021 was sawnwood and totalled 53,7400 cubic metres with a value of US$36.38 million, up 93 percent in volume and 88 percent in value over the same period in 2020.

In the first five months of 2021, imports of wood products from Malaysia reached 55,3800 at a value of US$16.76 million, up 7.8 percent in volume and 35 percent in value over thesame period in 2020.

Particleboard remained the main imported wood product from Malaysia in the first five months of 2021, reaching 34,070 cubic metres with a value of US$8.85 million, up 29.7 percent in volume and 63.4 percent in value over the same period in 2020.

In the first five months of 2021, imports of logs from Malaysia dropped by half in volume and by half in value.

On the other hand, imports of sawnwood increased by 161 percent in volume and 10 percent in value, reaching 17,680 cubic metres with a value of US$6.93 million.

 

Shipping delays as port operations slow

Shipping companies are warning that Vietnam will face a shortage of containers in the coming weeks because of disrupted schedules for ships returning to Asia, trucking delays and factory closures. 

It has been reported that shippers moving products out of the Cat Lai and Cai Mep ports in Ho Chi Minh City are seeing delays of two to five days.

The Cat Lai Terminal is heavily congested and Saigon New Port Corporation said it has stopped taking in refrigerated cargoes because of delayed loading. Shipping companies have suggested exporters ship through ports such as Tan Cang Hiep Phuoc in HCMC and Tan Cang-Cai Mep and Tan Cang-Cai Mep Thi Vai in the neighbouring province of Ba Ria-Vung Tau.

 

Vietnam wood and wood product export and import update

Exports of wood and wood products in July 2021 reached US$1.33 billion, up 17 percent compared to July 2020. 

In the first seven months of 2021, exports of wood and wood products reached US$9.58 billion, up 55 percent over the same period in 2020. In particular, exports of manufactured products reached US$7.45 billion, up 64 percent over the same period in 2020.

Imports of wood and wood products in July 2021 reached US$282.7 million up 35 percent compared to July 2020. In the first seven months of 2021, imports of wood and wood products reached US$1.83 billion, up 40 percent over the same period in 2020.

Exports to the Japanese market in July 2021 reached US$128.9 million, up 26 percent compared to July 2020 and in the first 7 months of 2021 exports to Japan reached US$834.7 million, up 19 percent over the same period in 2020.

Exports of bedroom furniture in July 2021 are estimated at US$196 million, little changed from July 2020, but in the first seven months of 2021, exports of bedroom furniture were around US$1.4 billion, up 47 percent year-on-year.

According to preliminary statistics from Customs, Vietnam's imports of wood raw materials in July 2021 reached 25,900 cubic metres, worth US$8.9 million, up eight percent in volume and three percent in value compared to July 2020. 

In the first seven months of 2021, imports of wood raw materials reached 168,300 cubic metres, worth US$ 62.8 million, up eight percent in volume and six percent in value over the same period in 2020.

In the first six months of 2021, imports of wood raw materials from the US reached 374,610 cubic metres, worth US$153.72 million, down 14 percent in volume, but up two percent in value over the same period in 2020.

 

Timber enterprises implementing '3 on-site' ask for public understanding

The South-East of Vietnam, including Binh Duong, Dong Nai and Ho Chi Minh City together contribute over 70 percent of Vietnam’s total value of wood and wood product exports.

To avoid production disruption during the current lockdown covering southern Vietnam, many wood processing factories have asked for permission to implement the model of ‘3-on-site’ which means on-site production, on-site dining and on-site overnight. 

They have also asked for permission to operate a ‘1 road, 2 places’ operations. Both production models aim to avoid the spread of coronavirus among workers.

For the ‘1 road, 2 places’ arrangement entrepreneurs must ensure isolated production and residences in two separate locations, with a single transport route for workers to commute.

This pandemic production model has been functioning for a while at small companies (less than 500 workers).

However, the system has not been a total success for some larger companies.

Wood processing enterprises which have been implementing the ‘3 on-site’ model in the provinces of Bình Định, Bình Dương and Đồng Nai have detected clusters of Covid-19 cases but are asking that the production model be allowed to continue.

The latest survey from the Bình Dương Furniture Association (BIFA) showed that among 100 wood enterprises which have been operating the ‘3 on-site’ model, 71 have ensured operations while 29 have been unable to avoid infection clusters.

Similarly, 60 percent of the 50 companies surveyed in Dồng Nai Province said they have suspended operations because their workers have been infected. Another 30 percent of companies have been operating in an effort to fulfil contracts.

The ‘3 on-site’ model, which involves on-site production, dining and rest, has received an enthusiastic response from workers as it has helped  maintain their incomes as well as support production and the business.

Lê Xuân Tân, Director of Happy Furniture in Đồng Nai Province, said his company participated in deploying the ‘3 on-site’ model under extremely strict controls from production to accommodation.

Frequent Covid-19 tests are carried out.

Though admitting ‘3 on-site’ is quite a costly operational model, Tân said the factory’s closure would impact production and supply chains and mean workers would lose their jobs.

 

China

First half 2021 real estate development

A press release from the National Bureau of Statistics reports real estate growth and sales in the first six months of 2021. 

Between January and June, investment in all categories of real estate increased 15 percent year-on-year, higher than in the same period in 2019. Investment in residential properties increased 17 percent in the first half of 2021.

The pace of investment has slowed every month this year as the government is trying to take some heat out of the market by tightening mortgage practices. One consequence of this is that loan approvals are taking much longer now compared to the early months of the year.

Between January and June this year, land purchased by developers was down almost 12 percent year-on-year.

A further press release from the National Bureau of Statistics reports retail sales in the first half 2021 jumped 23 percent. Sales of building and decoration materials (builders’ woodwork) rose around 33 percent in the first half while sales of furniture rose 30 percent.

Retail consumption contributed almost 62 percent to China‘s GDP in the first half of 2021, just above pre-pandemic levels. Online sales, which have been boosted by lockdowns and social distancing restrictions, also grew year-on-year. 

China's economy grew slightly more slowly than expected in the second quarter, weighed down by higher raw material costs and new Covid-19 outbreaks.

 

GGSC-CN Index Report (June 2021)

The Global Green Supply Chain (GGSC) for forest product is a global platform voluntarily established by enterprises, research institutes, industry associations, international organisations and others to implement “an initiative to build a collaborative network for a global green supply chain for forest products”. 

The GGSC-CN reports on sentiment among participating enterprises in China.

In June 2021, China's PMI index declined to 50.9. The index has remained above 50 for four consecutive months indicating that the economy continues to recover. In June, the wood production and manufacturing industry maintained a good momentum. 

Wood production continued steadily, domestic demand remained stable, However, the price of raw materials accelerated, inventory continued to decline and cost pressure increased.

The GGSC-CN comprehensive index for June registered 53.3 (55.0 for last June and 45.7 for June 2019). The index has been above 50 for four consecutive months indicating operations of the enterprises represented by GGSC-CN index continues to expand.

 

The GGSC enterprises reported the following challenges:

•Hard to get stable supply of solid wood raw materials and rising prices of raw materials

•Difficult to purchase wood

•The raw materials for rubber manufacturing increased greatly, resulting in the increase of enterprise costs

•During the rainy season and off-season of timber purchase in Guangdong Province, the quantity of timber is less than before.

 

Products in short supply:

Black walnut, poplar logs, okan, red oak, flooring substrate

 

Commodity of which the price has increased:

Teak, black walnut, fibreboard, okan, taun,veneer, melamine, formaldehyde, urea, hardware

 

Commodity for which the price has declined:

Steel products

 

In June 2021, four out of five sub-indices of the GGSC-CN fell and one was unchanged. The production index registered 61.1, a decline from the previous month but remained above 50. 

The new order index registered 55.5 percent, a drop from the previous month but still reflecting the ability of enterprises to secure orders.

The new export order index reflecting international trade registered 50 percent, a large increase of 20 points from the previous month showing orders from abroad increased in June.

The main raw material inventory index registered 38.9, a decline of 11 points from the previous month.

The employment index registered 50 a sharp drop from the previous month. The supplier delivery time index was 50, same as the previous month.

 

Centre for upgrading wood products for international markets

It has been reported that the Ministry of Commerce has established a national demonstration centre for transformation and upgrading of wood products for international markets.

The new centre is in Mulin City one of main timber production and distribution areas in Heilongjiang Province. 

Forest cover in Heilongjiang Province is 62 percent of the total area and has an estimated stocking of 220 million cubic metres. In addition to local resources timber is sourced in Russia with around one to twp million cubic metres imported annually.

Mulin City is an important base for imported timber processing and exporting. The National Quality Supervision and Inspection Center for Furniture and Wood Products effectively promotes trade from Heilongjiang with Russia and Europe. 

The industry has adopted a ‘two resources and two markets’ strategy for the wood products processing and industries in the city.

 

Guangxi forest tenure exchange transactions surge

The Guangxi Forest Tenure Exchange Center was launched in 2016 and since its transaction value has exceeded RMB13 billion currently. 

In the first half of 2021, the exchange saw transactions rise to RMB2.4 billion, 89 percent over the same period of 2020.

At present, Guangxi Forest Tenure Trading Center has a total of 123 state-owned forest farms and 55 forestry enterprises and its business covers Guangdong, Yunnan, Fujian and Shandong provinces. 

In the past five years, the trading centre has increased sales revenue of RMB647 million for the transaction participants, saved the purchase cost of RMB133 million and effectively promoted the development of forestry industries.

In March 2021, a China-ASEAN wood trading platform was officially established to improve the upstream and downstream supply chain in Guangxi Province and other parts of the country.

In the next five years, Guangxi Forest Tenure Trading Center will shift from single variety trading to many commodities trading and build a RMB100-billion-level China-ASEAN commodity trading platform.

 

Europe

European plywood market lucrative, but challenging

At the time of writing, the 63,200-tonne dwt Konya was unloading its cargo of plywood and other wood products at the UK port of Tilbury. 

It was the first timber breakbulk vessel out of Port Klang, Malaysia to London in years and a sign of the times.

Some European plywood importers report that container costs out of Asia have started to come off their pandemic peak. Others, however, say that they are still being quoted charges which one described as ‘unreal’. 

“We’ve recently been offered rates for a 40ft container of US$15,000 to US$20,000,” they said. “That compares with US$1,500 to US$2,000 in October 2020. It’s crazy.”

Even those who report some softening in container rates confirm they remain at historically high levels, hence widespread migration to breakbulk.

The unprecedented inflation in container charges is principally attributed to the impact of the pandemic on trading patterns, which has left containers in the wrong places, with major quantities stacked empty at ports in consumer countries.

“Changes in consumption and shopping patterns triggered by the pandemic, including a surge in electronic commerce, as well as lockdown measures, have led to increased import demand for manufactured consumer goods, a large part of which is moved in shipping containers,” stated a briefing note on the situation from UNCTAD. “Carriers, ports and shippers were all taken by surprise. Empty boxes were left in places where they were not needed, and repositioning was not planned for.”

As the global economy more generally revived when lockdown restrictions eased, exporters in producer countries, notably in Asia, found themselves increasingly short of containers and prices rose accordingly. 

“There’s also clearly been an element of profiteering at some shipping lines,” said a plywood importer. “The fact some are quoting container rates at half the value of the plywood contents is not all down to availability.”

Importers also point out that breakbulk is not a straightforward alternative, particularly for those who have not used it before. It involves more administration, the risk of penalties if cargoes are not at port on time or in the volumes booked and greater likelihood of product damage in transit. 

While considerably cheaper than container freight, it has also become more expensive.

“Breakbulk operators are seeing an opportunity to make money and their rates have roughly doubled in the last six months,” said an importer distributor.

At the same time, production in many parts of the world remains constrained by lack of personnel due to Covid-19 infection or isolation, plus pandemic safe work practices.

Raw material supply is also cited as an issue for some manufacturers. Product prices have consequently continued to climb.

Some European importers expected plywood demand to ease somewhat over the summer season. But, with tourism still depressed by the pandemic, others say they’re not expecting to see the usual degree of holiday slowdown. 

The general consensus is that for the time being consumption remains on an upward curve. The European DIY and home improvement market is cited as a key plywood demand driver, as it has been since summer 2020.

“While pandemic controls are being relaxed, large numbers of people are still working from home at least part of the time, and that’s expected to be a permanent state of affairs for many.  As a result, they’re spending more on improving and enlarging their properties. Loft conversions and garden office building are at record levels,” said a UK-based importer.

“Spending on holidays, which was absolutely decimated in 2020, also continues to be depressed this year, leaving more funds for investing in homes and gardens. The UK Construction Products Association stated that in normal times UK holiday expenditure alone exceeds £60 billion a year. So there’s a lot of surplus money around.”

Demand from new build is also reported to be looking increasingly healthy, not least due to fiscal support from governments which see construction as a key engine of economic recovery. 

This is borne out by the June report from Euroconstruct. It says that European construction recovery is faster than expected and much of the loss in output due to the pandemic is expected to be recovered in 2021. 

It forecasts average building growth in the 19 Euroconstruct countries this year to be 3.8 percent, following last year’s 5.8 percent contraction.

While recovery rates will vary from country to country, with Ireland and Hungary expected to show some further decline in 2021, this puts the industry overall on track to reach pre-crisis levels of activity in 2022 latest.

Besides construction, importers also report good growth in demand from joinery, furniture manufacture, packaging and boat building. “It’s pretty much across the board,” said one.

So far, the import sector reports little market push back on price. “It can’t last forever, and if we’re not seeing some more significant price easing in two or three months, there may be more resistance, especially if there’s any degree of economic slowdown,” said one importer. “So far though, customers accept that this is a market-wide phenomenon. They’re doing good business, so they’re willing to pay.”

Despite logistical difficulties, added to which are longer manufacturing lead times, most importers are reported to be ‘well covered for purchases’ over coming months.

“But stocks on the ground are still very short, there’s little in the way of a product buffer,” said an importer. “Whatever comes in is delivered immediately. Nobody is saying, why don’t you hold on to our shipment and we’ll take it in four to six weeks. Customers are waiting for vessels to arrive to receive their cargoes. They want it straight away.”

In terms of source of supply, China is reported to be keeping up with demand, albeit with longer lead times, but prices have been rising increasingly steeply.

“In the first quarter increases were moderate, but in Q2 we’ve seen rises of 15-20% F.O.B.,” said an importer. “Compared to Brazilian, that’s not too bad, but when you factor in freight rates it makes quite a difference.” 

Chinese producers are also reported to have become increasingly assertive.

“Some are trying to renegotiate outstanding contracts,” said an importer. “For orders placed April/May they’re maybe asking for another US$15-20 per cube.

They say they’re facing rising costs for raw materials, including glues, logs and veneer.

If you don’t pay, you risk the plywood not being produced and, if you’ve booked the breakbulk ship space, you then risk incurring dead freight and demurrage charges from the shipping line.” 

Chinese ports are also reported to be congested with breakbulk vessels and shipping lines are asking for surcharges to cover added waiting times.

Brazilian price inflation is attributed primarily to the combination of the impact on manufacturing of the severe Covid-19 situation in the country, plus huge demand from the US construction market.

“For standard 18-20mm elliottis plywood we were paying US$250-300/cubic metre last October/November. Lately the asking price from Brazil has been US$500-600/cubic metre. Basically they’ve doubled up,” said an importer. “Unless they desperately needed a specific product, European importers more or less stopped buying Brazilian in March/April this year when prices reached this level. ”

Despite these shipping problems, the US remains a booming market, the government is injecting more money into the economy and, even at recent high price levels, Brazilian plywood remains the cheapest Americans can get for the quality.” 

Brazilian prices are in turn said to be helping push up Chinese.

Russian birch plywood supply is reported as tight, sold until September, and prices have also reached new heights. 

“Yesterday we were asked to pay £62 per board for 18mm. At the start of last year pre-pandemic it was £17,” said a UK importer.

Adding a further market challenge is the preliminary antidumping duty imposed on Russian plywood by the EU on June 15. This has been set at 16 percent delivered at Place (DAP) and will remain in place until December, when the EU will decide on the rate going forward.

Looking further ahead, some European importers anticipate Russia’s log export ban, set to come into force in the New Year, having plywood market repercussions.

“It shouldn’t affect production in Europe unduly, as its Russian birch log imports are limited,” said an importer. “But China imports huge volumes of logs from Russia in all species, including birch. So unless the two strike a bilateral deal, Chinese manufacturers may face a raw materials challenge and we could see further pressure on their production and prices.”

The option of plywood importers buying European product rather than expensive imports from elsewhere has been limited by manufacturers’ capacity. “European prices have also been rising,” said an importer-distributor. “We’ve bought a little Polish recently, but pricewise, they’ve also followed the international trend.”

An added issue for UK businesses has been fallout from Brexit. They report increased transport costs from mainland Europe, with haulage companies upping rates to offset the increased time taken by new port and customs procedures.

There are issues too trading with Northern Ireland and Ireland. Under the UK’s EU exit deal, Northern Ireland remains in the EU single market. That means plywood and other timber products from the British mainland imported into Northern Ireland have to undergo EU Timber Regulation due diligence.

“Also if we ship goods to Northern Ireland for transit to Ireland, they incur further duty, even if we’ve paid duty on them entering the British mainland,” said a plywood company with sites in England and Northern Ireland. “There are ways around this, but it really isn’t a satisfactory arrangement.”

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