Global Trends Review, June 03-09, 2013: surging lumber prices in Japan; growing export wood trade in early 2013; further shift of board & paper capacities

To stop long lasting deflation, Japanese government took monetary easing policy, which depreciated yen’s exchange rate sharply in short time, ITTO reported. The yen/dollar rate was 78 last autumn, now it plunged to 102. Also the yen depreciated to the Euro by about 25%. Wood industry is facing inflation of imported wood materials by weakening yen. Not only wood products but cost of other materials like adhesive for plywood and laminated lumber and fuel cost of transportation is climbing.

Whitewood laminated post prices are now 2,050 yen per piece delivered and redwood laminated beam prices are 62,000 yen per m3. The focus is climbing cost of European lamina, which pushes manufacturing cost of laminated lumber by domestic laminated lumber mills.

Prices of Canadian SPF dimension lumber (2×4-8) for the second quarter are about $610 per thousand board feet C&F, 37% higher than the same quarter last year. With exchange rate of 102 yen, it would cost about 46,000 yen while current market prices are about 45,000 yen per m3 FOB truck port yard.

Second quarter prices of Douglas fir baby square are about $510 per m3 C&F, which costs about 52,000 yen then May prices are about $550. With exchange rate of 102 yen, the cost would be over 60,000 yen. Current wholesale prices have gone up to 57,000 yen but further hike is necessary. If the prices go up over 60,000 yen, there will be competition with domestic cypress square.

Since log supply shortage in South East Asian countries is critical, export prices seem to go up more. Domestic softwood plywood manufacturers’ cost depends on how much imported materials mills use. Domestic cedar is becoming the main materials but some mills still use North American Douglas fir and Russian larch logs, which cost is higher by weak yen.

North American log export prices have been escalating by active housing starts in the US so that the lumber prices in Japan have been going up. Chugoku Lumber, the largest Douglas fir lumber manufacturer has raised the prices three times successively since last February but increase of export log prices and depreciation of the yen continue so that it has to increase the prices further. With busy demand, however, buyers have to accept higher prices.

Russian lumber prices were high even without exchange rate of weak yen. Russian-made red pine taruki (30×40 mm) prices shot up to 63,000 yen per m3 FOB truck port yard and domestic mills’ product prices are 68,000 yen delivered. They are about 10,000 yen higher compared to beginning of the year.

China increased Chilean lumber imports

The average price of logs in China in 2012 was 757 Yuan/m3, the same level as in 2011. The average lumber price was 1213 Yuan/m3 (+6%), wood chips price – 716 Yuan/m3 (-17%). Wooden flooring was priced at 158 Yuan/m2 (+20%), plywood – at 1868 Yuan/m3 (-9%), MDF – at 1505 Yuan/m3 (-11%), particleboard – at 1103 Yuan/m3 (+3%).

Importation of logs and lumber to China were up in the first four months of 2013 after a reduction in wood demand (especially softwood logs) during 2012, reports WRI’s Wood Resource Quarterly. The total value of North American imports was up 30% from 2012. The biggest changes in log and lumber imports between 2011 and 2012 were the sharp decline of Russian log volumes crossing the Chinese border and the reduced lumber shipments from the US to Chinese ports.

During the first four months of 2013, import volumes of both logs and lumber picked up and were 12% and 19% higher, respectively, than in the 1Q/12. The housing sector, a major consumer of imported lumber, has been strong in early 2013, and prices for new houses in 70 cities rose on average by over 4% in April.

North America is a major supplier of softwood products to China, with the market share for lumber and logs in the 1Q/13, accounting for 51% and 23%, respectively.

New Zealand’s log-exporting companies continue to expand their presence in China. In 2012, New Zealand was the only country that expanded shipments when total Chinese log imports fell by 15%.

The biggest change in the Chinese buyers’ sourcing of lumber has been the doubling of importation from Chile and the almost tripling in shipments from Sweden and Finland. Although these three countries still account for less than 10% of all imports, it is likely that their presence in China will expand in the coming years.

Wood export trade growing

US imports of softwood lumber in January-March 2013 stayed at of 6.093 million m3, representing a year-on-year rise of roughly 16%, while the value boosted by 53% to $1.105 billion, which shows the surge in lumber prices in Q1 in North America.

Exports of wood products from Brazil in April 2013 increased 13.6% year-on-year to $217.4 million. Pine sawnwood exports fell 12.5% in value to $14.0 million or by 11.9% in volume to 64,400 m3. Pine plywood exports increased by a substantial 20.9% in value to $36.4 million. The volume of exports also rose 24.9% to 95,900 m3.

The German building-industry associations ZDB forecasts year-on-year growth in turnover of 2% to €94.49 billion for 2013 in the German building industry, including 3.5% in residential building and 1-1.5% in commercial and public building. However, it remains to be seen whether these levels of growth can be realised in view of a weak trend in the first three months. Weather-driven delays in the first quarter caused a more significant decline in production than had been seen in preceding years.

Egger said it was cautiously optimistic for 2013/2014, with stable market development in German-speaking countries and Eastern Europe, and a slight increase in business in the UK, according to TTJ. The company is confidently investing in its factories. Egger’s turnover in the last financial year ended April was €2.2 billion, up 10% on the previous year. “Despite the crises in some European countries and the problematic shortage of wood resources we could conclude a gratifying fiscal year,” said Ulrich Bühler, Egger Group’s head of sales and marketing. Egger has sought to mitigate the effects of resource scarcity and raw material price increases by having its own forest management companies, operating biomass power plants and owning glue production facilities, as said in the report.

In the meantime, Noritec is preparing for start-up of a new cross-laminated timber plant with a capacity of around 30,000 m3 at its Stall mill, EUWID Wood announced. The firm is part of the Austrian group Hasslacher Holding. The company replaces existing cross-laminated timber plant, which has a capacity of 18,000 m3 per year.

Pulp & paper: further shift of capacities

Stora Enso and Pakistani company Packages Ltd. (said to be the largest packaging and board producer and converter in Pakistan) have completed the process of establishing a joint venture called Bulleh Shah Packaging, as announced in September 2012. The joint venture will to a large extent provide packaging products to key local and international customers in the fast-growing Pakistani market. The new company is to manufacture corrugated case material as well as consumer board such as folding boxboard and liquid packaging board. Stora Enso said that annual production capacity of paperboard will amount to 360,000 t. A total of $135 million are planned to be invested in the construction of a biomass power plant and the rebuild of current board machines, amongst others.

The Mondi Neusiedler fine paper mills in Austria have been making losses for years. Now, the company aims to regain profitability, as reported by EUWID Paper. Negotiations with employee representatives have been initiated. Mondi Group will carry out restructuring measures at the paper mills of Mondi Neusiedler Theresiental and Kematen in Austria. Neusiedler will mainly focus on the production of premium products in the future and relocate production of B- and C-grade copy paper to other Mondi sites. The two mills, which became part of the Mondi Group in 2002, employ almost 700 people and produce a total of 380,000 t of uncoated woodfree paper. Mondi last reduced its uncoated woodfree capacity in 2008 when it closed its Szolnok mill in Hungary. The site had a capacity of 140,000 t and was one of Europe’s most cost-intensive production sites.

Lecta company announced a price increase in its one- and two-side CWF papers. It will be implemented in the paper deliveries from early July. Taking in consideration the manufacturing cost levels and the rising input costs the price increase is inevitable, the company says. Lecta is the second largest European coated woodfree paper-manufacturing group, made up of Condat (France), Cartiere del Garda (Italy) and Torraspapel (Spain).

Prepared using corporate press releases, Timber Trades Journal, ITTO, Wood Resources International, EUWID Wood, and EUWID Paper.