Global Trends Review, May 13-19, 2013: OSB demand in China predicted to grow; new board capacities to appear in China and India

In the latest contracts concluded with buyers in East Asia, Baltic shippers have agreed increases of €25-30/m3 on the softwood lumber prices that applied in the first quarter, EUWID Wood reported. In North Africa, prices in the hitherto applicable contracts have only risen slightly for exchange-rate reasons. Lumber prices in new contracts in the UK have risen by up to €25/m3. The price increases there are also largely attributable to the rate of exchange. Price increases became necessary due to the increase in the strength of the euro against the pound. British buyers only put up little resistance to the mark-ups because Swedish shippers were also asking higher prices for deliveries in the second quarter.

Prices in Central Europe have gone up by an average of €10/m3 and have thus risen less conspicuously than in the UK and East Asia. According to information from Baltic sawmill representatives, the pressure that was still being exerted by competition from Swedish producers in particular in the first quarter has decreased because the prices for Swedish lumber have risen more sharply on average than those for Baltic rough products.

The Norwegian company Moelven is going to carry out extensive modernisation at five sawmills and further processing mills in Sweden and Norway during 2013. The company has recently ordered three tunnel driers for the Swedish sawmill in Valåsen from Valutec Group, which will replace the existing tunnel driers. The new driers have cumulative capacity of 140,000 m3 per year and will be commissioned in the autumn. Recently the company reported poor financial results for the first quarter of the year, as many other sawmillers in the Nordic countries.

International Forest Products (Interfor) has reached agreement in principle to acquire the assets of Keadle Lumber Enterprises, Inc. in Thomaston, Georgia. Keadle is a well-regarded producer of high quality southern yellow pine lumber and has been in business since 1947. The mill currently produces 80 million board feet (189,000 m3) on a one-shift basis. Interfor intends to increase the mill’s kiln capacity and add a second shift to the operation, as market conditions improve, bringing production to an annual rate of 160 million board feet (378,000 m3).

The value of total UK sawn and planed softwood imports was down by £15 million or 10.5% in the first two months of 2013, as TTJ said quoting Timber Trade Federation (TTF). Planed import values reduced by 19%, while sawn wood values dipped 5% on-year. Sweden saw its leading market share fall from 52% to 47%, Finland increased its share to 15%. Latvia also grew volumes. Ireland was fourth with an 8% market share. The TTF said the main reason for the dip in volumes was the 73,000 m3 reduction from Sweden. The value of whitewood imported was 13% lower than a year ago, while imported redwood values were lower by around 4%. Hardwood imports fell by nearly 20% during the period, though France’s market share shot up from 6% to 12%.

Raising consumer awareness will expand domestic demand for OSB, ITTO predicted. The first production line of oriented strand board in China was built as far as in 1985 with annual output of only 10,000 m3. In 2011, national annual output of OSB was around 400,000 m3. Many manufacturers in China are small now and produce as low as 20,000 cubic metres annually. The largest OSB maker is Hubei Baoyuan Wood Industry Co., Ltd with an annual output of 220,000 m3. OSB is mainly produced from species such as pine, poplar, birch and willow in the northeast of the country and from poplar in central and southern China. It is reported that there are 104 OSB manufacturers in China but the market for this grade is not well developed for a product which is new to end-users. Research of analysts and companies showed that consumers are unaware of this product because of lack of promotion.

Demand for birch plywood made in Russia and Eastern Europe held steady at the level reached at the end of March during April, EUWID said. However, demand has been just roughly in line with last year’s level during recent weeks. Businesses were unable to make up the sales shortfall that materialised in the first few weeks of the year and would find it hard to offset this factor, according to the majority of insiders. Raw plywood with a better-quality surface is currently more popular. CP/C and CP/CP-grade raw plywood is also selling well, if available. Demand for birch plywood filmed matt on both sides and birch plywood with a film/mesh surface has been weaker than the raw plywood business in the recent weeks.

EU imports of Russian plywood declined 9% to 756,000 m3 in 2012, ITTO reported. Russia’s share of all EU imports remained flat at 22% on-year, but increased slightly from 20% in 2009. The vast majority of EU imports from Russia now consist of birch plywood. Russian filmed birch plywood is an important competitor for Chinese filmed plywood in Europe. This product has also made inroads into traditional markets for some tropical hardwood products, particularly in continental Europe.

Due to concerns about EUTR legal liabilities, importers have become extremely wary of buying replacement volumes of both MLH plywood and poplar/bintangor plywood from China. At present, buyers in the UK, Belgium and the Netherlands are focusing on Chinese plywood composed of eucalyptus or poplar cores and certified tropical wood surface veneers. German buyers are now concentrating mainly on film coated poplar plywood from China. This year, Chinese mills capable of delivering FSC certified plywood have seen a noticeable increase in demand.

New board capacities to appear in China and India

One of the largest global containerboard producers, China’s Nine Dragons will launch six production lines over the next three years, including five production lines in China as well as an additional packaging paperboard production line in Vietnam with annual production capacity of 350,000 tonnes. Along with active expansion of overseas markets, such move is estimated to add more than two million tonnes to company’s production capacity.

The chief minister of Tamil Nadu state in India has announced the establishment of a Rs.12 billion ($218 million) project for the annual manufacture of 200,000 tonnes of multi-layer double coated packaging board. This new plant will be built in Tiruchi, India, by Tamil Nadu Newsprint and Papers Ltd. At present, around 40% of the demand for coated paper is met through imports. The new plant will produce high-end white liner boards for folding boxes, the fastest growing segment in the paper industry. Tamil Nadu Newsprint and Papers is producing 400,000 tonnes of printing and writing papers and has recently started a 600 tonnes per day cement plant using paper mill waste and fly ash as raw material.

Stora Enso is proceeding with its plans to reduce newsprint capacity by another 475,000 tonnes per year before the start of price negotiations for the second half of the year. The company has recently stopped production on two newsprint machines in Sweden, PM 2 at the Hylte mill and PM 11 at the Kvarnsveden mill. In February, Stora Enso announced it would permanently shut down the two machines during the second quarter due to continuing structural weakening of newsprint demand in Europe. According to Stora Enso, newsprint production on the 205,000 tpy PM 2 in Hylte has been closed down for good. In the case of the 270,00 tpy PM 11 in Kvarnsveden, the company explained it had halted production for the time being in what is said to be a market related stoppage.

Arctic Paper company reported 1Q net loss of PLN 6 million ($1.9 million). The net loss recorded in the first quarter of 2013 was due to decrease in sales profit margin on falling sales prices of paper and NBSK pulp, unfavourable EUR/SEK exchange rates levels and the increase of BHKP pulp prices, which had a negative impact on the mills’ results.

Brigl & Bergmeister, European producer of one-side coated papers for labels and flexible packaging, will implement a sales price increase of 5-7% depending on the grade for deliveries from July 1, 2013. This step is necessary to compensate for the extraordinarily high cost increases in raw materials, energy and freight. Despite very high capacity utilization, the margins of the industry have reached unacceptably low levels, the company said.

In the light of sustained increases in raw materials, Sappi Fine Paper Europe has also reviewed current margins for its Speciality paper products and is going to raise prices by 6% from July 1, 2013. The price increase will affect coated and uncoated flexpack paper, siliconising base papers and label papers.

Magazine paper producers in Germany are going to raise prices in the second half of the year. They are trying to pave the way for hikes by taking downtime. Further shutdowns appear inevitable amid the prevailing supply surplus and forecasts of another decline in demand, above all for LWC, as predicted by EUWID Paper.

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