Bearish sentiment in Japan caps log prices

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ITTO's Tropical Timber Market Report
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Prices for Malaysian logs moved up marginally in September but the underlying demand was not strong enough to sustain them. Currently, prices remain largely unchanged. Sentiment in the Japanese industry and in Malaysia is bearish, says the Japan Lumber Reports (JLR).

Importers in India, big buyers of Malaysian logs, are unable to live with the previous high prices, particularly as the rupee has depreciated significantly and rapidly. Indian buyers are reportedly looking for lower FOB prices. The other major market for logs is China where buyers are quiet.

Weak demand for super-small meranti and MLH logs
The rainy season will soon begin in Sarawak and the question is when will it actually cause a slow down of harvesting opeations. Normally the rain intensifies in December but so far, says the JLR, the slight rain so far has not hampered extraction and transportation. Malaysian plywood mills are reportedly not chasing logs supplies as the plywood market is dull. As a result some log types such as super small Meranti and MLH are moving very slowly.

Sarawak meranti regular logs for the Japanese market are priced between US$280-300 per cu.m., unchanged in two weeks. Some suppliers are pushing for US$330 per cu.m but the Japanese mills find it hard to pay that much unless the quality of the logs is extremely good. Meranti small log FOB prices are also flat at US$260-270 per cu.m while super small log prices are US$200-230, US$20 down from October.

The demand for tropical logs in Japan is rather limited consequently suppliers are facing an up-hill struggle even to maintain prices at current levels. The JLR reports that Japanese plywood mills have ample log stocks and as consumption is slow the mills are cautious about committing to additional supplies.

Kitanihon Plywood abandons restoration of damaged plymill
The Kitanihon plywood factory located in Ofunato which produced around 11,000 cu.m of plywood annually was badly damaged by the March tsunami. The company has now abandoned restoration efforts due to the high cost and the risk of another tsunami since the plant is close to the ocean. A total of 127 employees will loose their jobs.

The subsidiary company, Ofunato Plywood, which had been manufacturing tropical hardwood plywood, had also stopped operation in May with the loss of 50 jobs.

Domestic forestry to get a boost from supplementary budget
A third supplementary budget was approved in late November reports the JLR. Japan’s Forestry Agency secured a budget of Yen 317.5 bil. far larger than the initial budget request of Yen 270 billion. The increase is due to a three year extension of the fund for revitalisation of the forests.

Funds are provided to subsidise the supply of domestic forest thinning for processing and use in the rehabilitation of quake damaged areas. Funds are also provided for the building of logging roads for more efficient harvesting. The JLR says additional works to be financed from the budget include, clarification of forest boundaries, provision of harvesting machines, subsidies for log extraction, assistance for construction of additional wood processing facilities and work to dispose of biomass from the quake hit areas.

The focus of the budget is restoration of quake damaged areas and as such the previous emphasis on promoting domestic wood use in public buildings and support for the wider use of domestic timber is not emphasised in this budget. The JLR reports that an amount of Yen 11.2 bil. is provided in the budget for restoration of damaged wood processing plants. Funds have also been allocated to investigate the extent of radiation contamination from the damaged Fukushima nuclear power plant and as well as for decontamination of the forest but, as yet, there appears to be no available technology for this.

Incentives aimed at stimulating housing demand
The budget for the Ministry of Land, Infrastructure and Transport contains elements aimed at stimulating demand for housing. A range of measures have been introduced including, making it easier for home buyers to secure a mortgage, support for energy efficient homes and extension of the housing ‘eco point’ system.

The ‘eco-point’ system will apply to energy saving units and also house building in the quake damaged areas. Accordingly, the scheme is now called ‘Restoration support and housing eco point system’. Points are earned by home owners when energy efficient materials and systems are used for building houses (e.g. double glazing, insulation and solar panels). A budget has been provided to support local contractors who build the so called ‘long life quality homes’. A subsidy is will be provided for houses if more than half of the timber used is certified.

Housing starts slipped in October as builders waited for reintroduction of subsidies
Total starts in October were 67,273 units, 5.8% less than the same month a year ago. This was the second lowest level of housing starts since October 2009. The JLR commented that house builders postponed startup as they anticipated the incentive measures introduced in the latest budget.

Owner units have fallen for two months and the starts for October were the second lowest for October. Units built for rent were the lowest for an October month. On the other hand, condominium starts were up but were less than 9,000 units. The only sector for which starts were unchanged was the detached built for sale homes. In the quake damaged areas of Iwate and Fukushima prefecture starts were down by more than 10% but starts in Miyagi prefecture increased.

JapanLog and Sawnwood Prices in Japan

Logs for Ply Manufacture, CIF
Meranti (Hill, Sarawak)
Yen per Koku
(koku=0.278 m3)
Medium Mixed
8,300
Standard Mixed
8,400
Small Log (SM60%, SSM40%)  
7,700
Taun, Calophyllum, others (PNG) 6,800 
Mixed light hardwood, G3/4 grade (PNG) -
Keruing MQ & up (Sarawak) 12,000
Kapur MQ & up (Sarawak) 11,000
Logs for Sawmilling, CIF Yen per Koku
Melapi (Sarawak) High Select 13,000
Agathis (Sarawak) High Select -
Lumber, FOB Yen per m3
White Seraya (Sabah) 24x150mm, 4m, Grade 1 155,000
Mixed Seraya, Sangi 24x48mm, 1.8-4m, S2S 58,000


Wholesale Prices (Tokyo)

Indonesian & Malaysian Plywood Size (mm)
Nov
 Dec
(¥ per sheet)
2.4mm (thin plywood, F 4star, type 2 ) 920 X 1830 370
370
3.7mm (med. Thickness, F 4star, type1) 910 X 1820
540
540
5.2mm (med. Thickness, F 4star, type 1) 910 X 1820
630
630
12mm for foundation (F 4star, special) 910 X 1820
1120
1120
12mm concrete-form ply (JAS) 900 X 1800
970
970
12m coated concrete-form ply (JAS) 900 X 1800
1100
1100
11.5mm flooring board 945 X 1840
1450
1420
3.6mm baseboard for overlays (OVL) 1230 X 2440
990
990
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