KUCHING: Malaysian and Indonesian hardwood plywood are losing their shine and dominance in the Japanese market.
According to the Japan Lumber Reports (JLR), the most noticeable change is that imported plywood is no longer influential in the plywood market.
“Imported South Sea (tropical) hardwood plywood used to dominate the market but now even when monthly import volume is less than 200,000 cbm (cubic metres), there is no panic at all,” it said.
Japan Finance Ministry’s figures has shown that Japan’s imports of hardwood plywood from Malaysia, Indonesia and China fell to about 125,000 cbm in September 2019, down from 228,200 cbm in September 2018.
“The market share of domestic softwood plywood and imported plywood has reversed and domestic share is getting larger while supply of South Sea hardwood plywood became unstable due to log shortage. Plywood users rely more on stable supply of domestic plywood,” said JLR, a trade journal, which is published every two weeks and reproduced by International Tropical Timber Organisation (Itto) Tropical Timber Market Report (Nov 16-30, 2019).
JLR said the trend means a structural change of plywood market from imports to domestic supply as it is obvious that domestic plywood is leading the market.
“Because of environmental restriction and declining of forest resources, there is no possibility that supply of hardwood plywood from Malaysia and Indonesia would become competitive in price and qualities again like before.
“South Sea hardwood has been the most important material as composite floor base but due to insufficient supply and high prices, Japanese floor manufacturers have been forced to shift to using domestic softwood plywood,” it added.
The JLR said as the gap between suppliers’ export prices and the market prices of imported hardwood plywood is getting wider particularly since 2017, the Japanese importers suffered negative business for almost a year.
In first half of 2018, the market prices rose together with suppliers’ prices, so imported plywood was major factor for profits for some companies.
Then, the suppliers’ prices dropped and the market prices in Japan decreased much more than the suppliers’ price drop, so many importers suffered losses.
“In producing regions in Malaysia and Indonesia, production and shipment plan collapsed due to log supply shortage and resultant higher log prices.
“In Japan, warehouses near ports are jammed with imported plywood and many ports restricted accepting plywood cargo ships.
“Smooth import procedures were disrupted. While confusion lasted in ports, the market skidded and high cost inventories had to be disposed at lower prices, which resulted in huge losses for the importers.
“Initially, the price skid was supposed to stop around June but the bleak market continued during the summer months. This is nothing unusual and it happened cyclically before,” added JLR.
Plywood mills struggling with tight log supply
The report said as supplying plywood mills in Malaysia and Indonesia have been struggling with tight log supply and low orders from Japan, so the only thing they could do now is to curtail the production. One solution, suggested JLR, is for these mills to use planted timber species to manufacture plywood if the prices are competitive with Japanese cedar.
Japan Laminated Wood Flooring Manufacturing Association statistics have revealed that the percentage of domestic wood used for floor base in September 2019 is 36 percent, which is 10 points more than a year ago.
The association said the reason for shifting to domestic wood is because of increase in South Sea hardwood plywood and decline of the supply although the imported plywood has been used for floor base for many years in Japan with dimensional stability.
“To replace natural hardwood, plywood of planted species of falcate and eucalyptus increased for some time but after the demand increased, the price soared, so use of domestic softwood plywood rapidly increased due to price stability since 2014,” it added.
Planted timber species grow faster but they lack strength and the surface is soft, making them easily scratched.
“Up until 2000, South Sea hardwood plywood was the main material for floor base but then, the prices started climbing since 2006 and they shot up to US$700 per cbm C&F at one time, which triggered diversification of floor base materials.
“In 2007, Panasonic developed 100 percent particle floor base for the first time in Japan. Then in 2009, Daiken started marketing composite floor ‘Forest Hard’ which is the first domestic softwood plywood floor with MDF (medium density fibreboard),” it added.
In 2010, the association declared to pursue using domestic softwood plywood for floor base.
The report said major house builders changed the specifications to use domestic softwood plywood as floor base after the composite floor manufacturers raised the sales prices of their products following another round of price hike in South Sea hardwood plywood in late 2017.
“Right now, the main floor base in domestic softwood plywood is with MDF but there are a variety of other materials, such as hardboard with softwood plywood or planted wood plywood and hardboard. So, diversification is progressing to avoid risk of high cost and supply instability.
“Looking at development of new floor base by individual companies, everyone is now trying to increase use of domestic materials to avoid risk of exchange rate of imported materials and unstable supply,” it added.
On housing starts in Japan, the Itto report said Japan Land, Infrastructure, Transport and Tourism Ministry’s data showed that it dropped seven percent year-on-year in October 2019, after the almost five percent decline in September. On an annualised basis, housing starts fell to 879,000 in October from 897,000 in September.
