According to reports from European plywood importers, the cost of containers from Asia has begun to fall from the peak of its new crown epidemic. However, some other importers stated that the price of the 40-foot container recently received is still between 15,000 and 20,000 US dollars, which is still inflated compared with the 1,500 to 2,000 US dollars in October 2020.
Even those importers who report that container freight rates have been loosened have confirmed that container freight rates are still at historically high levels, and therefore generally choose to replace them with bulk cargo transportation. The unprecedented increase in container costs is mainly due to the impact of the new crown epidemic on trade patterns, which has left a large number of containers vacant in the ports of consumer countries. In particular, the changes in consumption and shopping patterns triggered by the new crown pneumonia epidemic, including the surge in e-commerce and blockade measures, have led to an increase in the import demand for consumer manufactured goods. A large part of the goods are transported in containers, but a large number of them are transported in containers. Empty containers were stranded at the port, which triggered a surge in container freight.
Recently, with the relaxation of blockade restrictions and the general recovery of the global economy, exporters from producing countries, especially those in Asia, have noticed a large shortage of containers and rising prices. Even some shipping companies' container prices have reached half of the value of the plywood transported. In response to this situation, some importers choose to transport bulk cargo, but it is not easy to transport bulk cargo, especially for those who have not used bulk cargo transportation before, because the uniform speed of bulk cargo involves more management. If you fail to arrive at the port on time or fail to reach the predetermined quantity, you may be fined, and the product is more likely to be damaged in transit. Therefore, although bulk cargo transportation is much cheaper than container transportation, considering the above factors, the cost of bulk cargo transportation may be more expensive. In addition, the price of bulk cargo transportation has also risen, and prices have risen accordingly. An importer distributor said: "Bulk cargo operators see an opportunity to make money, and their shipping costs have roughly doubled in the past six months."
In addition to the sharp increase in transportation costs, European plywood import trade also faces other challenges, such as the rise in plywood prices. Especially in the past three months, global consumption has continued to accelerate, and the government's economic stimulus measures have provided a greater impetus for consumption. But at the same time, production in many parts of the world is still restricted by the lack of personnel due to COVID-19 infection or isolation, as well as safe working methods during the pandemic. In addition, the supply of raw materials is also a problem faced by some manufacturers. Therefore, the price of plywood products will continue to rise.
An importer distributor interviewed said: "Although the current profit is very good, the product needs to be managed and distributed, and the main customer’s satisfaction needs to be maintained under the condition of rising prices, which makes the business pressure more and more. It’s also more challenging than ever."
Some European importers expect demand for plywood to decline in the summer. However, as the tourism industry is still suppressed by the new crown pneumonia epidemic, it is expected that the market demand for plywood will not experience the usual holiday slowdown. Most importers generally believe that, for now, consumption is still on an upward curve. Since the summer of 2020, the European DIY and home improvement market is considered to be the main driver of plywood demand. "Although epidemic control is being relaxed, many people still need to work from home, and it is expected that this will become a permanent state for many people. Therefore, they are spending more on improving and expanding their properties. An importer in the UK said: "The renovation of the attic and the construction of the garden office have reached record levels. "
According to the UK Construction Products Association, people will significantly reduce their holiday spending in 2020 and will continue to do so in 2021, so people will leave more funds for investment in homes and gardens. Under normal circumstances, the UK alone spends more than 60 billion pounds on holidays each year. Therefore, many families have a lot of surplus funds because they have to cancel holiday consumption. According to reports, the increasing demand for new construction projects is mainly due to the government's financial support, because the government regards the construction industry as a key engine for economic recovery.
The report of the European construction company in June also confirmed this. The report said that the European construction industry is recovering faster than expected, and most of the output losses caused by the new crown epidemic are expected to be restored in 2021. It predicts that the average construction growth rate of 19 European countries will reach 3.8% in 2021, compared with a decrease of 5.8% last year. Although the rate of recovery varies from country to country, among which Ireland and Hungary are expected to see a further decline in 2021, the industry as a whole is expected to reach the level of activity before the new crown epidemic in 2022. In addition to the construction industry, importers have also reported that the demand for joinery, furniture manufacturing, packaging and shipbuilding is also growing well.
Despite the logistical difficulties and the long production cycle, most importers indicated that they have sufficient purchasing capacity in the coming months. An importer said: "The local inventory is still very short, there is almost no stock. Anything that comes in will be delivered immediately. Customers are waiting for the ship to arrive to receive their goods, and they want to get the goods right away."
In terms of sources of supply, it is reported that China is becoming an important supplier. Despite the long delivery time, prices have been rising sharply. An importer said: "The price growth of plywood from China in the first quarter was moderate, but in the second quarter, the offshore price rose by 15-20%, but this is not too bad compared to Brazil. , Because when you factor in shipping costs, you will find that the cost of importing Brazilian plywood will be higher."
An importer also reflected: "Some exporters are trying to renegotiate outstanding contracts, especially for orders in April or May 2021, which may require an additional 15-20 US dollars per cubic meter. The reason is that they are facing raw material costs. The increase in prices includes glue, logs and veneers. If you do not increase the price, you may not be able to produce plywood. If you book a space for a bulk carrier, then you may face empty cabin charges and demurrage from shipping companies Fees.” According to reports, China’s ports are also congested by bulk carriers, and shipping companies are asking for surcharges to subsidize the additional waiting time.
The increase in the price of plywood products in Brazil is mainly due to the impact of the country's severe new crown epidemic situation on the manufacturing industry, coupled with the huge demand in the US construction market. An importer reported: “For standard 18-20mm plywood, the price we paid in October/November last year was US$250-300/cubic meter. Recently, the asking price in Brazil was US$500-600/cubic meter. Basically, the price has doubled." Therefore, unless European importers urgently need a particular product, they will more or less stop purchasing Brazilian products when the price reaches this level in March and April this year. Recently, due to problems with the shipping route between Brazil and the United States, European importers have received more spot quotations from Brazilian producers at slightly lower prices. But whether this is the beginning of a broader downward trend remains to be seen. Despite these transportation problems, the United States is still a big market for Brazilian plywood, and the US government is injecting more funds into its economy. Even at the recent high prices, Brazilian plywood is still the cheapest American can buy. Of high-quality plywood.
According to reports, the high price of Brazilian plywood, in turn, helped push up the price of Chinese plywood. An importer distributor said: "In the past, people who bought in large quantities from Brazil have been trying to buy alternative plywood from China, which has further increased the inflationary pressure on plywood products." According to reports, the supply of birch plywood in Russia is tight, the order has been scheduled for September this year, and the price has reached a record high. A British importer said: "We have just been asked to pay £62 for the 18mm sheet. Before the new crown became popular at the beginning of last year, its price was £17." Another market challenge is the preliminary anti-dumping duty imposed by the European Union on Russian plywood on June 15. This tax rate is set at 16% DAP (Delivery at Destination) and will be maintained until December this year when the European Union will determine the future tax rate. This has also caused more European buyers to turn their attention to Asia, but the cost of freight has restricted the feasibility of switching from Russia to Asia. But regarding the cost of containers, importers believe that Indonesian plywood producers can use anti-dumping duties to replace Russian plywood with their products.
An importer said: "In 2016-2019, the number of Indonesian timber imports to Europe increased. Although part of the reason was the general increase in consumer demand, it was also due to the convenience provided by the FLEGT license to a certain extent. If not because of containers For freight rates, Indonesian plywood has a great opportunity to replace plywood from Russia. However, because Indonesia’s container quotation is 13000-15000 US dollars, it is not a feasible proposal to replace plywood from Russia. In addition, in Indonesia, container transportation will be converted to bulk cargo transportation. It is also problematic. Because in order to facilitate the transport of the meeting, you need 1000 cubic meters to 2500 cubic meters of goods. This is possible in China, but it is more difficult to organize in Indonesia, and the reliability of delivery to the port is low. If the goods cannot be delivered to the port in time, you may face charges from the shipping company. We have an unfinished order from Indonesia, originally scheduled to depart in June 2021, but now we are told that the shipment will not be shipped until the end of September. It is said that the manufacturer They are also facing the problem of a shortage of logs. If customers need to face a three-month delay, or even longer, they will not be interested in this order. Therefore, Indonesia may become an interesting partner for us, but because The combination of these negative factors is not an attractive option."
But things may change over time. If the price of the container drops to US$7,500, plus the EU’s anti-dumping duties on Russia, then Indonesia may attract business from Europe. However, this situation still faces a lot of uncertainty. Looking ahead, some European importers expect that Russia’s log export ban will take effect in the new year, which will have an impact on the plywood market. An importer said: "But this should not have much impact on European production, because European imports of Russian birch logs are limited. But China has been importing a large number of logs from Russia, including birch. Therefore, unless two Otherwise, Chinese manufacturers may face the challenge of shortage of raw materials, and EU plywood importers may bear the pressure of a further increase in plywood prices."
Some plywood importers are also adjusting their strategies to purchase plywood products from Europe instead of importing from other countries. However, due to the limitation of the production capacity of local European manufacturers, this is not a viable option. Moreover, the price of European plywood has been rising following the international trend. In addition, another problem facing British companies is the impact of Brexit. Plywood importers in the United Kingdom report that plywood transportation costs from continental Europe have increased, and shipping companies have increased freight rates to offset the time added by new ports and customs procedures. In addition, there are some problems in trade with Northern Ireland and Ireland. According to the Brexit agreement of the United Kingdom, Northern Ireland remains in the EU single market. This means that plywood and other timber products imported from Northern Ireland from the UK must undergo due diligence under the EU Timber Act. In addition, if importers ship goods to Northern Ireland for re-export to Ireland, they will also incur further tariffs, even if the goods have already paid tariffs when they enter the UK. A plywood company with factories in England and Northern Ireland said: "There are some ways to solve this problem, but this is really not a satisfactory arrangement."
