KUCHING: Although plywood prices has not moved much as of late, analysts are confident that a rerating was soon on its way based on anticipated increasing exports to Japan and recovering sales volumes.
Hoe Lee Leng of RHB Research Institute Sdn Bhd (RHB Research) said this will be due to the fact that the bulk of Malaysian plywood products are exported to Japan, making Japanese demand the major price determinant.
“In Japan, the aggressive policy easing to reflate the economy has led to higher government spending, aggressive monetary easing and structural reforms,” Hoe said.
“This should help to promote asset prices that would stimulate consumption and business investment to sustain the recovery over the longer term. These policies have thus led to stronger growth in Japanese housing starts over the last few months.”
Between January to May, the RHB Research analyst noted that housing starts grew 7.2 per cent year-on-year (y-o-y) to 367,400 units versus a 6.1 per cent y-o-y increase in the same period last year.
At such a growth rate, full-year 2013 housing starts will clock in at 946,400 units, for the fourth consecutive year of annual growth,but still lagging behind the one million-unit annual mark before 2009.
May’s starts of 79,800 units were 14.5 per cent higher y-o-y, 2.5 times the y-o-y growth recorded in April, and the 10th straight month of y-o-y gains.
With rising economic activity in Japan, Hoe noted that Japanese plywood import volumes have also been improving as demand from house builders and pre-cutting plants rise.
Over the past few months, South-East Asian plywood manufacturers have pushed for higher selling prices amid steeper log input costs and log shortages,” the analyst said, adding that volumes grew 9.1 per cent y-o-y between January to May.
This is now starting to come through, as market prices in Japan have gradually improved since April, by about three to five per cent, both on a y-o-y and q-o-q basis.
Concrete panel prices in Japan are around US$530 to US$550 per cubic metre now (up from US$500 to US$510 per cubic metre a year ago), while floorbase prices currently around US$680 to US$690 per cubic metre (up from US$650 to US$660 per cubic metre a year ago).
“According to the managements of the timber companies we cover, while order volume has improved from Japan, prices have not risen as significantly yet,” Hoe added. “However, given the general lag of four to six months to pass on higher log costs to plywood customers, most companies expect plywood prices to start moving up more sharply from September-October onwards.
In view of the above, RHB Research was thus projecting average plywoo prices to rise by three to five per cent in 2013 and by a further four to six per cent in 2014.