Structural change of Japan’s plywood import business

Performance of building materials trading firms for the last term is disclosed and imported plywood business is major key factor but gap between suppliers’ export prices and the market prices in Japan is getting wider particularly since 2017 so the importers suffer negative business for almost a year.

In the first half of 2018, the market prices rose together with suppliers’ prices so imported plywood was major factor of profit for some companies. Then in late 2017, the suppliers’ prices dropped and the market prices in Japan decreased much more than suppliers’ price drop so many importers suffered loss.

In producing regions in Malaysia and Indonesia, production and shipment plan collapsed by log supply shortage and resultant higher log prices. In Japan, warehouses near ports are plugged 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 loss for the importers. Initially price skid was supposed to stop around June but bleak market continues during summer months. This is nothing unusual and it happened cyclically before.

IMPORTED PLYWOOD NO LONGER INFLUENTIAL TO PLYWOOD MARKET 

The most noticeable change is that imported plywood is no longer influential to the plywood market. Imported South Sea hardwood plywood used to dominate the market but now even when monthly import volume is less than 200,000 cbms, there is no panic at all. Market share of domestic softwood plywood and imported plywood reversed and domestic share is getting larger while supply of South Sea hardwood plywood became unstable by log shortage. Plywood users rely more on stable supply of domestic plywood.

This means structural change of plywood market from imports to domestic. It is obvious that domestic plywood is leading the market. By environmental restriction and declining of forest resources, there is no chance that supply of hardwood plywood from Malaysia and Indonesia would become competitive in price and quality like before.

South Sea hardwood plywood has been the most important material as composite floor base but after by insufficient supply and high prices, Japanese floor manufacturers have been shifting to use domestic softwood plywood without choice.

Supplying mills in these countries have been struggling with tight log supply and low orders from Japan and only thing they can do now is to curtail the production. One solution is to use planted species to manufacture plywood if the prices are competitive with Japanese cedar.

 

(Source: ITTO TTM Report)