Prices

Price discovery mechanisms
Major price developments

Price discovery mechanisms

No transparent price discovery mechanism presently exists for tropical timber products. Futures contracts for tropical hardwood plywood had been offered in China on the Shanghai Commodity Exchange (SHCE) and the Suzhou Commodity Exchange. In the late 1990s, however, the Suzhou exchange was disbanded, while the SHCE merged with the Shanghai Metals Exchange to form the Shanghai Futures Exchange (SFE), and its plywood futures contract discontinued. The SFE is authorized to list plywood futures but has not done so yet. In the United States, futures contracts for wood-based panels were introduced by the Chicago Board of Trade (CBOT) in 1994 and by the Chicago Mercantile Exchange (CME) in 1996. All contracts were discontinued after a few years because they failed to attract sufficient liquidity. The potential for futures contracts in tropical plywood is being widely discussed. For further information and analysis, please refer to: UNCTAD. The Feasibility of an International Tropical Plywood Futures Contract. Geneva: UNCTAD, 1998. View pdf (283 KB).

In tropical plywood trade, the general reference was the price lists issued by trade associations (Indonesia's Apkindo INDO 96, Malaysia's M96 and Brazil's K14 and BR 96 lists). However, since the Indonesian Plywood Manufacturers' Association Apkindo abandoned its price leadership role, it has become more difficult for producers and consumers to benchmark their prices to some objective reference price.

The most comprehensive price information is gathered and distributed by the International Tropical Timber Organization (ITTO). Reference is made to benchmark species (e.g. Malaysian Meranti, African Mahogany, Iroko), whose prices are deemed to reflect overall market trends.

Major price developments

Prices of primary timber products began to fall in 1995, and fell more steeply during 1997-1998. The sharp economic downturn in Asia in mid-1997 resulted in a strong downward pressure on prices for most products from all regions. Asian log prices declined for most major species during 1998, as did prices for major export species of Asian sawnwood. African log and sawnwood prices remained stable or declined only slightly, being supported by steady demand in Europe. Any decline was largely as a consequence of lower demand in Japan and South-East Asia, coupled with increased competition from low cost Asian logs. Latin American exports were also affected by low prices in Asia.

Since then, the situation has stabilized and, for many tropical timber products, the price trend has been reversed back upwards.

Prices for most primary tropical timber products and species kept on rising steadily through the mid-2000s, as supply of raw materials tightened, global economies improved and consumer confidence and demand strengthened in most markets.

African log and sawnwood prices kept strengthening, with some species reaching new record highs in 2006. Price gains reflected disruptions in log supply (heightened by political unrest in Côte d'Ivoire and Liberia, a United Nations embargo on Liberian exports, and the increasing prevalence of log export bans in the West African region); greater demand (including from China and India, moderated, however, by dull demand in the European market); tax increases in several countries; shipping bottlenecks; and rising freight rates. All of these factors combined to force many producers to push for higher prices. African log and sawnwood products are generally priced in euros (whereas Asian products are quoted in United States dollars), and currency movements may affect price gains.

Log prices for some South-East Asian species rose to 10-year highs in 2006 due to tighter supply of Asian logs heightened by crackdowns on illegal logging, restrictions on log exports and reduced logging quotas. This rise was also the result of active buying from China and India.

Prices for South-East Asian plywood kept on rising during 2005-2006, reflecting continuous shortages in log availability heightened by tighter control of illegal logging in Indonesia and elsewhere, and bottlenecks in shipping capacities. Further price rises were prevented by moderated consumption in Japan and fierce competition from Chinese plywood.

Annual averages of free-market prices (1970-2006),
selected products and species

Source: UNCTAD GDS CSIRB Commodity Price Statistics.

Sources of price information:

ITTO's Annual Review and Assessment of the World Timber Situation. The latest issue can be downloaded in PDF format. Data tables from previous years are available as Excel files.

The ITTO's Tropical Timber Market (TTM) Report, a fortnightly publication by the ITTO Market Information Service (MIS), provides indicative prices for over 400 tropical timber and value added products.

UNCTAD's Commodity Price Statistics.