Recently, the Ministry of Finance and State Administration of Taxation jointly issued a notice on export tax rebate rates for some commodities. The notice states that from 1 November 2008, China will increase export tax rebate rates on commodities involving intensive labor, high levels of technology and high value-added production. The new rates apply to a total of 3,486 products, accounting for 26% of goods subject to customs tariffs. The export tax rebate rate for some furniture will increase between 11%-13%, up from 9%.
Judging by the comments of European agents and importers, the effects of the banking crises on demand for sawn hardwood have been immediate and fairly dramatic. One major supplier to the UK notes that ‘our sales of sawn hardwood were doing reasonably well until the first week of October 2008 when the panic over the stability of the banks came to a head. Demand picked up a little the week following the announcement of the bank bail-outs, but it has gone quiet again now’.
Overall consumption of hardwood sawn lumber in the UK has taken a hit from the rapid decline in new residential construction. This has particularly affected demand in the mass production joinery and window manufacturing sector. This in turn has fed through into particularly weak demand for commodity tropical hardwood species including sapele and meranti.
FOB prices for sapele quoted to UK importers have remained soft in recent weeks. However agents suggest that these prices may have hit a floor as margins amongst African exporters are already extremely tight and production levels have been sharply curtailed. Much reduced forward purchasing of sapele during 2008 also means that UK grounded stocks are now low and there are gaps in some areas. In the credit crunch, the pressure to buy little and often has intensified.
Meanwhile weakening of sterling against the dollar has meant that sterling prices for meranti have been rising and are now less competitive against sapele. Demand for iroko in the UK has held up reasonably well, however the market for framire/idigbo is described by one agent as ‘dire’.