Summary
• Production cutbacks have led to tight supply.
• Prices are rising slightly as a result.
• UK demand for European oak has fallen because of the exchange rate.
• Demand for certified timber has weakened.
Despite the recession and difficult trading conditions, hardwood traders are taking some comfort in the fact that they had prepared for a more severe scenario.
Although demand isn’t anywhere near what it was a year ago, many traders contacted by TTJ said that, all things considered, it was better than they expected. TTJ was told that over the past six weeks customers were starting to have more confidence and were forward ordering again, but others felt this was only the result of customer inventories having been dramatically reduced.
Price movement
Although the situation could be more gloomy, this is the worst recession that many have experienced and prices, which have fallen dramatically, remain weak, TTJ was told.
One importer said he had never seen prices fall by as much over such a short period as he had seen this year, and that’s having worked through four recessions. “You could call it almost a collapse of prices,” he said.
Prices dropped throughout the first half of the year across the board, but they are now steady or stable and slowly starting to fight their way back, largely because of tight supply. One contact said the cost of oil was also behind attempts to raise prices.
Prices of North American material are still very weak but one supplier predicted the market was at the edge of a price increase because products were becoming scarce. “It’s got to go up now and hopefully everything will follow suit,” he said.
Another contact said African hardwood prices were probably as low as they were likely to go at the moment. If anything, he said, they would have to start increasing otherwise the mills would not make any money. Others reported prices in the Far East to be low but steady.
Production cutbacks
Nearly all contacts reported that production cutbacks have resulted in tight supply, which is getting worse. It wouldn’t take much of a pick-up in demand for prices to rise and shortages to kick in.
At some stage in the second half of this year the whole hardwood industry would have a serious problem, with shortages across all hardwood species, one contact predicted. While in the first six months it had been a struggle to attract orders, soon it might be a struggle to fulfil orders.
One distributor said it was already apparent that customers were having difficulties getting hold of certain products. “You get the same enquiry going around and around and around and it comes back to you, so it’s obvious the customer hasn’t found it,” he said.
An importer estimated that, while there were supply pockets where the effect would not be as dramatic, “75-80% of the supply areas are going to struggle to cope with any reasonable increases in demand”.
Supply is so low that customers may be surprised at how long it will take them to build stocks again. “We’re at a stage where people are looking at restocking and the lead times for restocking are longer than people expected they would be in many items,” TTJ was told.
In terms of species, sales for timbers from the US – tulipwood, ash and especially white oak – are reported to be strong. Walnut and cherry are selling slowly – a reflection of the construction downturn and demise of demand for interior finishes. UK demand for European oak has been dented by the unfavourable sterling/euro exchange rate.
Tropical species
In terms of tropical species, sapele and iroko are reported to be in strong demand.
However, demand for certified wood has fallen, a trend that most contacts attributed to people trying to save costs. One industry expert pointed out that there were fewer government-based contracts at the moment, which require certified products, but he expected demand to gain momentum once the economy recovered.
Another contact echoed this sentiment, especially with the construction work for the 2012 Olympics well under way, and he advised importers to start thinking ahead.
