Summary
• Some mills are considering further production cuts.
• Log prices have started to rise as demand from China, India and Vietnam improves.
• European demand is still low.
• Sawn lumber prices have changed very little since January.
• Ghana has been particularly hard hit by the drop in demand for processed goods.
As we move towards the end of the second quarter it is clear that the tropical timber market has turned out rather differently from the gloomy forward predictions of West African exporters back in January. At that time, buying countries had already experienced the prolonged and sudden drop-off in timber use in both Continental Europe and the UK, and the even more sudden halt in the availability of bank and other finance, and exporters were complaining that the European market was at a standstill. West African exporters were under heavy pressure to reduce log prices and the minus signs for European shipments hit ajacou, azobe, sipo, sapele, tali and mansonia.
For Asian destinations the price falls were more comprehensive, and even deeper, adding ayous, iroko, okan and several others, which were all marked down heavily, and volumes traded were dropping off to a minimum as buyers hung back waiting to see whether exporters would hold their nerve.
The Gabon government announced the expected ban on harvesting of four major species – moabi, makore, ozigo and afo. This had little or no effect on log prices although sawn lumber prices rose marginally for remaining stocks. Reports were then of more mill and concession closures by the major producers, affecting not only sawmills but also veneer and ply mills which felt the squeeze and either reduced production or closed entire lines. The Gabon government released the log quotas, some two months late, and not all concession holders were happy. Some are said still to be trying to negotiate higher volumes.
Producton levels
So far there are no signs of mills reopening or stepping up production, and some are contemplating further production cuts as the market has moved away from earlier expectations that demand for sawn and processed products would increase at the expense of log exports. The reverse has proved true. Producers did hold their nerve as Asian buyers quite quickly came back, and log prices have now begun to rise from an already firm base as demand from China, India and Vietnam has improved.
India in particular has been a very steady buyer right through the past months and its economy has been buoyed up still further by the success of the previous government now returned again to power after the election.
In May, prices for a number of favourite log species advanced again and azobe prices now stand at €35/m³ higher than January, makore is €70/m³ higher, okan up €48/m³, padouk €30/m³ higher, tali up €70/m³, and mansonia is €30/m³ higher. Others have also made some small gains while the European favourites such as sapele and sipo have not moved during the past months. This is hardly surprising given the low level of business although, with the equally low level of production, exporters and traders really have not been very interested in reducing prices.
Right now some log exporters report that, due to concession closures, production cutbacks and heavy rains in some areas, they are unable to supply the full volumes against contracts for some species including the Indian favourites – padouk and belli. Although Congo Brazzaville has resumed cutting of okoumé logs for export, current demand has given exporters the opportunity to raise prices by €2-3 when previous expectations were for weaker prices. Recently there have been enquiries from some European buyers for modest volumes of logs, even sapele and sipo.
Chinese demand
Back in January, producers thought that buyers for China had begun to indicate that they would be moving more positively over to reductions of log imports and higher volumes of sawn lumber. This has not happened and, also affected by the slowdown in the export trade for manufactured goods, China is keeping up log volumes to maintain employment in local sawmills and processing industries.
As long as European buyers stay out of the market there seems little likelihood of any significant resumption in business for sawn lumber and processed products from West African mills. Ghana has been particularly hard hit by the drop in processed exports but appears able to maintain some progress through steadily increased exports to neighbouring countries.
Overall, sawn lumber prices have had a mixed reaction to the market during the first half. The vast majority have changed very little or not at all since January, while padouk and sipo lumber lost €20/m³, okoumé lumber is down by €10/m³ and makore by €60/m³. Abura has been in steady demand for Italy and, after a rise of €50/m³ in January, it is now a further €60/m³ higher. Moabi gained only €10-20/m³ and is rather variable with low, intermittent demand. The Gabon ban on harvesting moabi seems not to have affected prices for this timber that used to be in good demand, especially by the French.
There are reports of very large stocks of movingui lumber in exporters’ warehouses, with no takers in sight, while the previous substantial overstocks of sawn sapele are said to have been almost all taken up, though the prices have not yet shown any signs of firming after a long period of weakness.
Central African Republic
As the Central African Republic seems to be out of the sawn sapele market altogether because of border difficulties and the high costs of the long overland road transport to a port for shipment, buyers may find it less easy to source top quality sapele lumber when demand returns to more normal volumes.
The downturn in consumption of plywood in consumer countries has had considerable impact on the West African timber industries. Manufacturers have closed some plywood lines and a number of veneer producers also have curtailed or stopped production and found difficulty in clearing existing stocks.
Upstream, the log business with North African and other plywood producer countries did lead to some tough price negotiations early in the year but reductions were limited to around US$5/m³ only for okoumé and only for a month or two until Asian buyers returned more strongly into the market.
The trade in okoumé sawn lumber for South Africa has maintained good business but buyers have been slow to make payments, adding to the financial strains for producers.
It is financial aspects – slow payments, high taxes, and governments slow to meet obligations – that are possibly causing producer businesses at least as many problems as dealing with the sales and marketing difficulties.
As with likely supply difficulties for Swedish softwoods, there is a distinct likelihood that when there is a move towards more normal trading, buyers may run across difficulties in sourcing adequate volumes of their favourite African hardwood. Yes, perhaps even sapele!
