Summary
• Demand for hardwood is low.
• Some UK traders are having problems booking space on vessels.
• There is little forward buying for sapele and iroko.
• Framire supply is tight because producers have recently concentrated on iroko.
• The price of dark red meranti has fallen because of lack of demand.
• FSC-certified Brazilian decking timber is said to be attracting premiums of up to 40%.
The hardwood market has been flipped on its head over the past few months, with supply now appearing to outstrip demand in all but a limited number of species such as keruing and the thicker dimensions of framire. As one contact put it: “The attitude six months ago was that if you had wood, you would be okay – but that’s not the case any more.”
In effect, the world’s recent financial woes appear to have undermined the confidence of hardwood buyers, such that order levels have remained disappointingly low in the aftermath of the summer holiday period. Although some major UK hardwood enterprises are claiming to be meeting their budgeted sales targets, most described enquiries as intermittent at best. Factors blamed for this tangible sense of nervousness among purchasers include: the global impact of the sub-prime mortgage crisis in the US; signs of weakening in the UK housing market and the knock-on effect of reduced expenditure on properties; higher interest rates in the UK; and taxation levels which, in the opinion of many, have “gone too far”.
“It’s like everyone is still on holiday – and perhaps they wish they were,” was how one industry contact summarised the atmosphere within the hardwood sector. Another ventured: “It’s gone very quiet – the September-to-November period is usually good but it’s challenging out there at the moment.”
Little but often
Several contacts said that, in general terms, consumers have been purchasing only enough material to cover their immediate needs rather than full container loads. The “little but often” approach to purchasing is entailing an increased administrative burden but for scanter rewards, TTJ was told. As a result, importers are coming under “ever-increasing pressure to turn timber into money”.
To make matters worse for UK traders, many are encountering problems in booking space on vessels – notably out of the Far East. “You manage to sell the stuff and then it doesn’t come,” said one contact. At the same time, he added, freight rates are “going through the roof”, thereby making it “even harder to sell” and pushing people in the direction of alternatives to hardwoods such as softwood or MDF.
Market conditions are not entirely positive even for North American white oak – for a long time one of the strongest-
performing hardwoods. A relative “glut” of 8/4 material has developed and prices have weakened to some extent; by contrast, supply of 4/4, 5/4 and 6/4 white oak has remained reasonably tight and prices are firm. White oak supply traditionally declines over the winter, leading some regional experts to forecast potential shortages come next spring.
All thicknesses of black walnut are continuing to attract healthy demand at firm prices despite the isolated suggestion that the species must be near its peak in price terms.
Meanwhile, tulipwood and ash have been relatively static in price terms while cherry has aroused limited interest in the market place at reasonably level prices – even though the species is widely dismissed as “completely out of fashion”. Prices for the thinner sizes of hard maple are said to be edging slightly higher on the other side of the Atlantic, but little or no effect had been registered in the UK at the time of writing.
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“The attitude six months ago was that if you had wood, you would be okay, but that’s not the case any more” |
Several UK hardwood contacts have taken trial consignments of North American red oak, but none is reporting a substantial upturn in interest from UK buyers who have become accustomed to white oak. “It’s not really being considered in the UK for mainstream use,” TTJ was told. “It’s a species for which you can still strike bargains.”
Meanwhile, European oak has continued to move well and prices have risen by 5% over the last couple of months. “At the moment, the weakness of the US dollar is keeping North American timbers very competitive and yet people still want to buy European oak despite a 25% price difference,” TTJ was told this week. “It would be interesting to see what would happen if the US dollar got significantly stronger and the euro significantly weaker.” UK stocks of European oak are said to be reasonable.
Sapele sufficient
Turning to tropical hardwoods, UK stocks of West African sapele appear sufficient to meet the current low levels of demand. Against the backdrop of a relatively flat forward position, some Continental exporters are said to be prepared to ship sapele to the UK “at what appears to be cost” in response to over-stocking and a widespread lack of demand on mainland Europe. There has been scant forward purchasing of both sapele and iroko, with some contacts suggesting that thicker dimensions of the latter may not be particularly abundant. The price of wawa has remained firm in the face of electricity and production cost issues in Ghana, but UK demand has been limited. The sipo market was also described this week as firm.
As mentioned above, supply of framire from the Ivory Coast has remained tight because, in recent times, many producers have preferred to process iroko owing to the higher margins available. As a result, buyers are struggling to obtain sufficient volumes of 2, 2.5 and 3in framire in particular – despite an improvement in shipments. “Gold dust” was how one hardwood expert described the species, adding that the rising prices of the thicker specifications were dragging up those of other dimensions. One contact said the framire price had jumped around 15% since the end of July this year, while another calculated the increase over the past 12 months at around 30%.
Among the Far Eastern hardwoods, keruing has remained in short supply in the UK market, to the extent that “everybody is screaming for the thin boards”, TTJ was told this week. However, the shortage is unlikely to disappear in the near future given that buyers in Japan and the US are prepared to pay far higher prices for specifications that are more convenient for the producers. In the UK, importers are understood to be seriously considering kapur as an alternative.
Sales of Far Eastern hardwood decking material in the UK have been disappointing over recent months although prices have proved to be quite resilient.
Meanwhile, prices of Far Eastern dark red meranti have been falling owing to the “perfect storm” of a lack of demand and high stocks held by customers and producers alike. Some traders in the Far East have been accused of “panic” attempts to sell material in order to induce some cash flow. The monsoon season between November and January could alter the supply and inventory situation but, for the present, material is readily available in all the regular specifications. The price of meranti is estimated to have fallen by 15-20% over recent months; one contact said that prices at source had dropped around 8% over the last month “and they haven’t stopped yet”. And he added: “The end user probably isn’t aware of the full impact of these lower prices as yet.”
Brazilian hardwoods
The traditional Brazilian hardwoods such as mahogany and cedar – on which many UK traders cut their teeth in previous decades – are no longer sold in any quantity into the UK market. Nevertheless, decking grades such as ipe and garapa are crossing the Atlantic at prices which remain very firm as producers attempt to offset the impact of a strong domestic currency in relation to the US dollar. In the UK, however, traders report disappointing demand over recent months and blame generally poor summer weather leading to the shelving of many decking projects.
According to several regional specialists, FSC decking timbers out of Brazil are attracting “huge” premiums of up to 40% compared with a norm of nearer 15%.
