A quite sudden blockage in the supply pipeline for logs from West Africa to China brought a swift but perhaps temporary pause in the high demand and the steady rise in log prices that had dominated the market through the last months of 2006 and right up to mid-April. It is reported that the Chinese ports of Zhangjiagang and Zhganhou are full with very high stocks of logs and arriving log vessels are being forced to wait an unspecified time before acceptance for discharge. Buying for China also dried up just as quickly and producers have been ordered not to load new shipments of okoumé and redwood species even when the logs are on the quaysides ready for loading.
The notional offer price for the customary mixed grade of okoumé logs for China stands at €50 below that for recent sales. Notional because there is little or no sales activity for Chinese destinations. Okoumé is by far the largest traded volume, almost all from Gabon and Congo Brazzaville producers and, while some are able to switch okoumé logs to markets in North Africa and Europe, others will find difficulty in placing the substantial monthly volumes anywhere other than China.
The other major red species also temporarily blocked for China already have other viable markets for these generally smaller individual volumes, with demand for Europe particularly good at present, so producers are more than confident the disruption for these species will have little impact on either price or export volume.
India also continues with strong demand for the harder and heavier species. Of course, the okoumé situation has caused a certain amount of consternation and mentions of a market ‘collapse’ though the optimistic view points to the continued strong Chinese economy and the ongoing astounding rate of new building and construction, which shows no sign of slowing down. West African producers note too the steadily rising prices being achieved by the industry in the Far East for almost all timber products and this has brought a degree of confidence in the medium to long-term market stability. The expectation is that this hitch in the okoumé log shipments to China will resolve itself within a very few weeks as the current temporary overstock moves on into production and consumption.
Quota hiatus
In other news, the long-heralded log export quota schemes for Gabon and Congo Brazzaville are technically in force as of January 1, but in fact are still not implemented. Producers have provided the required information on production and processing capacities but are still awaiting the issue of their permitted log export quota volumes, that is the proportion of total log production that has to be processed in order to be allowed a percentage of export in log form. A consultant appointed by the government of Gabon has reported on how best to assess quotas and implement the new system in a way that will be fair to both government and industry. It is understood that producers in Congo were, up till recently, still negotiating with the government on volumes and quotas.
For some years Cameroon has implemented a ban on export logs of 20 or so premium species, coupled with an allowable log export quota volume for some processing mills. However, reports are that the overall tight log supply is sufficient only to cover the local demand for processing mills with very little volume left over for export as logs.
Until the past couple of weeks, log prices had made steady gains through the first quarter, led by just a few of the preferred species although the recent favourite, okan, a substitute for greenheart, has now been less in demand and the price barely holding on to the higher levels seen over the past three months.
News of a resumption of timber production and exports from Liberia is hard to come by after the removal of the export ban imposed by the UN. However, it is understood that a very limited number of concession areas may be awarded later this year, with a possible start up of some exports before the end of the year. First exports are likely to be logs, but no doubt swiftly followed by sawn lumber as old sawmills are renovated and new facilities installed.
Sawn lumber prices
West African sawn lumber prices have not been affected by the Chinese log export problem. In the past year or two the price of export logs has impacted, if at all, very slowly and marginally on the market prices achieved for sawn lumber, therefore producers do not believe that market stability will be disturbed by the current problem with okoumé log exports. Mills in the West African region report good business, steady demand and stable price levels. All species have held on to the price gains they made earlier in the year and, with fairly full production and good order books, producers seem confident of stable market conditions through the year.
Much will depend on how well demand holds up during the European summer vacation period and fortunately the reports from consumer countries are of an active construction sector and good demand for timber products. Movingui and moabi had strong price increases in March/April as did padouk, due to heavy demand for Europe and a lower supply. Sapele, sipo and makore were also reported as being less easy to source but in good demand and at firm prices. South African buyers have indicated they are poised to increase their intake from West Africa substantially over the next two to three years. Sawn okoumé lumber has found a good market in South Africa where the mix of grades and specifications is more attractive than for the more stringent requirement for Italy.
The new chief executive of the Ghana Forestry Commission recently stated that there was a “mess” in the Ghanaian forestry sector. Apparently this refers to revenue leakages, low stumpage prices and the perennial problem of the so-called chainsaw operators. Ghana has made strenuous efforts over the years to curb illegal incursions into the forest reserves where chain saws are used to fell trees then cut them up into what is usually very ropey lumber to feed the thriving local markets. Ghana has many thousands of self-employed carpenters and small woodworking enterprises in the informal sector and sourcing raw lumber for this important part of Ghana’s economy is often difficult and tends to be a market pull for illegal timber suppliers. The new chief executive proposes an innovative, sensible and logical solution which is to make sure that the formal timber industry supplies sufficient low-cost lumber for local use, thereby removing the market incentive for the illegal operators.
