“2004 has been the year of the shortage for the hardwood trade – and if demand in the UK had been stronger, it would have been an even more frustrating year.” This view from a leading UK hardwood specialist was echoed by many other leading industry figures as the sector headed deep into the fourth quarter.
Nowhere have these supply issues been more pronounced of late than in West Africa, where certain regions have been afflicted by such heavy rains that logging activity has been severely disrupted. There is already a reduced availability on many species and log supply is expected to remain the key market issue for many months to come.
Specialists in the Ghanaian market, for example, reported the most torrential and persistent rains witnessed in many years. “There is not a lot of wood to sell, although supply is commensurate with the lack of demand in the UK,” said one. Another added: “Wawa is very difficult to get hold of. It’s still raining and all the mills are desperate for logs.”
He pointed to evidence of late shipments, price increases and disappointed customers in the UK. “Demand would have been better if wood had been available,” he stated with confidence.
Supply and demand
Supply of sipo remains difficult while demand was described this week as “subdued”. Iroko also remains tight – particularly for fixed widths and lengths – and is continuing to attract escalating prices. “Iroko is 25-30% more expensive than sapele at the moment,” TTJ was told. “I think it has priced itself out of the market for a lot of uses.”
One UK trader confirmed that he held reasonable stocks of iroko on land and on water, although he feared that current price levels would make many customers “fall off their chairs”. However, others reported difficulty in securing sufficient iroko to satisfy even medium-size orders.
Meanwhile, sapele has experienced reasonable demand of late. Prices have rebounded to some extent in the UK but are still some way short of replacement cost. “UK sellers are giving it away far too cheap,” one contact complained. There are even reports of some shippers being prepared to submit lower offers in a bid to secure volume business. The market has also been influenced of late by the fluctuating euro/sterling exchange rate.
Lack of supply from Brazil has been a fact of life for a number of years and reports earlier this week of a dispute at IBAMA were unlikely to smooth the flow of material. Some traders were planning to alert customers to the current situation and to warn of the possibility of further delays and backlogs. This news emerged at a time when UK demand for Brazilian cedar was showing signs of slowing.
Following on from the long rainy season of 2003/04, the rains have already returned to the south of Brazil and are expected to hinder logging operations over the next few months. Exports of some of Brazil’s secondary species – including tatajuba and ipe – have already been affected by the rains and transport difficulties, it was suggested.
In TTJ’s previous hardwood report, it was indicated that some previously produced stocks of Brazilian mahogany had gained approval for shipment. According to a regional specialist based in the UK, he had booked a couple of boxes more than two months ago but was still waiting for the final, official sign-off. Indeed, given that US buyers have been offering high prices for any available supplies of Brazilian mahogany in recent times, he feared that sellers would take the “easy option” and ship everything to the US.
Peru produces what is generally considered to be a good quality mahogany but the country’s poor infrastructure and relatively small sawmills are said to be restricting its impact on the international market.
Monsoon season
The onset of the monsoon season, as well as sustainability/environmental pressures, are also expected to have an impact on the Far East hardwood market. Dark red meranti prices are “firm and firming”, and have increased by around 4% over the last month or so. That said, no shortage of offers was reported this week.
The same cannot be said for keruing which remains extremely difficult to obtain in either pre-machined or rough sawn form. Offers are “few and far between” – not least because of good demand for logs from the Far East plywood industry – and buyers in both the UK and US are struggling to satisfy all their customers’ requirements.
As for North American hardwoods themselves, some of the higher specifications are reported to be difficult to source for the UK market. White oak prices have continued to gain ground and are expected to firm still further in the coming months, not least because winter weather may be only a few weeks away in certain parts of North America.
One contact estimated that the 1in white oak price had risen by around 10% since the start of the year, although he added that the species was attracting a wide range of prices that depended to some extent on the region of origin.
Lack of orders
A lack of white oak orders from the commercial sector has dented UK demand of late but, as one specialist argued, “buyers still can’t expect to snap their fingers and get what they want”.
Another added: “The white oak market is still generally bullish, although availability has improved. There are not so many holes in importer inventories; for example, 1.5in and 2in had been difficult but now are easier.”
Hard maple has also proved to be something of a hot property in recent weeks; prices have been pushed up principally by domestic demand in the US and sellers in the UK are hoping a greater measure of stability will return shortly to this market. “Maple has gone up by 5 or 10% in the last month or so and it has come as a bit of a shock to some people,” TTJ was informed. “If there are any bargains around, they are being snapped up.”
The prices of steamed black walnut and ash have remained largely stable, while cherry has been stable to slightly weaker. Once again, tulipwood was the only species to be universally described as weak.
General availability of North American hardwoods has been improved by a relative lack of activity in the European market over the summer months, as well as by a downturn in orders from China which has been attributed to energy problems, ongoing attempts to cool the nation’s economy and a push among buyers to drive down lumber prices.
European oak
European oak continues to be offered in reasonable quantities and available supplies are broadly in line with demand. One contact contended that some retail customers were adopting the European species as a “fashion statement” and advertising its “local” origins in their stores. However, others suggested that European oak prices were not sufficiently low to prompt a widespread move away from rival North American material. “Suppliers need to get the reliability of quality and service right before a lot of people will consider switching,” one said.
Overall, the UK hardwood trade appears to have enjoyed a reasonable if unspectacular pick-up in sales since the end of the summer. While a small number of contacts were reporting a “very busy” October, most were somewhat more conservative in their market assessment and expressed fears of a loss of momentum as the fourth quarter progresses.
“We don’t seem to be getting answers to a lot of our offers,” one source observed. “It is still largely a just-in-time market – you have got to have the right species available at the right time.”
According to the majority of sources in the UK hardwood trade, 2004 as a whole has been something of a “hard grind” characterised by a lack of activity, trouble in making budgets and a plethora of supply problems.
