The summer slumbers reported in July appear to have persisted into September – traditionally the month when industry returns from its holidays with a burning desire to get on with business. At best, demand was described this week as “reasonable”, but the majority of UK hardwood industry contacts were still complaining of a “bitty” demand picture, with a worrying proportion of regular buyers reluctant to purchase significant volumes.
A leading importer summarised the thoughts of many in the UK hardwood trade in saying: “The summer as a whole has been patchy and we won’t have broken any records.”
Against this backdrop of unspectacular UK demand, the forward prices of most Far East hardwoods have continued to increase throughout most of this year. Since the first quarter, the price of dark red meranti has been rising, with thicker dimensions said to have moved ahead faster than, for example, the thinner 1in and 1.25in sizes.
Price levels have also escalated on the back of problems for shippers; containers are understood to be in short supply in much of the Far East, partly because a large number have gravitated to China to ship electrical goods for Christmas. One UK agent described the overall supply situation as reasonable, with contracts arriving “roughly on time”. However, he added: “We are being hammered on container rates – we are even considering a return to break bulk.”
Amid this flurry of regular price movements, UK consumption of dark red meranti has been generally described as lacklustre, with most customers preferring to purchase on a hand to mouth basis. However, a minority of contacts said that there was “good, steady demand” and that, in the main, customers had not been deterred by “fears of higher prices hurting the market”. Further increases in price were anticipated by most contacts, at least in part because of the difficult freight situation in the Far East.
Cheap offers
Meanwhile, the keruing market has been affected by the availability of “some cheap offers” and by a lack of demand from a number of key consuming industries. “Suppliers are keen to do more keruing business but not all the mills want to cut the thinner material that the UK generally wants without there being some thicker material to support it,” TTJ was told.
In Africa, the export restrictions in Cameroon are continuing to have a substantial impact on the market. There are reports of delays in logging because the country’s forest authorities lack the necessary resources for the swift implementation of new requirements affecting concession allocations and forest management planning. Some of the buyers who would normally secure their hardwood in Cameroon have been forced to look at alternative sources of supply, such as the Central African Republic and Congo.
UK demand for West African hardwoods has shown some improvement following the holiday period, although regional specialists are still concerned at the low level of enquiries. “The European market as a whole is far from exciting while the UK is dominated by short-term business where buyers are mainly just topping up their stocks,” according to one source.
Sapele remains the leading species in the UK and, in common with most other African hardwoods, prices have moved little since July, despite the reasonable tightness in supply as key producing areas emerge from the rainy season. A sudden burst of buying activity would push up prices very quickly, it was said this week. Supply of sapele has also become more “intermittent”, said one importer, because kiln space in Cameroon was increasingly being taken up by other species.
Kiln-dried preference
Contacts also highlighted the trend among UK buyers towards kiln-dried material from the Continent over air-dried from West Africa. According to one expert, this approach “reduces delays and helps the cash flow situation”.
Buyers in Ireland have returned to the iroko market following the summer – but only for sufficient quantities to keep stock turning over. Meanwhile, the important iroko markets of Spain and Portugal have remained fairly quiet. UK demand for utile and wawa has been flat,whereas sales of framire have been relatively good.
North American hardwood exporters are reported to have achieved better than expected shipment levels ahead of the holiday period in many markets. However, according to the UK trade, demand for North American hardwoods has been “quite quiet” for 2002 as a whole. Importers appear to have reduced their stocks and are buying generally smaller than normal volumes on a more hand to mouth basis. “People are buying when they need the material and then they want it straight away, making it a difficult market to cater for,” was one observation.
One contact identified cherry as a prime example of a North American hardwood whose sales have been slower than normal this year. “One inch material was around US$3,900 per thousand board feet for the upper grade at one point not so long ago, so I reckon it hit such a high point that a lot of end users were put off.” That said, the cherry price has shown signs of hardening over the past few weeks, with the market described in one quarter as “firm and aggressive for the normal spread of lengths” although other contacts felt the market for the species was little better than stable.
|
“People are buying when they need the material and then they want it straight away, making it a very difficult market to cater for” |
The hard maple price is understood to have weakened slightly and offers have become more flexible. Oak has been relatively stable and tulipwood has held on to small price gains achieved some weeks ago, although prices remain unspectacular. Ash has also sustained a limited recovery in price.
In North America itself, the market is said to have become markedly busier since the end of the first quarter of 2002, not least because US private housing starts increased by almost 4% in the first half of this year compared to the corresponding period of 2001. But despite these more favourable circumstances and growing confidence in future prospects, many hardwood operators are understood to be suffering from cash flow difficulties.
North American shortages
The production cutbacks in North America over the past two years are still largely in place, thus leading to shortages in certain items. One expert observed: “A lot of North American mills were under pressure in the spring when green lumber prices were so high, and they reduced production. So it is natural that gaps should start to appear.”
In the main, talk of shortages has not really affected the UK because of generally low demand on this side of the Atlantic. Several contacts pointed to “one or two gaps appearing in some primary items”, including medium sizes of white oak and 1.5in and 2in tulipwood. Black walnut remains in vogue although some US mills are complaining of their inability to secure decent supplies of logs. While availability of 1in and 2in remains reasonable, 2.5in and 3in black walnut is so hard to obtain and so expensive to buy that “you need a security van to bring it in”, joked one contact.
The smart money appears to be on US producers maintaining their conservative approach to output until they see a marked upturn in export demand. The overseas market is important to US producers because, while domestic buyers tend to purchase the lower grades, the foreign markets buy a large proportion of the higher grades which offer better potential for higher profit margins.
The recent weakness of the US dollar in relation to the euro has raised hopes of an increase in hardwood sales into the euro zone during the remainder of this year.
Prospects for Brazilian mahogany appear to get no brighter despite the recent UK court ruling against Greenpeace. The environmental body had been calling for a judicial review of the UK government’s decision not to halt shipments of mahogany into this country. However, with the species continuing to attract problems and controversy, many buyers are understood to be dismissing it from their hardwood purchasing calculations and seeking alternatives such as utile and, to an increasing extent, sapele.
Mahogany supplies
Supply of mahogany was described this week as non-existent, with importers talking of contracts signed in “the dim and distant past” for material that appeared increas-ingly unlikely to arrive. Although acknowledging that supply remained “exceedingly difficult”, another contact reported rumours that one company was carrying a reasonable volume of thicker stock.
Meanwhile, in terms of price movements, there has been little change to report in cedar and most of the other Brazilian hardwoods sold in small volumes in the UK. Indeed, one trader claimed that, from his company’s perspective, the price paid in dollar terms for cedar and tatajuba had hardly changed in more than two years, while the virola price had not shifted significantly in well over a decade.
In terms of the main European hardwoods, a growing demand has been reported for oak whereas European and export demand for beech has been largely uninspiring.
Several contacts noted the emergence of some “desperate” offers on beech largely because previously active customers in China had “stopped buying for the moment”. Beech prices have come under pressure as a result while many mills in western Europe are said to be suffering an intense financial squeeze.
Demand from China for beech sawn lumber is expected to remain at lower than normal levels for several months to come.
