The UK trade in hardwood began to improve towards the end of the first full working week in January but is still ‘not fantastic by any stretch of the imagination’. A few optimists suggested there had been some improvement in conditions compared with last month, but subsequently acknowledged that this was largely because December had been so awful. ‘December was very worrying,’ said one importer. ‘I think we got into the Christmas spirit a bit early in this country.’
The more pessimistic members of the trade fear 2002 is going to be ‘extremely tight’, arguing that the repercussions of the September 11 terrorist attacks and the general decline in the world economy may prompt delays in – or the shelving of – major contracts involving hardwoods. One trader explained: ‘Some of our customers seem extremely busy but they are generally the smaller ones.’
Trade was reasonably consistent, said another trader, but generally involved smaller volumes than had been hoped. Customers were tending to look to buy ex-stock rather than forward except for ‘specials’ such as hardwood mouldings. One of his industry colleagues ventured: ‘Some of our customers seem busy but others are significantly quieter than normal at this time of year – buyers reducing their volumes by 20% is by no means unusual.’
After many months of relative inactivity, there were signs of some change – albeit possibly minor – in the situation surrounding Brazilian mahogany exports. Following export licence restrictions, there have reportedly been some court injunctions taken out by shippers in a bid to export accumulated material and ease their mounting cash flow problems.
Mahogany exports
Several contacts were at pains to emphasise this is unlikely to lead to large quantities of mahogany arriving in the UK. At best, it seems a little more fluidity may be reintroduced into Brazilian mahogany exports. As one regional expert pointed out: ‘Some exporters may have applied for and got licences to export stocks that are ready, but what we don’t know is how much of that wood is pre-sold. Some buyers in the US would pay vast amounts to get their hands on the wood, and so what remains unsold could be very small.’
Despite its illustrious past, many in the UK hardwood trade regard Brazilian mahogany as yesterday’s species, not least because an increasing proportion of the dwindling available supply has been snapped up by North American buyers. But even the Americans are said to be looking with increasing interest at other substitutes on the grounds of both cost and supply reliability.
Offers are continuing to come into the UK for Brazilian cedar but demand and consumption are said to be at uninspiring levels, not least because the material suffers in price by comparison to West African sapele and Far Eastern meranti. As Brazil tussles with exchange rate problems, one trader said of the commercial unattractiveness of the country’s hardwood: ‘The only thing I have had out of Brazil so far this year has been a diary.’
Looking at the West African market, the end of last year brought an expected slowdown in activity and this has been followed by a fairly brisk resumption to trading in January – particularly since the middle of the month. That said, supply is generally tight, with some shipments affected by rains while prices for key species such as sapele and iroko are barely altered from their levels of late last year.
Cameroon difficulties
Log supply is understood to be difficult out of Cameroon, with a large proportion of the logs said to be originating from Congo and the Central African Republic.
Volumes out of the Ivory Coast are near to normal while Ghana is still battling against the additional 10% export levy imposed on lumber. The levy has led many mills further down the path of value-added production.
Ireland, has for some time now been an important market for West African iroko. Last year, however, the trade was reported to be carrying surplus stocks. These have since fallen back but, despite evidence of customers ‘topping up on certain sizes’, sales into the country have remained unspectacular.
One expert suggested this week that this tailing off may lead to a longer term decline in iroko’s share of the Irish market as other species – notably sapele and North American hardwoods – gain ground.
In the UK sapele is also continuing to make headway against other species. One trader said that he had anticipated an increase in sales of utile or sipo to make up for the lack of availability of mahogany. But, instead, his customers were increasingly asking for sapele.
US hardwood
The North American hardwood picture has brightened little in recent weeks. Figures suggest that the continent’s lumber production is down by 35% or by an estimated 5 million bd ft on the back of reduced industry confidence, profits and funding. And the consensus is that an upturn in the overall market is unlikely in the first or possibly even second quarter. But while these cutbacks have created shortages, they seem to have failed to translate into higher prices down the line for hardwood exports. Kiln-dried inventories are said to be sufficient for current demand.
For the moment, ash and white oak remain particularly weak. There was a suggestion this week that operators ‘are simply logging around ash’ but also that thicker specifications were much less available than standard 4/4. The hard maple price, meanwhile, has been stable at its lower levels. Some exporters are maintaining that tulipwood has ‘turned the corner’ and started to rise in price, but again there are deals to be found.
Almost inevitably, it seems, the only two North American hardwoods to attract truly positive comment this week were cherry – described as ‘firm to strong’ – and black walnut, whose price has been bolstered shorter supply.
One trader described the market for North American hardwoods as ‘ticking over’, adding: ‘We are selling our landed stocks – which must be good news.’ David Venables, European director of the American Hardwood Export Council, was also upbeat at AHEC’s annual European conference in Dublin late last year. With lumber sales over 800,000m³ and veneer business worth more than US$180m in 2000, the EU remained the biggest market and long-term prospects for American hardwood timber in Europe appeared good, he told delegates.
A leading importer also acknowledged that, while North American hardwood prices were generally on the weaker side at present, demand for most species remained reasonably healthy.
He also pointed to ‘a lot of buying interest’ in eastern European oak, the appeal of which had been bolstered by the fact that sap is measured out as a defect. The same source also reported interest in beech of both German and eastern European origin.
Slow sales
Turning to the Far East, the optimists had been hoping for higher levels of activity around dark red meranti given its price relative to West African sapele, but forecasts of price firmness have not been realised and sales are said to be quite slow. There was a reasonable amount of pre-Christmas buying by importers and traders to take advantage of Malaysian material that was priced low in order to develop income ahead of the slowdown around the Chinese new year.
The volumes of material coming out of Peninsula Malaysia and Sabah have been limited but this has not prevented meranti being available at ‘bargain basement’ prices.
As reported recently (TTJ January 26), Sabah Timber Association chairman Andrew Tham has warned that the state is over-logged and that the timber industry needs to allow time for Sabah’s forests to regenerate. Heavy rains and early preparations for Chinese new year have put a further dampener on a market in which many mills ‘believe they are due a price increase or two’.
Malaysian shippers themselves are expecting prices to rise following the Chinese new year break, not least because of the lack of material coming onto the market.
Keruing prices
The keruing market was described this week as ‘frustrating’ given that there has been little interest from the leading consuming sectors, notably vehicle and joinery manufacturers. ‘More sellers than buyers’ was how another regional expert described the market. He estimated that the keruing price had dropped by as much as 15% since November. But he stressed, that price declines in other Far East hardwoods were less severe.
The vehicle industry was described this week as ‘dire’, with reports of credit and other financial problems in the sector. Similarly in the US, the normally big-buying truck producers have cut keruing orders, pushing sellers into other markets.
The ‘huge’ range of prices on offer smacked of ‘desperation to turn logs into lumber, and lumber into cash’.
The view from the UK kilning sector was that 2001 had been a barely average year but that, in the early days of 2002, there were signs of a growing willingness among clients ‘to put their hands in their pockets’. The demise of some prominent UK kilning operations and the downsizing of others had seemingly convinced many in the trade of the need to pay more for their kilning work, one source suggested.
