Despite reports of reasonable activity in October, something of a ‘spot’ market mentality has developed for hardwoods in the UK, with few importers appearing to have the confidence to commit themselves forward to any great extent. ‘Orders are down in volume and everybody wants the material double quick,’ said one industry expert.
As for profits, another source lamented that the only margins likely to be seen by the hardwood trade at present ‘are down the sides of these pages’.
The main news of late has been the fresh setback for supply of mahogany following an announcement last month by the Brazilian government that it was suspending the transport and export of mahogany. According to several contacts, the restrained reaction by the UK hardwood trade reflects the diminishing volumes of Brazilian mahogany imported in recent years.
Environmental lobby group Greenpeace recently sought to re-focus attention on Brazil through the publication of a document entitled Partners in mahogany crime, which alleges the involvement of ‘mahogany kings’ in illegal logging activities and insists national/international agreements, action programmes and laws pledging to protect the Amazon or control the mahogany trade have proved ‘hopelessly inadequate’.
Greenpeace plea
In the UK, Greenpeace has called on the government to seize imports of Brazilian mahogany and on retailers – the publication names Harrods and the John Lewis Partnership in particular – to remove mahogany products from their stores. A Greenpeace press release issued in late October says: ‘The ban will stay until the Brazilian government can carry out a full investigation into rampant illegalities in the industry.’
There is a general expectation that mahogany supply will restart once IBAMA has carried out its inspections, although little, if any, material is thought likely to move before the end of the year. ‘There are no quotas and we don’t know when there will be quotas,’ said one trader. Another spoke of ‘frustration’ among customers that the timber was not available to them but added that there had been no order cancellations to date.
Despite the historical significance of mahogany in the UK market, many UK hardwood traders have become tired of the long-term complications surrounding its import and choose to leave well alone in favour of other South American species. The market has become ‘too uncertain’ while, despite the economic downturn in the US, the Americans are still proving adept at mopping up most of the available supply, it was suggested in several quarters.
One trader described the mahogany decision as ‘pretty irrelevant’, adding that it had become ‘a secondary species’ in the UK. Another leading UK trader suggested: ‘Mahogany has almost priced itself out of the market. The main importers are still holding some stocks but the US is now almost the only market.’ He pointed to African utile/sipo as ‘a great alternative’ at a much lower price.
While the UK has grown increasingly ‘fed up’ with mahogany, another source suggested that the US was unlikely to turn its back on Brazilian mahogany, given the high levels of investment already made.
‘The US has put a lot of money into Brazil,’ he said. ‘Brazil is their back yard, they know how it works and so they will want to see their returns.’
The UK hardwood sector’s disenchantment with mahogany has not prevented some anger being expressed at the ‘broad brush’ Greenpeace attack on imports. One contact spoke of his concern over ‘all this propaganda’ and cast doubt on some of the assertions made by the environmental group, adding that, over the years, his own company – along with many others – had been forced to follow strict procedures governing mahogany imports.
For the moment, the UK market for Brazilian hardwood is relatively depressed. Some buyers appear convinced that they are over-stocked, with the result that hand-to-mouth purchasing has become more commonplace.
Offers of Brazilian cedar are said to have increased – possibly because the important US market has been showing less appetite following the downturn in its domestic economy.
The US hardwood export statistics for the year to July indicate that volumes have been running10% behind those of the corresponding period in 2000. Meanwhile, UK imports of American red oak and black walnut increased substantially in the first half of this year: the former soared 137% to 9,340m3 while the latter jumped 50%. Joiners and hardwood traders alike identify black walnut as an increasingly high-profile ‘fashion’ product for customers looking to achieve ‘contrast’.
In the US, mill production cutbacks and closures during the year are beginning to have a measurable effect. There remains a reasonable availability of kiln-dried US hardwood but the situation is expected to change in the coming months owing to ever-shorter supplies of green lumber. According to one regional expert, concern over the dwindling strength of the domestic economy has prompted mills to reduce production by an average of around 25-30% this year, while tulipwood production has been trimmed by nearer 40%.
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“Everyone is feeding off stocks and has not got the confidence to put on big orders” |
Shortages forecast
Looking at individual species, several UK traders are anticipating the emergence of shortages over the medium term – notably in cherry and black walnut. Prices for the former were described this week as firm to firming, while good demand from both home and export customers is said to be outstripping supply. Black walnut availability is becoming difficult although the price appears to have reached a plateau following a period of firming.
Price levels among the other mainstream North American hardwoods – including hard maple, red oak and white oak – have been stable over recent weeks, while there are signs that the drastic production cuts affecting tulipwood ‘are beginning to have the desired effect’. One trader said that prices for the species had risen by ‘10% in the last month’ and that supply and demand have ‘certainly reached equilibrium’.
Given the increase in green lumber prices, there is concern that kiln-dried hardwood prices are not following suit. Indeed, there were complaints at the recent American Hardwood Export Council‘s European convention in Dublin (TTJ November 10) about the inability to push up kiln-dried prices in line with rising ‘green’ prices. One of the explanations appears to be that some exporters are eager to turn stocks into cash and are therefore willing to sell at lower prices.
Rises imminent
That said, there is a widespread belief that the market is already running in the direction of shortages and that price increases are ‘imminent’ for North American hardwoods. Stocks in the UK are thought to be reaching low levels, with many buyers still content to pick up stock off the ground rather than take the perceived risk of buying forward.
Several hardwood contacts were pinning their hopes on a busy start to the new year following a period of reflection for buyers over Christmas.
Turning to the Far East, dark red meranti prices have moved up several percentage points since the late summer and have generally managed to hold on to most of this gained ground. There have been reports of tighter supplies from the Far East as a result of the rainy season and sawmillers/loggers reducing their activities in the face of low prices. ‘There does not seem to be a great deal available for quick shipment,’ was one comment this week.
The European market has been generally quiet in recent weeks, with the odd suggestion that some UK importers are prepared to reduce their commitment to stocking the species because profit opportunities have become restricted. It was also indicated this week that a flurry of timber arriving from the Far East in the latter part of the summer was still serving to satisfy current appetites in the UK. By contrast, one UK trader said that his sales of DRM had been maintained, although his total sales of hardwood from all regions were between 10-20% below budgeted levels for the whole year.
Meanwhile, after enjoying stable prices for most of this year, it was reported that the price of keruing has slipped several percentage points, partly as a result of a reduction in demand from the important US market.
African hardwoods are also said to be suffering from the ‘limbo’ effect created by the general lack of forward buying in the UK market. ‘Everybody is feeding off stocks and has not got the confidence to put on big orders,’ said one regional specialist, adding that stocks would ultimately diminish and that an anticipated post-Christmas rush in demand for sapele might prove difficult to satisfy.
The supply of sapele out of Cameroon continues to be difficult as a result of logging restrictions, log shortages at some mills and poor weather. However, volumes have continued to emerge from the Ivory Coast and Ghana. One trader described the overall supply situation from Africa as ‘a bit sticky’ but added that prices were generally unaffected because of the low volume of orders being placed.
A substantial amount of the sapele coming into the UK has been arriving from the Continent and one contact predicted that, over the next 10 years, ‘a very large proportion of tropical timbers’ will follow the same route. He also predicted a substantial hike in the volume of ‘traditional’ hardwoods – such as oak and ash – arriving from eastern Europe, provided that the region’s infrastructure concerns were addressed.
As for other African species, utile remains popular but is available only in small quantities while the Irish love affair with iroko appears to be hitting some rocks. Ireland continues to buy the species, but ‘in dribs and drabs’ and ‘according to certain specifications’. Price appears to be something of a problem and one contact said that there may be an increasing reaction in favour of sapele among some Irish buyers.
