Hardwood businesses are no longer experiencing what one called the “feeding frenzy” for timber that characterised the first half to three-quarters of 2021.
“There’s more stock around and prices are more stable, albeit at continued high levels,” said an importer. “Trade is not going into reverse, but it’s not the bun fight we saw at some points last year. It’s probably most accurate to say the market has normalised.”
But where continued stress is reported, and expected by some to intensify, is in hardwood supply.
“It’s down to a combination of factors,” said an agent. “Global demand continues to grow as economies emerge from the health crisis and output in some key sources, notably tropical countries, is still constrained by Covid-safe work practices, or mills playing catch up even after these have been relaxed. The disruption pandemic caused in shipping, and particularly container distribution, is also affecting availability – as well as freight charges – and a further Covid hangover is hold-ups in export administration.”
They added that, with further concern over the impact Russia’s log export ban may have in the trade, their principal concern going forward will be “getting hold of the timber”, while “sales can take care of themselves”. That seems to be the general consensus.
“While we experienced a bit of a hiatus over the festive season and we’re not at the pace of summer 2021, we had a strong January,” said an importer. “We’re ahead of budget and all the signs are for continuing healthy demand.”
Construction is expected to be a continuing key driver for the sector, a view borne out by latest forecasts for the industry from the Construction Products Association (CPA). Following 2021’s 13.3% increase in UK building output, it predicts further growth of a “robust 4.3%” in 2022, taking turnover 3% ahead of 2019, followed by 2.5% in 2023.
The CPA predicts that infrastructure will be the strongest construction area, but private housing is also expected to perform well, with 3% growth in 2022 and 2023, following last year’s 17%.
Private sector RMI, which gave the UK timber sector generally such a lift in 2021, is also predicted to remain buoyant. The CPA forecasts that inflation may slow consumer spending on larger renovation projects and that overall RMI activity won’t increase. But, with home-working seemingly set to be the post-Covid norm for millions of consumers, driving further expenditure of money saved from not taking holidays and reduced leisure activity in the pandemic on converting houses and gardens to live-work spaces, it predicts the sector will plateau at the high levels of 2021, when it grew 17%.
“According to the Bank of England, households have accumulated £200bn of savings since the initial Covid lockdown,” stated the CPA. “And the demand for a better quality home environment, the so-called ‘race for space’, appears to be continuing.”
Hardwood suppliers are getting continued healthy demand from general joinery too, with customers reporting solid order books into 2022.
“We’re yet to see significant recovery in retail, but we’re also getting some pick up in the pubs and wider hospitality sector,” said an importer-distributor.
Overall, while some switching is reported from most expensive hardwoods to cheaper species, there also seems so far to have been little customer push back on continued high prices.
“When softwood prices started to fall some customers held off, wondering if hardwood would follow suit,” said an importer-distributor. “But in December, they started coming back, realising that wasn’t happening.”
On the various sources of supply, despite exceptional price increases and mills struggling to keep up with demand, the American Hardwood Export Council reports UK US hardwood imports in the first 10 months of 2021 up 81% to 135,000m3. That was higher than any full year in the last 30. However, an importer-distributor did not expect volumes to stay at these dizzying heights into 2022.
“The market’s well stocked, plus we saw a degree of switching to European species when US supply was most problematic and prices hit their peak, with white oak and tulipwood doubling over the year and other lead species up 40-60%,” they said.
Another importer said, while they were still experiencing “pretty good demand for American”, there were continued supply constraints.
“Covid is still impacting output and we’re seeing long lead times,” said an agent. “Shipping services also remain restricted – we recently had to suspend a contract to New Zealand as there was no service out of the eastern US.”
Meanwhile, prices of white oak and tulipwood are reported to have softened recently, but only marginally, with walnut, ash, maple and cherry remaining firm. “Price levels overall are still being sustained by US exports elsewhere and strong domestic demand,” said an importer.
Some importers report a “reasonable flow” of hardwood from Africa, but others say supply is becoming increasingly problematic.
Covid affected the African timber sector later than counterparts elsewhere, but it is now impacting the continent’s production, logistics and export administration. Constraints in shipping services and container shortages are added problems.
“We’ve seen lead times increasing for a while – we’re still awaiting shipment on some 2020 contracts,” said an importer. “Some suppliers also report possible exploitation of the situation by shipping lines. They say they’re being drip fed containers, so it’s holding up stuffing. They’re then late getting cargoes to port and being charged demurrage.”
They saw little prospect of the situation improving, suspecting it was more likely to deteriorate. Consequently the advice to customers was to order African sooner rather than later.
“I would say that as a salesperson, wouldn’t I, but I think those who don’t place contracts now could regret it in a few months,” said the importer.
A point made by importers in the last TTJ hardwood report (TTJ November/ December 2021), that they were seeing less sapele coming from the forest, continues to be mentioned.
Another importer said that, while they were currently securing supply, the “narrative over the next five-plus years is for sapele to become scarcer”.
“Some see this as an opening for more secondary African species,” they said. “But the UK generally is moving away from random width timber. They want something easy to deal with, and increasingly moulder-ready. Rather than seeing other random width African hardwoods coming into play, I believe we’ll move to more engineered tropical product, comprising various species.”
The overriding issue mentioned by importers for Asian supply continues to be container rates.
“Shippers still don’t have access to enough boxes in the right place at the right time and that’s still reflected in cost,” said an importer. “They may have come off last year’s peak, but there’s no sign of container rates returning to anything like pre-Covid levels.”
The number of importers using cheaper breakbulk from Asia is reported to be continuing to increase, although it’s still regarded as more difficult to plan and less reliable in terms of delivery date. Slow discharge is also said to remain a problem, with UK port workers no longer used to handling timber breakbulk.
“We’ll see how the experience treats us, then decide what to do going forward,” said an importer trialling the latest service.
Others report Asian freight problems leading to customers switching to meranti alternatives, including sapele and also, with shipping from South America improving, engineered grandis.
European oak supply has also tightened, with some comparing the position to that of American white oak mid-2021.
“The price is up with further rises to come, but even if you’re willing to pay, it’s increasingly difficult to secure the volume,” said an importer-distributor.
The situation was put down to various factors, including increased demand in the rest of Europe and elsewhere, plus previously mentioned changes in Croatian policy on sales of logs from state forest.
“More are being offered in open auction, rather than put out to tender, which is increasing competition and driving up prices,” said an importer. “Overall, European oak log prices have increased recently a further 10%.”
Others report longer-term deterioration in European log quality, reducing supply of the UK’s favoured prime grade.
Another preoccupation of some is what effect Russia’s log export ban will have on hardwood supply.
“The key is how Chinese hardwood importers, major Russian log buyers, will respond,” said an importer. “They may buy more Russian lumber, but it’s inevitable they’ll also increase log purchases from elsewhere. That includes Europe.”
European beech is reported to be more readily available and seen by some as an oak alternative.
“It’s very much in vogue as a good utility hardwood that’s still reasonably priced, although we’re now seeing rises of about 10% per quarter,” said an importer.
Demand for modified wood also remains buoyant but, said one importer-distributor, Accoya supply continues to be limited by development work at Accsys Technologies’ production plant.
Looking ahead, the hardwood sector remains in positive mood with demand and margins expected to stay “solid”. At the same time, it’s acknowledged that supply challenges will persist.
“The fact that it’s not easy to buy wood has enabled us to get a bit more margin and increase turnover and current dynamics look set to be with us through the year,” said an importer. “There will be supply peaks and troughs. To prevent that being a problem it’s down to the trade to manage the situation sensibly.”
