Recent times have brought a widespread change of hardwood buying strategy within the UK. No longer is it a case of purchasers piling it high when good offers become available; instead, the current trend is decidedly in favour of buying less volume but on a more regular basis so as to minimise the risks associated with carrying high stocks.
‘Customers in the UK are getting very canny with their purchasing – there is a lot of caution about stockholding these days,’ said one hardwood expert. Another suggested: ‘Even though the UK economy is not bad, people are listening more to their accountants and not holding big stocks.’
One apparent effect of this widespread purchasing strategy is to ‘flatten out the highs’ and create a more bland market picture. Traders contacted this week were able to identify an improvement in business levels between April and June after a slow start to the year, with some suggesting that sales had declined again by early July. However, the overriding impression given was of a market short on turbulence and excitement.
‘The orders are smaller and there are more of them,’ said one trader. ‘The trade has got to get used to these levels because the past is gone and we won’t see the like again. Customers are purchasing their hardwood in a different way and there is less reliance on forward shipment – so I don’t think any of us are breaking any records.’ Another said: ‘We have made our targets so far this year but we haven’t really bashed them into the ground. It is hard to get enthusiastic when demand is so patchy – especially when last year was so good for us.’
Another recent phenomenon has been the emergence of big Continental-based organisations which buy up large quantities of hardwood from a variety of origins and feed that material throughout Europe. This trend has added to supply flexibility but has not had an entirely positive impact on some elements of the UK importer trade.
Price dips
As for the market itself, few hardwood species have been exhibiting price strength in the past couple of months. West African sapele, for example, has dipped by around 5% in the last month. As one African hardwood expert commented, the weakness of the French franc made sapele ‘such a good deal compared to Far East species’.
The price is being held in check, it appears, by competition among the mills themselves and by the fact that certain major buyers – notably Spain – have taken a back seat in recent weeks. Fixed dimensions that were hard to find some weeks ago have become available again. ‘It will take a big volume market to come back to underpin a rise in sapele,’ according to one source. Iroko has also experienced a fall-off in demand, with the key Irish market still carrying more than adequate stocks following the high levels of imports received towards the start of this year.
The belief persists in certain quarters that available volumes in the UK are not overly high and that any supply problems in the near future could quickly turn the UK market for West African hardwood on its head. One source ventured: ‘I think things will go crazy in September – but not before then – and people will struggle to get everything they want.’
Ghana’s additional export tax remains in place on kiln- and air-dried lumber and ‘is making people think about what they cut and what they cut it for’. Indeed, there have been examples of shippers cancelling orders because the agreed contract has become unviable for them. Log supply in Cameroon and Ivory Coast appears satisfactory as West Africa heads into the rainy season.
Talk of future shortages is also coming from the Far East, although there is no firm evidence at present to support these predictions. Following a period of stability underpinned to some extent by German buying, prices of dark red meranti have eased again in recent weeks to ‘levels which raise the eyebrows’, with at least some of the approximately 5-7% decline in 2in kiln-dried material attributed to a reduction in freight rates. Sales of meranti are hard to find throughout Europe and so short-term prospects for the producers appear less than bright, with several contacts suggesting ‘we haven’t seen the bottom of this market yet’. One buyer confirmed: ‘I don’t feel under any pressure to buy meranti forward because I can pick it up easily off the quay.’
Demand for keruing is meanwhile described as ‘stable’ to ‘flat’ with UK buyers able to acquire the sizes they need.
Meanwhile, the moratorium affecting Indonesian ramin is seen as part of the reason for a ‘stable to improving’ market position for the species. However, doubts remain as to whether a ban could be made to stick. ‘A ban won’t stop 100% of the material coming out,’ said one trader, ‘but it will stop a certain amount and that will keep prices firm.’
Downward movement
There has been a general downward movement in US hardwood prices over the past couple of months – notably in 4/4 thicknesses – although ‘prices are all over the place,’ said one trader. ‘I have just had two quotes from shippers for the same specification of hardwood and there was a 25% difference between them.’ The offered price varies according to the pressure on the individual shipper to make a sale, he suggested.
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“We have made our targets so far this year but we haven’t really bashed them into the ground. It is hard to get enthusiastic when demand is so patchy – especially when last year was so good for us” |
Black walnut is generally considered to be the only North American hardwood to have shown any significant price firmness over recent weeks; cherry is also deemed to have maintained its level although ‘you can still pick up the odd bargain’, it has been suggested. By contrast, most of the other ‘mainstream’ North American hardwoods – such as hard maple, oak, ash and poplar – have been under differing degrees of price pressure. Ash is described as particularly vulnerable because of a marked lack of buying activity from the US furniture sector.
A measure of ‘panic’ had been apparent in North America earlier in the year as all the talk seemed to revolve around the inevitability of a recession. Prophecies of doom have been replaced by a greater sense of calm as Americans ‘are starting to live with the fact that their economy is less buoyant than it had been’. One source highlighted ‘the growing trend towards hardwood production cuts’, with export and domestic prices at levels that are low enough to dissuade many operators from cutting logs.
Several contacts suggested that supply could become tight before the end of the year given the trend towards production curtailments and even mothballing. There are even predictions that lumber prices may begin to show an improvement as early as the autumn.
The growing influence of China on the world timber markets was highlighted at the American Hardwood Export Council‘s Southeast Asia & Greater China Convention last month, which was attended by more than 650 delegates (TTJ June 23). Statistics reveal that US hardwood sales to China soared from US$41m in 1999 to US$73m last year. That said, there are reports of a relaxation in Chinese purchases of European beech and suggestions that lower volumes of US hardwood may also be heading out to China for the moment.
The story on Brazilian mahogany remains largely unchanged: the Americans continue to snap up most of what becomes available and the UK is left with meagre pickings at ‘horrendous’ prices that appear to go up every week. The new season is beginning and, in theory, offers should be starting to come in – ‘but it just isn’t happening,’ said one contact.
Cedar market
The virola market is described as ‘quite firm’, while cedar is not being bought in any great volume in the UK.
Demand for high-quality home-grown hardwoods continues to be heavily influenced by imports from Europe, North America and the Baltics, while lower grades are still suffering from poor demand.
As in many other sectors of the domestic timber trade, harvesting and transport operations were adversely affected in the early part of the year by poor weather which only began to show marked improvement in the second quarter. There have also been access problems as a result of the foot and mouth crisis.
Meanwhile, recent contro-versy over the rising cost of the Scottish parliament building in Edinburgh has overshadowed concerns that a US company has won the contract to supply oak laminated windows to the new development and that these will be made in Thailand (TTJ May 26).
It was suggested earlier this year by the parliament project team that domestically-grown timber would be unlikely to meet all the wood demands of the Edinburgh building. However, according to the Scottish Timber Trade Association, the choice of windows has not only denied business to domestic companies but also threatens to undermine the standing of timber windows in general if those selected ultimately prove to be sub-standard or fail in service.
Domestic hardwoods, as well as Continental and African species, still appear to be the principal fare of the UK kilning sector which reported an ‘adequate but not spectacular’ first half to the year.
Curtailing activities
Some well-known names have left the sector or curtailed their activities over recent months and this has provided additional work for some of those that remain; nevertheless, kilning prices continue to be keen and operator margins are under constant pressure. ‘Customers won’t pay what we need to refurbish our operations and keep them going – the prices of our raw materials are getting dearer but we can’t recoup these costs,’ lamented one kiln operator.
Another problem highlighted by a couple of sources this week surrounded delayed shipments and arrivals. This creates planning difficulties for smaller yards in particular, since there is limited space in which to carry stock.
