Demand for red oak from coffi n manufacturers did not hit its usual midwinter peak this year.
But that was about as adverse as comments got in a round up of UK hardwood sector business in 2015. At the same time, no one reported a standout 12 months. The consensus was that trade progressed from a fairly competitive fi rst half, to a stronger second and that this added up, as one agent/ importer said, to a year that was ‘good enough.’
"We hit most targets and there was an overall sense of stability. In a trade still carrying psychological baggage from recession, it was acceptable."
At the same time, the sector faced its challenges. These included, said an agent, ‘standard shifts in species demand’, but also ‘more than our share of currency fl uctuation thanks to Eurozone problems and Brexit vote anticipation’.
Underlying strategic market developments were also highlighted, with potentially more to come. These included a perceived increased infl uence on demand of the EU Timber Regulation (EUTR), and there was renewed speculation about EUTR-exempt FLEGT-licensed timber; will it fi nally arrive in 2016 and how might it affect trade.
As one importer said: "There are numerous factors to consider in today’s trade, besides buying and selling hardwood."
The consensus was that market momentum weakened in 2015, but this was business settling down to more sustainable growth, while initially causing a trade hiccup.
"2014 always felt a bit of a bounce back, but everyone hoped growth levels would continue," said an importer. "So we stepped up buying and come January 2015 there was lots of stock on the ground. Things then slackened off, the Euro fell further, and it got competitive."
"When the Euro hit 1.38 to the pound, sapele was especially bloody, with a lot of stock bought around 1.25," said an agent. But as this excess worked through and the euro levelled, business steadied. "Quarters two and three were better and fi nal fi gures weren’t far off 2014," said an importer/ distributor.
The increased profi le of Continental traders, notably Italian and Spanish, including some trading from UK landed stock, was seen as further evidence of the market’s relative health. The sectors still cited as underpinning business were joinery and furniture.
"Joinery producers report solid demand nationwide from newbuild and RMI," said an importer. "We’re also doing endless amounts for door frames for hotel and restaurant projects, plus major developments like Battersea Power Station."
With some exceptions, price trends across tropical and temperate timber also refl ected a broadly steady market.
"2015 prices are best described as boring," said an importer. "Currency movement blurred lines, but overall we saw fi rming of 5%-7%."
Among trends in species’ market share the continuing rise of European oak versus American white was mentioned most. It was attributed partly to further narrowing in price difference, accentuated by the initially weak Euro and not seriously affected by the latter’s recent recovery thanks to simultaneous strengthening of the dollar.
"For 1"/ 25mm Prime/Fas grade, European is still 35% more, but 2"/50mm prices are almost the same," said an importer.
European oak’s perceived quality and availability processed to UK market specifi cation are other established factors in its favour, but the EUTR is now cited too. "European oak is FSC-certifi ed by default and that’s an EUTR risk mitigating box many want ticked," said an importer. "FSC US white oak just isn’t available in the same volumes."
Demand for European was seen as a factor behind US mills cutting white oak prices up to 10% last year. And this market share shift is expected to be long-term, although there is currently some medium term relief for the Americans. Excluding currency fluctuation, European oak prices also firmed 10% through 2015 and it’s scarcer too thanks to rising Continental demand and continuing supply bottlenecks as more Croatian millers process their logs rather then ship them to Italy.
However, it seems switching back to white oak may not now be so easy. "American forward prices are firming too, up 2-3% already this year," said an agent/importer. "That’s partly the rising dollar, but also increased US domestic demand from construction and other sectors, including the booming Bourbon business, which may affect availability too."
The next hottest temperate hardwood topic is the lifting of the EU phytosanitary rule derogation for US ash, to combat spread of Emerald Ash Borer. From January this meant ash from beetle-infested areas must be debarked, have 2.5cm of sapwood removed and kilned. Consequently EU traders are looking at alternatives, notably European ash. Lending weight to an importer’s view ‘that this could be curtains for US ash in Europe’, American suppliers are also reported to be looking elsewhere.
"The EU rules are really disruptive for mills, so they’ll inevitably explore alternative markets," said an agent.
Among other US species, tulipwood demand continues to grow, while maple and cherry ‘remain on the fringes’ and the fashion for black walnut has faded.
Red oak demand remains steady overall and still almost exclusively for coffins, with the recent hiatus here attributed to mild weather.
"Cold winters still mean more funerals, so as the seasons seem to have shifted, so have red oak sales patterns," said an importer. "But it’s still the UK coffin timber of choice. We buy two containers per month and one of the big importers up to 20."
The big European species issue remains BM TRADA Q Mark and Warrington CERTIFIRE’s withdrawal of approval of beech for 60-minute fire door frames.
"The Germans are examining routes around this, like fire treatments," said an importer. "But currently it’s the rule, so we need new markets for CND beech and alternatives for fire doors. Options include sapele, lyptus and we’re also promoting FSC US maple."
Sapele, of course, remains the UK’s tropical mainstay. Following suppliers’ earlier attempts to raise prices, and the market glut at the start of 2015, it has come off in price 2-3%. As with sipo, however, that’s been offset by a stronger Euro and the overall fluctuation seems to have had minimal sales impact. Iroko demand is also good, but availability tight, so prices have firmed.
Some feared framire might fade, with suppliers unable to satisfy EUTR due diligence requirements. But, thanks to increased availability legally verified and certified, this hasn’t happened.
From Brazil, jatoba, cumaru and massaranduba sales are described as ‘sustained’
Meanwhile meranti demand is reported ‘stable at unexciting levels’.
"We thought collapsing Asian freight rates would help meranti," said an importer. "But joiners remain locked into sapele."
Messages on new hardwood products, species and substitutes are mixed.
Suppliers of ‘Grandis’ products and modified timber, notably Accoya, say growth continues. But headway for lesserknown tropical species remains slow. Some end users have adopted movingui as an iroko alternative. "But it’s generally bigger joiners with advanced technology," said an importer. "Smaller processors say it causes too much machine wear and tear and won’t be persuaded."
Its a similar story with engineered hardwood, such as laminated sapele and frake.
"Bigger joiners going the standardised dimensions route like engineered," said an importer. "But most want what they see the flexibility offered by mixed dimension packs."
As to whether EUTR-exempt FLEGTlicensed hardwood will finally become a market factor, scepticism remains over Indonesia meeting its pledge to ship the first to Europe this spring. But most agreed with one agent that ‘noises from Defra about Indonesia implementing its FLEGT agreement this year are the most positive yet’. And traders still believed the initiative could prove its worth.
"It’s another step, alongside EUTR, in eradicating illegal timber and being seen to do it," said one. "It entails entire supplier countries implementing timber legality assurance systems supported by the EU. So we should get behind it. Longer term it could persuade buyers to switch from one source to another."
The £31 per licence process fee to be charged by the UK FLEGT competent authority, was also not seen as an issue. "It will still cost less than EUTR due diligence," said a trader.
But the consensus was also that neither EUTR, nor FLEGT licensing, with their legality focus, would diminish demand for certified sustainability.
"We should see continuing increase in demand for FSC and PEFC certification as they complement legality measures," said an importer/distributor. "And we should promote them as such. Our industry can no longer take shortcuts on legality or sustainability. We’ve got these tools and we must use them all to full effect."
Looking forward, an importer said question marks over FLEGT licensing’s arrival were yet another factor making 2016 difficult to predict.
"Combine that with increased political instability globally, China’s slowdown and the EU referendum and it’s almost impossible to call," he said.
An agent agreed there were no clear signs to read. "But there’s no more reason to anticipate downturn than things getting better significantly quicker," he said. "In the meantime, 2016 started well. We’re meeting budgets and things are looking pretty level, with expectations of spot prices across the board rising [only] slowly through the year. So we’re optimistically cautious."
