UK hardwood traders anticipated a strong start to 2015 after a 2014 described as ‘sound’ and ‘on an upward track’. But the New Year did not generally live up to expectations.

There were exceptions. One relatively new importer/distributor reported their busiest half to date, although acknowledged that could be partly due to being a launch ‘moving up to its market level’.

Another described their first six months as robust, with a focus on shopfitting and joinery playing a significant role.

However, while no-one reports dramatic reverses, others report trade steady at best, and some a loss of momentum.

"Business took care of itself last year and we sold right up to Christmas," said an agent. "But January turned more hand to mouth."

"It wasn’t bad, but we weren’t where we’d hoped based on last year’s trends," said an agent. "We went from a smooth upward track, to bumping along."

The change in climate was attributed to several factors, including anxieties over the election and a possible hung parliament.

After the outright tory win, some saw a bounce back, but others didn’t. They reported customers’ concerns then switching to austerity measures and a potential public construction downturn.

Destocking put the brakes on too. "Price inflation and demand through 2014 put the trade in a buying mood," said an agent. "So we faced a less buoyant 2015 with a lot of wood companies then needed to offload."

Exacerbating the picture for African traders was the Euro’s slide against sterling.

"It left those holding African stock in sterling, notably sapele, at a 10% disadvantage," said an agent/importer. "The usual suspects treating sapele like the MDF of hardwoods worsened the situation and we had to drop prices to compete."

In terms of supply, North American species were reported readily available.

"There’s more timber in the system," said an importer. "That’s partly due to US mills restoring production, but more recently it’s been down to falling demand from China, which accounts for 30-50% of some producers’ order books."

US prices hold firm
This supply picture led to a red oak price squeeze, with one agent/importer reporting another 20% drop since May. But it hasn’t produced much softening in other species, with prices underpinned by demand at home and from other export destinations. Poplar is reported down around 5%, but, at most, white oak only saw ‘small reductions’ and ash held steady.

The species besides red oak that did see more of a dip was walnut. It’s down 10% since January, attributed to it "coming off the boil as the fashion species".

Both American maple and cherry were reported stable, but still described as "marginal species", although some hoped for more from cherry following promotion from the American Hardwood Export Council (AHEC).

And despite recent price cuts, red oak is still making little UK headway.

"In four quarter red it’s 30% cheaper, but with white oak still dominating every end use, it’s difficult to see red penetrating," said an importer.

The supply source where most issues are reported is Europe, with availability generally tightening, notably in oak.

"The dollar’s strength against the Euro has led to European users switching from American to European oak," said an importer.

"Consequently mills report log shortages and auction price increases and August shutdowns could exacerbate the situation."

An added ingredient is a strategic change in European oak processing. Croatian mills are undertaking more processing themselves, rather than ship logs to Italy, and the shift is said to be causing disruption.

The consequence of these factors is an 8-10% increase in European oak prices and ‘mills pressing for more".

European oak momentum
Longer term, however, particularly as supply stabilises, traders don’t see the species losing its impetus against US white oak.

"They’re different timbers, but there’s market overlap and the weak Euro is seeing European gain ground regardless of recent price and supply issues," said an importer.

"26mm European remains more expensive than four quarter American, but in 50mm they’re on a par, as are 10-12 quarter US and 65-80mm European, which now has 90% of the European market."

Views diverge on European beech availability. Some say supply has fallen due to demand elsewhere in the EU and recent mild winters impacting harvest. But others haven’t faced the same issue, perhaps, they suggested, due to different supply chains.

"We haven’t had supply or demand problems," said an importer. "We’ve even seen superior grades bought as colour no defect instead of poplar and framire," said an importer.

Few issues were reported with African supply either, other than the ‘fact of life that lead times remain six to nine months’.

Sapele mills were reported to have ‘good order books and healthy supply lines’, with sales prices stable, despite UK spot prices falling 7-8% due to overstocking concerns.

Some forecast sapele supply tightening in coming months, but another importer saw "no shortages any time soon".

There was more of a consensus that gaps may appear in iroko supply, which saw prices firm 4-5% due to buoyant global demand.

Similar concerns were expressed over sipo/ utile, but prices were reported steady, while framire had ‘good and average months, but overall was trading OK’.

The meranti market was also ‘uneventful’. "It has its followers, but doesn’t really threaten sapele, despite being 25% cheaper," said an importer.

The market seems divided on demand for engineered hardwoods, such as laminated and finger-jointed components. One agent said UK buyers and end users remain resistant. "They still like a solid face and aren’t adapting to the standard dimensions these products come in."

However, others, notably grandis eucalyptus and redwood suppliers, report customers increasingly persuaded by engineered products’ yield and technical performance arguments.

"As we’ve dropped anything without third party proof of legality, we’re also increasing our composites decking offer," said an importer/distributor.

Meanwhile, the drive to increase sales of lesser known tropical species is not yet having a discernible impact.

"It could increase forest utilisation up to 50%," said an agent/producer. "But so far the market isn’t persuaded."

"It’s a case of both securing supply and convincing people to experiment," said an importer/distributor.

Few have seen much movement in certified sustainable timber sales either.

EUTR hardwood focus
"Some thought the EU Timber Regulation (EUTR) would boost certified demand, others that it would suppress it," said an agent. "But the truth is that customers who specified it before continue to do so, and vice versa."

On implementation of the EUTR itself, there’s anecdotal evidence that enforcement agency, the National Measurement and Regulation Office (NMRO) is now increasingly focusing on the sector, with sapele from Cameroon under particular scrutiny following a critical report from Chatham House.

The NMRO itself could not comment on its activities, but companies seem unfazed it might be paying them more attention. They say the EUTR is now assimilated into their management systems and actually backed stronger enforcement.

"It’s in our interest to interrogate our sources of supply more and to ensure we are and we are seen to be a legitimate trade," said an agent.

Stable and positive outlook
The hardwood sector is equally unperturbed by prospects for the next six months’ trading. The first half may not have met expectations, but adverse factors, notably destocking, now seem to be working their way through the system.

There’s ongoing concern over the fortunes of the Eurozone. One importer also raised the spectre of a possible return to over-stocking later in the year, while others predicted gaps in sapele supply and a recovery in Chinese procurement forcing the market to ‘revise its price and availability outlook’.

However, an agent said the picture is now generally "more stable and positive".

"We’ve seen a second quarter pick up, leading to June being our best month so far and September to November is traditionally hardwood’s busiest period."

Another importer/trader also detected a further rise in confidence.

"Joinery customers are reporting growing order books due to both construction and RMI demand and staircase manufacturers are chewing through all the oak we can supply."

"While we had a bit of a rocky start, it hasn’t been a bad six months overall, perhaps down 5% on 2014," said an importer.

"Currency trends will be key, but if we manage that, we should be OK. In fact, we don’t anticipate being far off 2014 results for the year overall."