Although European markets have been dull through the summer, West African exporters have been kept busy with active buying for China and India. Prices have held firm after some notable increases in June and exporters remain confident of a modest upwards trend to the end of the year. Indian buyers seem to be even more confident and are prepared to pay asking prices. According to Malaysian sources, China and India have replaced Japan as the largest buyers of Far East logs. Selangan batu (balau) logs are now at US$270/m3 FOB and kapur at US$170/m3 FOB, a jump of US$20 as a result of recent purchases for India.
As reports of price hikes and the very difficult log supply in South-east Asia are confirmed, West African producers feel their markets, especially for logs, are set firmly in their favour. There have been few prices changes for West African logs over the past two months, in the main the adjustments have been in response to varied demand patterns, though in July iroko prices fell by some €60/m3 as buyers in Europe felt the increases early in the year had priced it out of the market. Since then European buyers have again started to take up modest volumes of sawn lumber and log prices are now stable. The other problem species has been sapele which had a major price fall because of lowered demand, high production and some quite large stock levels in export ports waiting for buyers. The stocks have now reduced but prices will take time to recover, possibly not before the beginning of 2006. Recent log price changes for a few species are in BC/C grades which are exported to China. It is likely the most significant price changes in the fourth quarter will be bunker surcharges due to the rise in oil prices.
However, in view of the overall lower log supply, and the efforts of governments in producer countries to maximise tax income from their forest resources, it is unlikely this will put anything more than margin pressure on exporters’ asking prices and buyers will be the ones forced to pay the higher freight costs.
Okoumé continues to be the major volume export species with Conga Brazzaville reportedly shipping 15,000-30,000m3 per month. In contrast, the commercial forest resource of Equatorial Guinea is said to be virtually logged out. Gabon continues to export substantial volumes of okoumé, but far less than in previous years, and from next year the government will bring in regulations restricting exports of logs of selected species and reserving these for local processing.
Price readjustments
Prices for sawn lumber have also remained stable through the summer and, as with logs, just one or two species are suffering some readjustments. Iroko and sapele again, though iroko prices have moved a little higher on revived European demand, but most other species are selling rather slowly to Europe. Cameroon mills have tended to be up to €20/m3 lower than Gabon for moabi, douka and utile. Gabon exporters say they were able to hold their prices and attribute the ability of Cameroon exporters to offer cheaper to the recent spate of small, locally-owned Mighty Might and Lucas bush mills which do not pay the same high land and logging taxes as fixed mills. Exporters complain that with the improved shipping services European buyers have been reducing their landed stocks and are pursuing a just in time policy.
Ghana is reported to be concentrating increasingly on sales to neighbouring countries such as Nigeria. Ghana’s third-quarter revision of the minimum guideline export prices left most species unchanged with very few increased by a small percentage.
Stock levels
Stock levels in West Africa are normal but demand from the UK, the Netherlands and Portugal has been low. There has been strong, renewed interest from South African importers looking to secure long-term supplies of sawn lumber, no doubt in reaction to the more difficult supply situation in South-east Asia and to the higher prices for DRM and the other top species. Prices for exports of sawn mixed light hardwoods in Asia have moved down with a slight oversupply and lower demand, but the better species are still on an upward trend and likely to maintain a steady increase, a situation not lost on West African sawmillers. A further stimulation in demand for sawn lumber results from the Indian government reducing the import duty on sawn lumber from 30% to 15% last February and removing a countervailing duty. This was replaced with a 2% levy on the applicable duty so the effective duties are now 15.3% on sawn lumber, 34.4% on all other items and 5.1% on logs.
India’s fast-growing economy has stimulated activity in the timber sector. Indian importers have offered West African producers large volume contracts for selected species and are seeking to buy into joint ventures. European timber companies have been relinquishing their dominance over African concessions and production facilities. The most recent major investments have come from Malaysia and China.
It isn’t likely that tropical timber prices will rise as quickly as the recent price of oil, but West African producers and exporters are confident that markets will remain very firm.
