The consistent high demand from China and India has resulted in a steady if unspectacular rise in West African export log prices through into the third quarter.
The trend has continued for selective increases in the prices of species outside those normally of interest to buyers in Europe. Many of these timbers, less popular or less used in Europe, are today some €30-45/m3 higher than this time last year, while newcomer okan is over €100/m3 higher than in August 2005.
Of the European favourites, iroko is €15/m3 cheaper than last year, in spite of a rise of €15/m3 during July, and the price of sipo has remained unchanged despite the greater interest from US importers having to buy the African khaya mahogany and mahogany type species to replace the almost unobtainable South American swietenia.
Sapele managed to hold on to a rise of €30/m3 after a long period out of favour, and bubinga scored a recent gain of just over €90/m3 on strong buyer competition from Germany, China and India. Gabon announced a 4% increase in the payments to producers of okoumé and ozigo and the state timber marketing organisation SNBG is expected very shortly to issue a new log export price schedule. China is now by far the largest purchaser of okoumé.
Risk of collapse
A Standard & Chartered Bank report quoted in the African Monitor has warned that African exports to China have “a high risk of collapsing” should there be changes in policies or an economic slowdown. China now obtains more than 20% of its oil from Africa and has become a dominant player in the timber industry in the past few years, as well as making considerable investments in minerals.
Observers in the timber trade – noting the ongoing shortage of logs in South-east Asia and China’s massive increases in exports of plywood and other wood products dependent on imported raw timber – might well beg to differ on the grounds that even in the event of an unlikely economic slowdown, China is hardly likely suddenly to let go of these newly won markets. Moreover, at the import end of the market the days are surely past when buyers can switch over to other sources of supply. The alternatives are just not there any longer. The ITTO MIS bulletin makes the point very succinctly: “In earlier years, Indonesia was an important source of meranti et al plywood to the US. In 2001, it held a market share of 44% of all US meranti et al plywood imports. In 2005, Indonesia’s share plunged to only 4% due to growing dominance by China”.
Mutual dependency
There is now, in this sellers’ market, a far closer mutual dependency in the chain of raw material supplier, processor/exporter and the importer/buyer that is much more difficult to circumvent than it might have been in past years. The recent entry of Indian buyers in a very substantial manner into the log market is very much a new and stabilising influence in the overall market picture. Consider also the heavy investments into West African forest products sector by some major Far East timber companies, not noted as being wrong footed. As TTJ has reported, in the past year or so South African buyers have entered into substantial supply contracts with West African producers and, if European demand is taken into account, even though this may be at lower volume than in years past there are sound economic reasons why the West African timber industry should feel relatively comfortable with its position in the market.
Sawn lumber prices have remained steady and largely unchanged over the past month or two, still failing to reflect the increases in export log prices. Looking one year back, there have been rather few and relatively modest price improvements over the 12 months. Padouk and sipo, possibly the best performers, both putting on €97/m3 to a current €520/m3 fob. Ayous and khaya FAS GMS managed to gain only €30/m3, while iroko GMS dropped by some €90/m3 though the scants fell by only €30/m3. In spite of good demand, moabi FAS fell €21/m3 though it is now reported that major importer Belgium has large current stocks. The MIS/ITTO August bulletin reports that an NGO is considering putting forward moabi for inclusion in CITES.
Ban lifted
The news that the UN ban on timber exports from Liberia has been lifted, or more accurately was not renewed, is causing some nervousness amongst exporters in the region. Rumours are that exports could commence as early as next month and the worry is that producers will offer low prices in order to move back quickly into the market. So far it is not clear if or how closely the Liberian forest authorities will be able to monitor prices.
Sawmills in Gabon, Cameroon and Ghana are said to have been very busy, with full order books and little inclination to respond to new enquiries for the time being, though at the same time noting the rate of enquiry is low during the usual summer vacation period in Europe. Exporters report the market as being dull, with Cameroon right into the rainy season especially in the coastal regions, and early rain in some areas in Gabon.
