Summary
• There is little European demand for West African logs and lumber.
• Okoumé lumber prices have risen slightly because of demand from Africa and the Middle East.
• There is little incentive for West African producers to reopen sawmills.
• Asian demand is sustaining West Africa’s log exports.
• Europe’s log trade continues to decline.
West African exporters are still complaining that European markets for logs and lumber are very dull, with barely any discernable change from the virtual standstill reported in June (TTJ June 13/20). There were no real expectations of the usual post-summer vacation surge in buying for autumn and winter stocks and, sure enough, so far there has been little, if any, renewal of interest from UK or Continental buyers.
Italy has been the only consistent European buyer through the summer months, focusing on ayous and okoumé sawn lumber in modest, but regular, volumes. In spite of this, prices for ayous have weakened since June by around €10-15/m³ due to lack of interest from UK and other markets, while okoumé lumber has gained in price, putting on €10-15/m³ thanks to good demand from South Africa, North Africa and Middle East countries.
This small but encouraging lumber price increase has been supported by the very strong demand and consequent notable price rise for okoumé logs for Asian countries. As seems to have been the case in recent years, the increase in log price has not been fully covered by the rise in the sawn lumber or product price.
Downward trend
In fact, the price changes in sawn lumber since June have been almost all downwards. Only okoumé and the demand from France for niove have triggered gains of some €10-15/m³. While most species have been unchanged, in the main, because of low or no demand, the limited number with any reasonably traded volume have all moved lower. One of the biggest losers seems to have been sipo, down by around €60/m³ for GMS and scantlings, beaten only by moabi which lost as much as €70-80/m³, most likely through poor demand from traditional French importers.
The ban on harvesting the four species moabi, makore, afo and ozigo by Gabon might well have caused a surge in the price of makore but in the past three months prices fell by around €40/m³. Azobe prices have varied in response to changes in demand from the largest buyer, the Netherlands, and is currently €15/m³ lower.
Little incentive
This scenario gives little incentive for West African producers to reopen sawmills and processing facilities and those with mills under construction must be considering very carefully the financial balance between doing nothing or making further investment to start production in what look to be unattractive market prospects through the fourth quarter.
However, one or two companies are forecasting that Middle East markets will continue to improve and foresee the possibility of reopening mills towards the end of the year because, while the luxury apartment boom in some Middle East locations may have hit the buffers, other construction is still reasonably buoyant.
The UK housing sector is said to have begun to firm up and the financial sector shows some signs of recovery but on the ground in the UK and in Europe generally, the timber and building industries face a difficult winter with uncertain prospects at least into the first quarter of 2010.
After a poor start in the early months of this year for West African log producers and exporters, trade has picked up very steadily and continued to gain ground through the past three months, with strong and growing demand from India, Vietnam and China. North African buyers have also bought in modest volumes.
Business for Asian destinations has underpinned the West African timber sector through the year and lately has not only brought a measure of recovery and stability from the earlier setback but in the past two to three months trade volumes and prices have strengthened. As with the lumber business, the number of species actively traded in any real volumes has been and is still limited to a handful, most of them almost exclusively sold into Asia.
Okoumé improves
Okoumé is by far the most important and, after stagnating for several months, prices have now moved ahead by €35-40/m³ with buyers becoming much less strict on grade and condition as high demand is stretching availability from the current lower supply base. Another winner is belli, up by €30/m³ on strong and steady demand from India.
Padouk logs are always in demand and have increased by €20-25/m³ in the past three months and okan came back into favour once again and is now around €35/m³ higher. Azobe logs are marginally down on the lower demand from the Netherlands and less interest from China but are still above the price at the beginning of the year.
As mentioned in the last report the log quotas released for producers in Gabon were less than exporters had hoped and, because of recently increased demand, by July some of the major producers had already used up their export allocation.
Reports are that, after long negotiation, the Gabon government has granted substantial increases of quota for several of the larger companies. Okoumé log exports from Congo Brazzaville had been severely curtailed early in the year but were resumed by major producers. At the time it did not seem warranted by market conditions but it has since proved to be good timing as demand has developed more swiftly than anyone had expected.
For Europe, the log trade continues the long-term decline, with few species traded and current volumes low. Moabi logs shed €5-10 and niove, another favourite for French buyers, dropped €15-20 after a small surge in buying petered out in July. Producers seem to be doubtful that there will be much improvement in the fourth quarter.
There is still some equivocation in the West African industry attitude to signing up for certification. Some producers concede they are receiving an increasing number of enquiries for fully-certified timber but also point out that many buyers of end products in the consuming countries are less concerned with the origin and certification than with the cost.
Ghana is still leading the way but other exporting countries in the region will have to accept the certification process, especially when the new EU regulations on imports of timber and timber products are completed and come into effect.
It seems entirely possible that the Far East demand pattern will continue to prop up the West African log export market for the near future, certainly into 2010, and while there are some faint indications that the sawn sector will hold on to the current very slow, but stable, position, it is not clear when to expect even the beginnings of a move towards an increase in volumes for European destinations.
