West African exporters’ optimistic forecast for trading through the second quarter proved correct as log export prices made some significant gains in price in March. These held firm through April and are expected to remain current through to the end of June. The sole exception has been sapele where over-production leading to high stock in Congo Brazzaville and Central African Republic has led to a fall.
Poor demand from Continental buyers, notably the Dutch and Portuguese, and some rather gloomy comments on the outlook for UK business in the third quarter did not hold back log price increases in movingui, bubinga, doussie and moabi, though sawn lumber has still not yet been able to match the increased cost of raw logs. This is in spite of some hefty price spikes for just a few sawn lumber species such as merbau and iroko.
It may be these are now at their ‘resistance’ level but the response from shippers is that supply is poor and unlikely to improve.
Tighter regulations
Throughout the West African region the strong trend initiated by programmes of loan and aid packages by IMF and the World Bank is leading to ever tighter regulation of forest industries. These cover financial as well as industrial aspects – for example, Cameroon exporters now have to pay all the various, land, logging and export taxes before the goods are allowed to be shipped. Previously there was a grace period but this concession is now removed, causing some cash flow difficulties for smaller enterprises.
Gabon is in an election year and regulations tend to be applied with some flexibility but the industry expects a much harder line of controls and taxes in 2006. In Congo Brazzaville some major operators decided not to go along with the steady removal of rights to export logs and are closing operations. Other larger logging operators in Cameroon and Central African Republic are reported to be closing down rather than turn over to the financially riskier processing. Other reports are that the remaining forest areas in Equatorial Guinea are now so depleted that large volume operations will no longer be viable by the end of the year and at least one logging company is said to be relocating. With the continued restrictions in Liberia and problems in Cote d’Ivoire, relocation sites are scarce, though it is said some have been seriously considering the prospects available in Angola.
Throughout the ever-tightening log supply situation runs the thread of the Indonesian operation to stop illegal logging and timber trading. This has resulted in a much more stable and firmer market price baseline for African as well as Asian producers.
Sawn lumber prices
Sawn lumber prices were firm but largely unchanged from late 2004 though, as with logs, some specially favoured species have bucked the trend. However, sapele is again weakening on low demand. The graph shows the iroko price to have levelled off though this may be more to do with the mix of grade and size rather than an overall decline as supply is still very tight with good demand. There is just a slight fall or levelling in the obeche/wawa price due to competition from other lighter weight timbers. This is mostly for Italian buyers who are seriously into sawn okoumé and some others who are replacing their previous dependence on wawa. Azobe is still in very short supply, prices are high and likely to remain so. Sipo is also in high demand with Continental buyers and prices are increasing following short supply and rising prices for dark red meranti.
Most West African mills have been reporting good demand and good forward order levels although efforts to push overall prices higher have really not succeeded in the face of sluggish demand in Europe.
Freights for West African exporters are slightly easier and ships are now prepared to negotiate a fraction here and there because of lower production and slow market demand for European destinations. Otherwise, trade levels are said to be good, with China particularly active for peeler logs and for an increasingly wide range of sawn lumber species. Processors in China seem willing to try several ‘new’ species like dabema and onzabilli for plywood, one reason why some producers consider it important to allow log exports at least for the medium term. Over the past two or three years China has significantly increased exports of plywood while dramatically reducing its own imports. It is good business for West African log exporters, while allowing a rational cut of diverse species from their concession areas.
Exporters are expecting that the current market conditions will prevail through to the third quarter, relying rather less than normal on demand from some European buyers but hoping that business with Spain and Portugal will pick up from present low levels.
