“Stable”, “consistent”, “satisfactory” and “bumping along around budget” are typical traders’ descriptions of the 2018 UK hardwood market.

“Some delayed orders suggest there’s more market anxiety as the Brexit countdown really gets under way,” said an importer. “But forecasts trade would enter a tailspin as we approached the date haven’t materialised.”

Another company echoed this view. “We’re not breaking records, but if you’d told me after the EU referendum that business would be where it is now, I’d have snapped your arm off!” they said.

One importer/distributor speculated that more competitive conditions in softwood might presage tougher times ahead for hardwood and a recent rise in bad debt “may be an omen”. However currently, they were also “still hitting good numbers”.

Steady sales

The Construction Products Association may recently have lowered its forecast for overall construction growth next year to 0.6%, but it maintains its 5% prediction for housebuilding growth this year, and 2% in 2019, with “risks to forecasts in the positive if government settles Brexit uncertainty sooner rather than later”.

Hardwood trade comment supports these figures. After a weather-hit poor Q1, the consensus is that Q2 saw marked improvement, before trade plateaued in Q3.

House construction and RMI business were both seen as main market drivers, with joinery generally and door and stair makers in particular said to be busiest customer sectors.

“And most report full order books up to at least Christmas,” said an importer/distributor.

According to Timber Trade Federation (TTF) statistics in October, overall UK hardwood imports were ahead 6.6% from January to July, to 315,000m3, with stable US trade and increases from France, Latvia and Norway offsetting falls in imports from Estonia, Cameroon and Italy. However, the TTF cautioned that customs investigations into the 7% hike reported in imports from Norway could reduce the overall growth figure, possibly to zero.

This also tallies with importers’ experience. One said their sales of hardwood, engineered products and clears were ahead 4%. “But when you strip out the other two, hardwood is probably only up 1%,” they said.

“We’re expecting year end figures to be at or marginally above 2017 levels,” added an agent. “But, market factors considered, that’s acceptable.”

Brexit precautions

One leading softwood supplier has confirmed plans to increase UK landed stock against post-Brexit customs disruption and others are expected to follow suit. But hardwood traders questioned had no such plans.

“In softwood you’re talking bigger volumes, shorter supply times, faster stock turnaround, so it makes sense for them,” said an importer. “But while we’re liaising closely with suppliers, we don’t anticipate upping stocks.”

This strategy was also thought less feasible for most hardwood businesses. “You’ve got to be able to get extra stock, pay for it and have somewhere to put it, and not many hardwood traders can tick all those boxes,” said an agent.

An importer/distributor also commented that they didn’t see it “as a time for speculation” given Brexit unknowns. “Those holding large hardwood stocks would see them devalued overnight in the event of a good Brexit deal resulting in significant strengthening of the pound,” they said. “So we’re looking, not leaping.”

Another agreed, although said they were “diversifying” ports of entry in case of customs hold-ups at London and Dover.

China tariff fallout

In terms of supply, availability from the US has been reported as good, with prices generally stable. Tulipwood remains in strong demand with prices firm, while ash, said an importer, continues to be in “respectable demand and shipping in good volumes”.

Walnut prices are reported to have firmed, but with demand “coming off the boil”.

Prices for the big seller, US white oak, are reported largely stable, but with UK customers, according to some, continuing to migrate to European oak, especially in thicker sizes, due to its specification and availability certified.

More recent weakening in certain US prices was attributed less to species sales trends and more to offers from individual mills affected by Chinese retaliatory import tariffs on US hardwoods and these, agreed importers, look set to be a key factor with regards to American trade going forward.

Currently the tariffs range from 5% to 10%, but are set to double in the New Year.

“So far, US shippers and Chinese buyers seem to have split the difference, but that will change when tariffs rise,” said an importer. “With China accounting for over 20% of all US hardwood exports, that has to have repercussions.”

As 85% of Chinese US imports are red oak, one importer said they wouldn’t “simply be able to shop for oak in Europe on a like-forlike basis”.

“Moreover, China is reported to have high inventories, so any impact will be delayed,” they said.

Another trader, however, felt the longer tariffs persisted, the more likely it was Europe would feel fallout.

Some see the tariffs potentially further weakening American prices generally and leading to more of a US sales push into Europe. “There was talk at the National Hardwood Lumber Association convention of targeting red oak at other markets,” said one company, “and, if US mills need cash flow due to the tariffs, it may destabilise prices across species.”

In the meantime, while still firm, some importers say European oak prices are not rising at previous rates. “We’re not getting the new logging season hikes we expected and it seems the phytosanitary restrictions on Croatian green timber exports have been circumvented, at least in part, by Italian investment in processing in Croatia,” said an importer.

Another commented that European price rises “may have reached a pitch where the market’s saying nought’s enough”.

“Hopefully we’re now looking at a more stable oak picture,” they said.

Another was less sure. “We may be in for a period where there’s simultaneously greater availability of European hardwood and more timber offered by the US due to Chinese tariffs, leading to a wider market softening,” they said. “Then again, in a few months Chinese buyers could be all over European hardwood. Basically, it’s no time for risk taking.”

Meanwhile, importers report continuing good demand for beech, despite loss of sales to alternatives, including sapele, for one-hour duration fire doors.

“There’s still demand for half-hour doors and actually tightening of supply for most popular dimensions for door frames,” they said.

In the tropical sector, shortages are reported in sapele. This is attributed to “what’s coming out of the forest”, global demand and ongoing bottlenecks at the Cameroon port of Douala. But the disposal by Rougier, a key UK supplier, of all but its Gabonese African businesses is thought to be a factor too.

Consequently, importers say they’re edging up prices, with predictions that forward rates will rise 7-8% further in the next six months. For the basket of African species prices and demand are reported to have been steady for three or four months, but with a further 5% rise due in the spot market.

As for Asia, the impact of extended rains continues to be felt in the bangkirai market, although surplus stocks in Germany have moderated price rises. Meranti has also been “edging up 1-2% at a time,” said an importer, while a tightening of its controls by PEFC is reported to have shortened supply of certified meranti and keruing.

Static expectations long-term

Medium to long-term some importers say they’re resigned to the hardwood market, in the words of one, “having areas of value, but overall being relatively static”. Growth potential in tropical timber especially is seen as limited, with the downsizing of not just Rougier’s African operations, but also those of specialists Wijma and Cora leading some to question the longer term viability of the model of European concession operators selling certified African hardwood to environmentally sensitive European consumers. Simultaneously, said traders, specifiers and consumers are being offered ever more user-friendly alternatives, with one company reporting Accoya sales now outstripping sapele.

However, there are also new initiatives to develop the market, as highlighted by the recent Sustainable Tropical Timber Coalition (STTC) conference in Paris.

Here the STTC and its backer, IDH, The Sustainable Trade Initiative, highlighted their focus on improving tropical trade data to better target market development initiatives. This included support for a joint project with the Global Timber Forum, EU FLEGT Independent Market Monitor project, Dutch forest and timber sustainability analysts Probos and the STIX tropical data platform to track flows into the EU of certified and FLEGT licensed tropical timber and wood from FLEGT VPA–engaged countries.

The ATIBT also presented its embryonic www.mytropicaltimber.org website, which provides species’ data and lists suppliers Europe-wide.

UK TTF managing director David Hopkins additionally suggested at the conference that new definitions of what comprises sustainable timber could also underpin the market.

“While respecting the work of the FSC and PEFC, figures suggest we’ve reached peak certification,” he said. “This prompts the question of whether we need new sustainability metrics, which could provide an opportunity for the FLEGT VPA initiative in particular.”

From a different perspective there has, of course, also been high profile marketing activity for US hardwoods recently, with the American Hardwood Export Council’s MultiPly project showcasing tulipwood crosslaminated timber’s structural potential at the London Design Festival – and garnering media coverage worldwide.

Back to the immediate term, UK hardwood traders are blending positivity and caution, hoping, after a stable 2018, for “more of the same”.

“Brexit may result temporarily in a stickier supply chain, but working with partners across Europe and worldwide, we’ll find solutions,” said an importer. “It’s in everyone’s interests, suppliers and buyers alike.”