Like many fellow citizens, there were those in UK hardwood who saw a post-Brexit UK heading for economic capsize, and their business with it.
“We all succumbed a bit to hysteria, forecasts of a slumping pound and share prices,” said an importer. “But while exchange rates are posing challenges, it’s not as severe as predictions, and the FTSE went up 400! The boat’s been rocked, but not by a tsunami.”
It was ‘way too early to breathe a big sigh of relief’, he added.
“We’ll see more aftershocks, like recent falls in UK construction figures, but for the time being the market’s relatively stable. It was a pretty consistent six months up to the vote, and has been steady since,” he said. “Longer term, no-one knows. But looking months ahead there’s nothing worrying us significantly. And we’re seeing some positive trends, like a certified timber sales upturn.” An importer-distributor reported some construction and refurbishment projects delayed pre-referendum, and not yet reinstated.
“But key customers seem oblivious to the media gloom and doom,” he said. “Our door makers, mostly servicing hospitality and office fit outs and high end residential developments, including the Battersea project, are very busy, some to the year end, and staircase and quality kitchen producers are still going nicely.”
Traders acknowledge they have had to make adjustments due to the fall in the pound, with more using spot inventory on a gap filling basis to limit currency exposure and because it’s now cheaper than forward pricing.
There were also reports at the recent London Hardwood Club meeting of suppliers ‘profiteering’ by pulling price lists and switching to spot rates, although changing tack when challenged.
Another importer said stocks on the ground also shielded them from latest fluctuation.
“As a just-in-time supplier, we were already well covered with US stock, for instance, bought at over US$1.45 to the pound,” he said.
African price trends were also ‘blurred’ by usual trading patterns.
“You’ve got six month lead times and material needing kilning adding further delay, so hardwood is coming in at varying exchange rates. We’ll get a better idea of the picture when timber is cleared through the current pipeline.”
News for individual species includes demand for sapele remaining ‘robust’, with several traders reporting a further shift to it from meranti. Sapele euro prices were down 5% in the first six months, but sterling spot pricing has increased 7-10% due to exchange rates and is forecast to continue to do so. But one trader reports forward prices stable, offset by a dip in the FOB Douala port rate. Iroko demand is firm, but it’s generally reported to be in very short supply, with one trader describing it as ‘like rocking horse manure’. Forward prices are consequently up 10%.
“It’s just impossible to get hold of, especially OLB certified,” he said. “The problem is it’s currently just not coming out of the forest. It happens. As concession holders move to harvest new areas, certain species aren’t so readily available.” Framire sales are reported consistent, but at a low level, also due to lack of suppliers able to meet EUTR due diligence requirements.
Another importer went as far as saying he could see the species “dying a death medium to long term unless suppliers stepped up on legality verification or certification”. Another importer, however, said they were testing a trial FSC-certified parcel of Cameroon framire, albeit at a 10-12% premium.
In terms of price, there’s no dispute that US white oak has risen sharpest this year. Over four quarters it is up 10%, and by 15% over eight quarters, with some mills ‘making their own price’ for special widths and demanding ‘prohibitive’ rises of 20-30%. The surge was put down to a combination of rising domestic demand, currency movement and ‘bullish mills’.
“Those sorts of increases could be challenging to pass on to some customers, and there’s still no sign of a slow down,” said an importer.
Of the other key US species, poplar/ tulipwood remains in strong demand with prices stable to firm, while ash is still popular, but with prices down 5% over the year. The latter is attributed to growing supply.
“There’s been an increase in ash logging to get to the raw material before the Emerald Ash Borer kills the trees,” said an importer. Cherry and maple meanwhile, remain on the fringes and according to one importer are ‘just meandering aimlessly’. Walnut, the big favourite of recent years, is also mainly just described as ‘steady’ by most traders having generally fallen out of fashion, with prices static. One importer, however, bucked this trend.
“We’re still doing well in top grade walnut to specialist joiners,” he said. “It’s what they traditionally use and they still want it.” Red oak importers report solid demand, but as ever almost exclusively from coffin makers, while prices, dictated by an ‘unexciting’ Chinese market, are steady. Among European species, oak has benefited from a flight from expensive US white. But supply issues, pushing prices up 5% this year with expectations of further increases, are limiting its capacity to fill the gap.
“Demand elsewhere in Europe has strengthened and mills there lean towards producing thicker stock, which UK customers are less keen on,” said an importer. “Croatia’s log ban is also impacting supply and Ukrainian proof of origin remains too vague for it to make a difference.”
Some traders say TRADA’s decision to bar beech from use in FD60 fire doors under its Q-Mark certification scheme as of January has hit demand. Others see the species remaining strong.
“It’s still in demand as an FSC-certified joinery paint grade,” said an importer distributor, adding that the TRADA ban also opened the door to alternatives.
“We’re selling more sapele for fire doors, and brown or ‘dirty’ maple,” he said.
One Far Eastern commodity continuing to do well, said importers was Indonesian balau decking; a mix of SVLK legality verified and FSC-certified.
There was also a consensus, that despite sapele’s long-term growth at its expense, there remained a ‘good solid market’ for meranti, with prices currently stable. Following adverse environmental publicity in recent years, however, traders remain wary of Brazil.
“We’ve been doing sourcing work with suppliers, but, while we’re bringing in cumaru and massaranduba, ipe remains off limits,” said an importer. “We’ve trialled movingue too, but customers remain resistant.”
Alternatives to ‘traditional’ solid hardwood continuing to make a growing impact included engineered components, notably in sapele, European oak, and eucalyptus, plus modified wood, chiefly Accoya. Composites are also reported to be making strong headway. One importer, however, thought all these would reach their ‘market level’. “Some end users don’t take to engineered, and, despite their yield benefits, until we see modified timber and composites being more price competitive, markets will be restricted,” they said.
The rise in demand for certified timber was attributed to various factors.
“Stricter enforcement of government procurement rules is probably a driver,” said an importer. “But certification is also seen increasingly as insurance against breaching an increasingly strictly enforced EUTR.” One importer, also reported customers more willing to pay a premium for FSCcertified African, generally around 5%.
On the predicted imminent arrival of the first timber licensed under the EU Forest Law Enforcement Governance and Trade (FLEGT) legality assurance initiative, which will be exempt EUTR due diligence, the trade has a less clear picture.
“First licensed products are expected from Indonesia and then Ghana, which aren’t significant suppliers for us,” said an importer. “But it might do the trade’s environmental image good overall and, if it encourages others signed up to FLEGT Voluntary Partnership Agreements to speed up progress to licensing, notably West African suppliers, we could see greater impact.
Looking forward overall, traders see no immediate reason why the market should not follow its current steady as she goes course. “There’s clearly continuing nervousness over Brexit’s impact long-term, but customers are accepting that exchange rates mean we have to increase prices, and generally report demand firm to good,” said an importer/ distributor. “Perhaps because we didn’t drop of a cliff after the referendum, in certain areas we’re even getting some feel good factor.”
