The UK market for American sawn hardwood gained strength in 2005 with volume up 10% and value up 13%, but currently appears rather unstable, according to many importers. Some had a busy time for two months after the Christmas and new year period, but have recently experienced business tailing off.
Demand for hardwood of all kinds turned decidedly nervous in March with many buyers becoming concerned about the low level of their forward orders. In talking to the UK trade, the word “erosion” is one that crops up frequently. Trading margins are being eroded by stiff competition and long term demand is still being eroded by alternative products and component parts for joinery and furniture imported from eastern Europe and Asia, especially China.
Oak is the major temperate hardwood in today’s market, as anyone visiting the European furniture and flooring shows has seen. Imports of American white oak by the UK in 2005 were up 14% in volume and 21% in value on the previous year compared to the overall import increase of 10% and 13% respectively for all American species.
White oak accounted for 42% of all American hardwood sawn lumber imported into the UK. Red oak by contrast amounted to only 4.4% of UK imports. In the EU25 white oak held volume in 2005 at 315,861m3 – down 0.3% – but red oak was down 34% from a low base. European imports of red oak were less than 4%. This may change in 2006 with a combination of ferocious promotion being undertaken by AHEC and a shift in the underlying structure of red oak in the U.S. domestic market, where prices have changed significantly during last year.
Made in Asia
Today the US hardwood industry is settling down to the fact that much of its key domestic furniture manufacturing capacity has been lost to Asia, which affected demand for #1 Common “furniture grade”.
This has been much more of an issue for some larger southern mills rather than northern and some Appalachian producers many of which are more diverse on species and less dependant on red oak.
However, as always, the US is quick to adjust its production and already prices are said to be stabilising and reflecting the lower demand and keener prices. In 2005 the average unit price of red oak exported from the US worldwide fell to US$439 from US$471/m3 in 2004. Manufacturers may also want to know that research by AHEC in Europe shows clearly that designers and specifiers are attracted by red oak, as in a recent survey independently undertaken at Saidue in Italy.
In Europe there are reports of upward pressures on oak log prices in both Germany and France with predictions of gradual increases in oak sawn timber throughout this year.
This is further reinforced by recent reports of oak log and sawn timber shortages in Poland, now the main supplier of furniture to the German market. Log shortages are partly due to the policy of restricting harvesting by the Polish authorities but are symptomatic of many anecdotal reports of rising oak prices in Europe. Major suppliers of oak to Poland are Germany, Slovakia and Ukraine. Thus it is not surprising that American white oak has continued to hold its own European market share on the strength of price, specification and availability.
Beech market
By complete contrast the beech market has remained dull with the general view that supply is more than easily able to cope with current demand; and supply could be significantly increased if demand improved. European ash is making some inroads into the US ash market.
While some UK importers are easily finding reliable supplies of European temperate species in suitable specification, others complain of the difficulty of doing business in eastern Europe and of rising prices. By far the most difficult American species to find in any volume is black walnut which is now one of the most sought after, particularly in China where walnut remains the flavour of the month.
Last year UK imports of American walnut increased by 53% in volume and by 69% in value, reflecting much higher prices and difficulty in supply. In fact, here lies a good example of potential market erosion as the number of walnut furniture and flooring products imported into the UK in 2005 must have been many times greater than the raw lumber.
In 2005 China imported American walnut logs, lumber and veneer to the value of US$43.7m (compared to US$6.8m by the UK), much of which was converted to products for the UK, European and American markets.
The UK property market remains surprisingly firm. For example Nationwide reported that annual house price inflation picked up during March. However, in the commercial property sector the problem, as identified by architects, is of too few new projects entering the pipeline in both new-build and refurbishment and restoration.
Nevertheless, looking at the new crop of UK architectural projects such as the new wing at the National Trust’s Ickworth House designed by Hopkins Architects, the continuing predominance of oak can be seen.
In the DIY sector the reported “collapse” of B&Q’s profits is another worrying factor for that market, in which the gloss may finally be going off the fashion for DIY, as recently suggested by some national media.
One of the main drivers of market erosion for hardwood traders is the continuing level of investment by many companies in modern processing plants in eastern Europe and Asia, which offer increasingly competitive products to the UK. On March 15 the US floor coverings producer Armstrong World Industries Inc in Pennsylvania announced a joint venture in China as a part of its strategy to expand its hardwood floor coverings production capacity. Bruce Hardwood Floors of Tennessee already has significant hardwood flooring production capacity in Asia, and others will surely follow.
The recent introduction of German-based trade shows in China, such as Interzum in Guanzhou and Domotex Asia in Shanghai in March, is another indication of this trend, particularly as one is likely to find many key UK buyers there. More wood industry shows are scheduled in China for May (Dalian), June (Shanghai) and September (Shanghai) to complete the circuit this year. In this respect UK hardwood buyers hold the key to further erosion of all sawn imports in their own hands.
