The UK hardwood sector generally described market conditions as “tough going” this week. Demand has picked up from a disappointing post-holiday period but is still falling some way short of many sellers’ expectations and is not expected to improve in the near term. To make matters worse, the postal dispute has delayed the arrival of cheques and documents and “may also have affected new business decisions”.
On the upside, most importers were allowing themselves to be “mildly optimistic” about general hardwood prospects for 2004.
Against this backdrop of generally unexciting UK demand, supply restrictions have remained the dominant feature of the West African hardwood markets. For example, while importers reported some success in obtaining material from the Ivory Coast, the country is still experiencing a significant level of tension and unrest. The national army has urged rebels in the north to end their boycott of peace-keeping efforts and to observe the ceasefire declaration of early July this year. Several UK timber industry sources bemoaned the lateness of their shipments of framire and iroko, contracts for some of which were signed in the spring.
Exports disrupted
Gyude Bryant has been sworn in as the head of a new power-sharing government in Liberia and is expected to steer the country towards fresh elections in 2005; for the moment, however, its export flows remain disrupted. There was also tragic news from the country last week with the murder of Victor Hannig, head of a small forestry and timber business and member of the Liberian Timber Association (ttjonline.com 11/11/03).
In Ghana, government restrictions continue to help to reduce availability of timber for export. In addition, it was suggested this week that many of the country’s sawmills are struggling to find the cash to pay for logs. With little availability of odum, utile or sapele from Ghana, a local expert observed: “People will really have to get their thinking caps on when they do their budgets for 2004 due to supply considerations.”
Add all these factors together and one could be forgiven for thinking that the UK was crying out for more West African hardwood. However, demand in this country has been sufficiently slack for supply issues to have had virtually no noticeable effect; for example, UK stocks of sapele seem to be sufficient to cope with the current, lacklustre levels of demand. Purchasing “off the ground” in the UK and Continental Europe is being preferred in many instances to buying forward, and there also appears to be plenty of timber at some West African ports. “The sapele market is all price related,” said one expert. “If you’re the cheapest, you’ll sell.”
Only in the case of iroko does lack of supply appear to have led to significantly firmer prices in the UK. “Prices are incredibly high,” acknowledged an importer. “It is currently dearer than utile and customers have started to ask us about alternatives.” Supply problems appear to be most acute with respect to special sizes.
With regard to other species, one trader suggested this week that 2.5in and 3in framire was proving difficult to source, largely because many African mills preferred not to cut these sizes. Meanwhile, strong buying on the part of US manufacturers is said to have impacted on the availability of higher qualities of khaya, although this species is by no means a major volume seller in the UK market.
Supply has also been a point of conversation with North American hardwoods, although many experts dismiss talk of shortages to come as just that – talk. According to one major importer, “we have been inundated with offers by US shippers”. In effect, it would appear that North America’s producers are maintaining their relatively tight rein on output while the domestic economy continues to struggle to break completely free of its downturn. Supply has also been affected in recent months by Hurricane Isabel.
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“Supply has also been a point of conversation with North American hardwoods, although many experts dismiss talk of shortages to come as just that – talk” |
Low demand
Regional experts point to the possibility of low green lumber inventories over the winter and of some firmness looking forward as higher lumber prices feed through to kiln-dried material. However, none of the market commentators contacted this week was suggesting that, in the short term, available supply would fall short of meeting low-level UK demand. Even the weakness of the US dollar has not tempted more European buyers to sign on the dotted line. Stocks on this side of the Atlantic were adequate for most species and thicknesses such that “we are not expecting any sudden surges in demand in the UK and on the Continent – certainly not this side of Christmas,” TTJ was told this week.
Exports of American lumber to the EU and the UK fell by 11.7% and 16% respectively in the first half of 2003, but some improvement was reported during the early part of the second half of this year.
For the moment, red oak is said to be experiencing strong demand in the US while white oak is achieving relative stability both in terms of production and price. In the UK, maple and tulipwood are also said to be stable, whereas cherry demand appears to have enjoyed less momentum this year – a situation attributed to weakness in the commercial and retail sectors which, in turn, has resulted from a general lack of confidence in economic prospects. UK demand for ash was described as “steady to weak” at already-low prices.
Another key factor affecting North American hardwood exports concerns freight rates, with shippers having talked recently about US$100 increases. Similarly, freight rate rises are also an issue with Far East hardwoods, given that break bulk vessel operators have imposed increases of generally between US$10-15/m3 with effect from November 1 and floating the possibility of a further rise for December. UK buyers expressed annoyance this week at the lack of notice of this freight increase, although the impact has been softened by the weakness of the US dollar.
UK buyers are still tending to purchase their meranti on a hand-to-mouth basis. They have been helped in this by the reasonable availability of landed stock and the general lack of competition for supplies. Two-inch meranti is said to be over-stocked in the Far East while 2.5in and 3in material is also relatively abundant. According to a regional expert, a combination of rain, lack of logs and holidays might lead to a rundown in supplies in the Far East by February/March next year. However, in view of the low level of demand in the UK, “I wonder whether anybody will notice,” he added.
The keruing price has increased by around 5% over recent months, partly as a result of a lack of logs and stronger demand from the US. A lack of vessel arrivals in the UK before the end of the year is expected to maintain upward pressure on prices of this species.
Brazilian mahogany
The US is also expected to mop up the Brazilian mahogany which has been offered on to the market, although this material is thought to have been cut some time ago. “So if the thickness the customer wants is not in stock, he won’t be getting it,” it was observed this week. That said, some UK importers and customers are reluctant to commit to mahogany because they prefer to avoid the environmental spotlight. “If we do get an offer, we have to know the material is going to be absolutely legal,” was one view this week.
Among the other South American species, cedar and tatajuba were said to be moving reasonably well. Increasing demand from China was also reported for primarily lighter-coloured South American hardwoods.
Meanwhile, eastern European hardwood appears to be making steady inroads into the market and to be gaining a more solid reputation for reliability and for “ironing out differences in quality”, although prices this week were described as “all over the place”.
