Summary
• Demand in India and Europe has maintained West African hardwood delivery volumes after China’s cut in species imported. • Log price trends in the last quarter have varied according to species; moabi and makore are down, sapele and sipo up.
• Introduction of controversial new log supply quotas in Gabon has been delayed.
• The upward trend in sawn lumber prices continues.
• Less predictable just-in-time buying and demand for premium species should encourage the market to look at alternatives.
West African hardwood producers and exporters managed to hold market volumes relatively stable through the last three months, in spite of the continued curtailment in the number of log species accepted by the Chinese. The list of timbers previously being exported to China included many names unfamiliar in the normal course of European timber trading. Olon/bongo, onzabilli, andoung, ekop, bomanga and many others had been bought in volume.
Fortunately, buyers for India have helped offset the Chinese move and remained active in the market for their favourite logs, mostly in the hard and heavy timbers. And while European interest in log imports is declining, some buyers, notably the Spanish and Portuguese, have kept buying. There is also ongoing modest demand for particular species among French and German buyers.
When it comes to log pricing, the rates of change and variations in winners and losers in the last quarter differed according to destination. As expected, Asia showed the most serious declines in the lesser species, with belli logs dropping €46/m3 in spite of active buying by India. Dabema was down by €38/m3 and bomanga down €25/m3, moabi losing €38/m3.
Asian buyers were not interested in makore logs, which lost €10/m3, but European demand was high and sawn prices rose.
Iroko prices remained unchanged for Asian imports, although for European buyers LM grade fell by €30/m3 and B grade down €15/m3. All buyers had to pay more for sapele and sipo thanks to strong demand from European buyers for logs and sawn lumber. The trend was reinforced when China then came into the market after seriously under-buying sapele. Sapele LM grade for Asia subsequently moved €30/m3 higher and B grade up €45. Sipo grades moved by €15/m3.
European buyers, with their more stringent grading requirements, now pay more than €100/m3 more than in mid-2007 for sapele logs and €45 -€60/m3 higher for sipo. Another winner was padouk with a rise of some €83/m3. For Europe, makore logs were in strong demand putting on €44/m3 for LM and €61/m3 for B grade and bubinga is now fetching €76/m3 more for LM and €45/m3 for B grade.
The implementation of the long-planned log quota systems for Gabon and Congo Brazzaville was cause for concern during most of the year. In the former, this sparked controversy as long-established logging companies complained that some of the more recent joint ventures and overseas investors were receiving preferential treatment.
Volumes to be allocated
A consultant had earlier been engaged by government to recommend how the system was to be run and the volumes to be allocated. However, it appears most companies were unhappy and, after detailed negotiations failed to find an acceptable solution, full implementation was delayed until early 2008.
Congo similarly found problems in balancing the need for sufficient log volume to meet “reasonable industry requirements” to export, while ensuring that the policy to increase further processing steadily was carried through. Differences in the country now seem to be resolved and the system in Congo was reported as fully implemented.
West African freight rates have also been on the increase and liner terms for European ports are up by €12/m3. Lumber rates are now €3 higher and ro-ro increased by €12/m3. For Asia, shipping methods continue to evolve. Logs are now commonly containerised, with some exporters adding stuffing at their yards and moving containers to port by road or rail.
Freight rates for redwood logs shipped conventionally for Asian destinations are up by US$55/m3 and the rate for okume logs is now ahead US$25/m3.
Ghana reported improved export volumesand prices of processed timber products in the second half and in the region as a whole sawn lumber volumes have been maintained. There have been some supply constraints in the final quarter due to heavy rains, particularly in Cameroon and Gabon.
Meanwhile supply of sawn sapele from Central African Republic has been restricted by the cost of the long-distance trek by road to the port of Douala and strict enforcement of maximum truck weights.
West African sawn lumber prices have performed more consistently and stayed steadier than log prices. But there was some fluctuation through the year. Downward pressure in the summer was followed by gains which held firm. From September to December all price changes were upwards, notably in premium.
Demand has resulted in steady gains for majored, even after previous increases, while prices firmed up for tiama FAS GMS for Italian buyers, who are currently out of the market for ayous and okume lumber.
Padouk prices held on to increases, but the most significant rises have been for sapele and sipo. Sapele GMS rose by €40/m3, though the scantlings dropped by €10/m3. Sipo GMS put on a further €50/m3 and the scantlings €25. Okume lumber also made progress after a period of stagnation and FAS GMS are up from €335/m3 to €375/m3. The scantlings increased by €50/m3. Okan prices were at one stage weaker as was azobe, but they regained momentum on demand for Europe. Prices recovered and are currently very firm.
Our previous report noted that, while Malaysian prices seemed to have run out of steam, West African exporters expected firm prices to the end of 2007. In the event this forecast was surpassed, with lumber prices remaining firm and premium timbers making quite substantial increases.
The market has been very much demand- led, subject often to quite sudden and unexpected shifts in buying patterns. Some West African traders were uncertain whether they would be able to hold on to all recent gains into 2008, but the likelihood is that markets will continue to respond to just-in-time buying, especially for the now more expensive premium timbers.
So there is perhaps scope for European importers and end users to be more adventurous and look out for alternative species which can cost less than the better-known varieties, but equal their performance.
