West African log trade has been very quiet over the European festive season and the Chinese New Year celebrations. However, there were some price changes at the end of December which have carried through into 2004.

Sapele prices took a sudden upwards surge, coming into favour with regular buyers and with surprisingly new demand also from China. Sapele LM and B grade logs moved up €53/m3 and BC/C grade up €30.50/m3. This demand spilled over into moabi as an alternative, putting on an additional €26.70/m3 for the very limited volumes available. Currently, most sapele is sourced from Central African Republic and Congo (Brazzaville) where the World Bank and IMF are pressing hard for governments to reform their pricing and taxation systems for forest-based industries. This follows on from recent reforms in Cameroon and Gabon to extract higher revenues for forest concessions, land and other taxes. These policies have squeezed wood processing industries quite hard and pushed log prices for internal consumption up very close to export price levels. These factors, and the general tightening of supply as governments impose much closer controls on extraction rates from concession areas, give producers confidence that log prices will remain firm even in slow trading conditions.

This situation is a complete reversal of the position last October when reports were of large volumes of low grade sapele lumber in West African ports. It is most likely this has been absorbed into the domestic markets, and some mills did reduce their sapele production at the time.

Iroko prices are very steady as there is currently scarcely sufficient volume available from producers in Gabon, Central African Republic and Democratic Republic of Congo (former Zaire) to meet the moderate market demands. Ayous log production is reported to be very low in the region and prices very firm on good demand, with Germany in particular actively in the market for increased volumes. On the other hand, sipo LM grade log price has dropped €15.25/m3 as demand has switched to sapele. Movingui also languishes, very much in the doldrums because of high stocks especially in France.

Chinese pressure

The continued pressure from buyers for China to push down prices for Gabon okoume finally has persuaded the SNBG state selling organisation to make reductions. It has announced CI (choix industriel) grade down by 5%, CE (choix economique) grade down 8% and CS (choix supplémentaire) grade down by 9%. Producers report that China is buying even lower than these prices from Congo Brazzaville and Equatorial Guinea and that volumes shipped from Gabon are still much less than normal. Some major producers had been pressing for higher okoume log prices but say that, apart from these other export log sources, the low US dollar prices for Brazilian lumber and the much weaker dollar exchange rates have been stiff competitors at this level of the international market place. The SNBG had proposed the introduction of two new grades for okoume logs which would be an amalgamation of QS and CI grades and the second mix would be of grades CI and CE. China buys roughly 60% of Gabon’s total production of okoume in the proportions of 40% CI, 40% CE and 20% CS.

Some exporters feel that new, lower grade mixes would tend to devalue the overall grade system, though conceding it may tend to hide a lower price regime. It is not yet clear if SNBG will push ahead with this revision.

&#8220Prices are under pressure and lower than exporters had hoped for only a few weeks ago”

Northern and southern European buyers prefer the higher grades and normally import in the proportions of 20% QS, 40% CE and 40% CI. However, the production of okoume veneer and plywood in Europe is in decline and factories in the Netherlands and France have closed as many of the traditional French manufacturers have set up mills in Gabon.

West African exporters are facing a number of problems, not least with sea freight. Apparently coal shipments from Germany and Russia to Asian destinations have diminished or ceased and coal now is sourced from South Africa. This means that there are now very few ships passing northbound available to pick up timber. The last ship from Gabon to Germany was at the beginning of November. Reports are that there are rising stocks of logs and lumber in ports awaiting shipment to Europe. Some container freight is still available for lumber and products but freight charges are rising.

Rains have been heavier and lasted through normally drier December and January, consequently mills are short of logs and some producers are considering laying off workers until the weather improves and cash flows resume when ships become available to shift overlying contracts.

Stable prices

West African export lumber prices continue very stable and unchanged. The rise in sapele log prices has not yet triggered through to higher sawn lumber prices but is likely to do so as existing contracts are completed. With sapele in favour with buyers, sipo is much less in demand and a price drop is likely. Azobe logs are scarcer and processors expect firm to better prices for sawn lumber and processed products. Ayous, moabi and makore prices are stable in quarter, with no significant changes either up or down. Germany has been in the market for ayous while Italian demand is currently much lower. Most mills are busy but many are short of logs and unable to build adequate stocks to carry through the rains in February and March. Cameroon has still not released coup familielle allocations and this has compounded an already tight log supply for sawmills.

Log and lumber markets are reported as being quiet but the low log supply in the West African region overall and difficulty in shipping to European and Far East destinations are perhaps much more on the minds of producers and exporters than any worries of what and when to sell against new enquiries. The increasing stock at the ports and low production are causing cash flow problems for many producers, and banks are being more than cautious in financing what they consider high risk business. Buyers for China are active in the market and are purchasing a wide range of different species, but prices are under pressure and lower than exporters had hoped for only a few weeks ago.

As noted in our report in October last year, no-one expected markets to alter significantly over the fourth quarter of 2003 and, again, traders are not optimistic for the first three months of 2004.