Summary
• Customers are unwilling to hold stock.
• Demand is now less consistent, although joinery grades have picked up.
• African hardwood prices have firmed and European hardwood prices are steady.
• Certified hardwoods are much more readily available.
• James Latham’s purchase of DLH (UK), now LDT, hasn’t had the expected effect.
Post-crunch the UK hardwood trade has learned to live with lower expectations.
“Margins are under pressure and it’s just very competitive,” said an agent. “It’s hard to buy as well as sell. Suppliers are experiencing the same liquidity issues as us and have cut production to control costs. The business has become schizophrenic as a result. When you’re selling you need to be proactive and optimistic and in procurement you have to be assertive to ensure you get the supply. Then you put your accounting head on and caution comes in because you need to keep tight hold on cash flow.”
Customers also seem to have become even more unwilling to hold stock, making trade still more hand to mouth. “We’ve had to get used to a new routine, where some people just won’t buy forward,” said an agent.
Market OK
However, both agents added that against this background the last quarter has been “OK”.
“It wouldn’t have been OK four years ago, but perspectives have changed,” said one. “OK means we’re doing enough to still be here next year.”
A home-grown and European hardwood merchant agreed. In fact, he said his last quarter had been his best for a while. “We’re not making comparisons with 2006/7, as we’re now in a new reality,” he said. “But we’re up 8% on last year and we’ve had some nice contracts, including £90,000 of finger-jointed oak cladding. Our strategy is to focus on what we’re good at and profitability, rather than turnover, and adapt to the conditions. For instance, more customers are closing for the summer break rather than staggering holidays. So we factor in a quiet July and a kick in August.”
An importer/distributor also thought that, “within the context of a competitive market, business since April has been reasonable”.
“Orders haven’t been consistent but that’s now standard. One week the phone is glued to your ear, the next you’re wondering if it’s ever going to ring again.”
The sales slowdown caused by adjacent Easter and Royal wedding breaks added to what another importer called the “roller coaster nature of the new business norm”.
Resilient joinery
Hardwood demand recently seems to have been most resilient in joinery.
“Some of our door and window guys seem almost buoyant, probably because they’ve got the right blend of refit and new build work,” said a merchant/distributor. “But shopfitters have been busier too. Some say they’re booked eight weeks ahead. It tends to be the bigger businesses, but they say that retailers who delayed refits or branch openings during the downturn are either more confident or at the point where interiors have got so run down, they have to go ahead.”
The hardwood demand exception in joinery is reported to be staircase manufacturers.
“It seems they’re still finding life difficult,” he said, “probably because of their relatively greater dependence on new build, which remain at historically pretty low levels.”
In terms of supply factors affecting the market, besides continued general production curtailments, traders highlighted the impact of political turmoil in Ivory Coast.
In TTJ’s last hardwood market report, the country’s exports, notably of its speciality framire/idigbo, were reported to be slowing to a trickle and, soon after, the port of Abidjan closed to international traffic entirely.
“Idigbo, of course, was in very short supply, but the situation had a knock-on in sapele too, which was seen as a substitute,” said an importer.
Following the arrest of ex-president Gbagbo, whose followers were disputing his 2010 election loss, order has been restored and Abidjan came back on stream through April. Consequently, framire supply is recovering, but it’s said to be a slow process.
Prices firm
The Ivory Coast problems are reported to have accentuated a general firming of African hardwood prices.
“Although we have been able to pass on some of the increase,” said an agent. “So far we’ve managed a spot market rise of 6-7%. We’re still off where we should be by 4-5%, but come the autumn we’ll attempt a bit more.”
A continuing price weak point, however, said another agent, remains sapele, despite some substitution for framire.
“Whatever the demand, it’s still undervalued and there’s always someone undercutting the market by £60/m³,” she said.
Some American prices also strengthened in the quarter, although again, it seems, mainly thanks to production cuts rather than demand.
“White oak remains the biggest species, but has been pretty steady on price, however, we did see firming on walnut and tulipwood,” said an importer. “Biggest pressure has been on ash due to the emerald ash borer infestation.”
Another agent said that most American prices now were “coming off their peak” however.
“There’s a lot of inventory out there in shippers’ yards and we’ve recently been asked by one to drop the price on small dimension white oak just to move it,” she said.
Weakest prices in US species are reported in maple and cherry as “both drop out of fashion”.
Steady European prices
European hardwood prices, by contrast, are reported to have been steady. “The disappointment is that we haven’t been helped by any real euro depreciation against sterling despite its problems,” said an agent.
Among European species, the most remarked trend is strengthening demand for beech.
“Oak’s still the big one, but beech has picked up, especially for door frames,” said an importer. “It finishes and paints well, and it’s dense, so suitable for fire-rated doors.”
English oak remains the big home-grown seller. “But we’re also seeing interest in sweet chestnut,” said the UK and European specialist. “Architects and consumers like the look and performance, but are also increasingly attracted by the fact that it has a smaller carbon footprint as it’s locally sourced.”
One importer/distributor also reported an upturn in demand for densified softwood, in his case Accoya.
“There’s increased awareness of the brand and end users are substituting it for tropical hardwood, particularly sapele used as a paint grade,” he said.
Another agent said they were diversifying into more value-added product, such as flooring, laminated products, stair components and mouldings. “If we’d just stuck with rough sawn, we’d be in trouble,” they said.
Uncertain future
Looking forward, a distributor said that global economic uncertainty, UK government spending cuts, “Olympics business dropping out of the equation” and declining consumer confidence were combining to cause hardwood market jitters about the year end.
“But we’re still pretty steady for the time being and, with some more confidence in construction, we’re cautiously optimistic of staying that way,” he said.
An agent said he didn’t expect life to get easier given the “financial market turmoil”, but still thought the medium to longer-term outlook was fair.
“Today’s hardwood business is more complex; you have to be part trader, part eco expert, part currency dealer, part fortune teller,” he said. “But, we’re acclimatised to the new environment, keeping reasonably busy and making a bit of money each month. For the moment that’s good enough.”
