The majority of UK companies with broad hardwood interests are finding that trading levels have failed to match hopes and expectations in the year to date. As one trader put it: “Nine out of 10 buyers are telling us things are quiet – and a lot of the others may be under-selling.”

A dip in high street spending is perhaps used too readily on occasions to justify a downturn in timber market demand. However, recent data from the Office of National Statistics confirmed that UK retail sales have hit the buffers: in the three months to May, sales were only 0.9% higher than a year ago – the lowest growth recorded since July 1967. Only last week, CBI figures confirmed that a sizeable 42% of UK retailers were seeing a year-on-year decline in sales. It would appear that slipping house values and increased concerns over debt have undermined consumer confidence. According to a number of leading UK hardwood traders, this has translated into a slowdown in order levels that has become particularly noticeable since the general election in May.

Feedback from the key hardwood consuming sectors suggests a general downscaling of activity in the face of reduced demand. Joiners are reporting “flat” spending levels in the public sector while shopfitters appear less active than normal for the time of year. One trader added: “A picture frame customer told me business has gone quiet for the first time in eight years.”

Less room for manoeuvre

As a result, UK-based hardwood sellers have been finding increasingly less room for manoeuvre. “If you haven’t got exactly the right thing or can’t deliver on exactly the right day, then you don’t get the order,” said one. Customers were preferring to place several smaller orders rather than one large order each month, leading to a higher logistics burden. “You work just as hard for the small orders as you do for the big ones,” it was pointed out.

Among the major plywood producing countries and regions, Brazil has been a focus of attention following reports at the start of last month that more than 90 people had been arrested in the state of Mato Grosso as part of a clampdown on illegal logging activities. Those arrested included the state’s chief of government environment protection agency Ibama and Mato Grosso’s environment secretary. The police said officials were being accused of falsifying permits to transport illegally cut wood.

Bans and suspensions

Temporary bans have been imposed on log and timber movements to allow for checks to be carried out in yards and ports; licences have been suspended and permits have been recalled for inspection.

Describing the move as “a sledgehammer to crack a nut”, one UK trader noted that responsible companies were suffering the consequences and were pleading with officials to return the situation to normal as soon as possible.

Another trader pointed to recent experience with Brazilian mahogany and said: “It’s a dangerous strategy to deprive the market of a hardwood for too long because buyers will start looking elsewhere for their material.”

The Brazilian real has strengthened in relation to the US dollar and the market is seeing firmer prices. Several contacts reported that they had been asked to accept variation clauses over the past month to allow for further currency fluctuations.

While one trader observed that UK demand for Brazilian hardwoods “has not been that clever no matter what species you are talking about”, there is undoubtedly concern in the UK regarding supply.

Disruption of export activity and shipment delays caused by last month’s police crackdown has created something of a seller’s market, with buyers being told in some instances: “That’s all there is, so take it or leave it.” Worry was also expressed this week over the wait for the Brazilian government to release management plans. “If they don’t come out soon, it will be too late because of the rains,” TTJ was told.

As for North American hardwoods, white oak has been far from plentiful with supply of 6/4 and thicker specifications proving to be particularly difficult.

The leading EU buyer of North American hardwoods, Spain has generally paid higher prices than the UK for its white oak but, according to market specialists, the differential has widened over recent times to a substantial 10%. “This is worrying,” TTJ was told, “because Spain is a hungry market for white oak.”

China has also emerged as a leading buyer of North American white oak although this major South-east Asian powerhouse is understood to be sourcing ever-larger volumes from Germany and Russia in order to keep pace with the growth in its domestic requirements.

Meanwhile, the last year has witnessed a major shift in the UK’s oak flooring imports. This country had previously sourced a large proportion of its needs from North America and Europe but, according to one leading expert, a substantial majority of the UK’s supply is now coming from China. “This change has been totally based on price,” he said.

Chinese demands for walnut

Shortages are also widely reported for the higher qualities of walnut, again partly because of the strength of demand from China. Hard maple has maintained its upward price momentum of recent times while UK levels of the other leading North American hardwood species have experienced no major changes of late.

After a period of steady rises, Far Eastern dark red meranti prices are understood to have stabilised in the UK on the back of increased availability, although one trader contended that thicker sizes were not entirely plentiful. There was speculation this week that the meranti price might come under a little pressure in the near term owing to the impact of holidays on demand from leading EU markets such as Germany, Italy and the UK. That said, shippers are finding difficulty in obtaining material from the mills because of the higher cost of logging licences and a reduced number of operators.

Given the recent weakening of sterling in relation to the US dollar, more buyers are tending to adopt a cautious approach and to opt for landed stock. One trader observed: “Meranti sales have been disappointing – exchange rates have made the species less appealing in comparison to sapele.”

Keruing supply

Mixed reports surround keruing, with several experts suggesting that the end of the rainy season has improved supply. One trader, however, complained that he had been unable to get offers for either sawn or machined keruing, “even when asking for more relaxed specifications”. It has been noted on numerous occasions that the US is a major buyer of keruing and demands specifications that are generally more attractive to producers in the Far East than those requested by the UK. Overall, these market conditions have ensured that UK keruing prices have remained firm.

For most UK traders, availability does not appear to be an issue with West African sapele but making any money on this “commodity” species has become no easier. Supply of iroko has remained more difficult while prices have flattened out somewhat after a sustained period of upward development. In general, established customers have appeared willing to absorb these higher price levels because of the material’s easy handling and machining properties.

Wawa has not been coming to the UK in major volumes but supply appears sufficient to satisfy demand. Several traders reported reasonable demand for sipo, partly because this higher value species offers greater scope for making a margin than, for example, sapele. That said, volumes of sipo coming to the UK remain quite low.

Last month’s increase in freight rates from West Africa to northern Europe has helped to underpin timber prices. Unrest continues in the Ivory Coast, not least because the key dispute over citizenship qualifications for presidential candidates has yet to be resolved. However, there are few reports of any problems with the country’s shipments of framire or sapele.