Scary and crazy are two adjectives applied by agents and importers to the hardwood market.
A year ago, they might have been referring to the sorry state of sales. Today it’s supply. Broadly, the market is agreed to be in recovery, with improving demand from shopfitting, hospitality and general joinery sectors driving oak, framire, sapele and tulipwood sales in particular.
As a second fix material, hardwood is not said to be seeing much direct return yet from the newbuild revival, apart from some sales to joinery and stair makers serving top-end projects. But the boost to consumer confidence from rising house prices does seem to be triggering spending on deferred hardwood-using big ticket items, like furniture, and RMI purchases, such as new kitchens and flooring.
"We’re not setting the world alight, but we’re definitely in a better place than 12 months ago," said an agent.
The challenge is that the long-awaited UK recovery has coincided with global growth in hardwood demand which, in turn, has collided with serious supply constraints. The result, said one agent, is "a worldwide feeding frenzy, buyers scrabbling to buy every stick of timber and firming prices across the board".
The main pinch point is in US hardwoods. "On one side you’ve got improving US domestic consumption, plus stronger sales to Europe and elsewhere, notably China, which is still hoovering up timber regardless of talk of economic slowdown," said an importer. "At the same time, mill capacity is 25-30% off its pre-recession peak and horrendous winter weather has hit harvesting."
As a result, US contracts are reported to be 60 days late and one importer said his usual monthly US hardwood consignment of 15 containers dwindled in January to two. "We’ve had to increase purchasing from agents from 15% to a third of business," he said. "We’ve been able to do it, but obviously sacrificed margin."
The biggest US price hike has been in white oak. "In 2012 eight-quarter was around US$2,850/1000bd ft, now we’re seeing quotes over US$4,000, while four-quarter is up from circa US$1,700/1000 bd ft to US$2,400," said another agent.
"We’ve seen another 20% rise in the last nine months, with added impetus coming from the Chinese moving to higher grades as their overheads increase," said an importer.
Other US species may not be seeing quite these rises, but from tulipwood to walnut the direction is generally up and no immediate relief is seen on the supply horizon. "Once the weather improves, pressure may ease but, after seven years of not making money, mills won’t be rapidly cranking up capacity," said an agent.
African pressures
African supply is not as tight, but pressures have been building here too, notably in sapele. Again, demand is picking up globally, and mills also remain "way below pre-recession output". Exacerbating the situation, a main crane at Douala Port in Cameroon has broken down, causing huge backlogs.
One importer reported sapele prices up 15% over the last year, and current quotes for KD at £750/m³ cost.
"KD is also harder to come by, with one big European KD operator in Africa selling green, presumably to cash in on the strengthening market," he said.
Prices for iroko, idigbo and secondary species are also "trending higher". Surprisingly, in one agent’s view, meranti prices, while firm, have not been dragged upwards by African species. "But, with the big Dutch market reviving, it may be a case of time," he said.
Another took a similar view on European hardwoods: "Oak, beech and ash have been relatively stable," said an agent. "But if we see US prices continuing to climb, it may tempt suppliers to follow suit, especially if white oak approaches equivalence with European." One importer said that the Ukrainian crisis may also have an effect: "We may not buy much Ukrainian, but European countries which do might turn instead to sources we use," he said.
EUTR impact
A factor that does not seem to have impacted business to the extent some feared has been the EU Timber Regulation. It has caused extra administration, and one agent reported some customers opting to buy as traders rather than ‘operators’, the companies which first place timber on the EU market and have to exercise due diligence under the EUTR. But most mainstream operators said it has mainly involved "formalising existing procedures".
"At most it’s made us focus more on what we were already doing," said an importer. The Regulation, said another, does not seem to have unduly narrowed the UK supply base either. "Over the years we’d already weeded out suppliers which fell short on legality assurance, and since the EUTR came in we’ve only dropped a couple more," he said.
One concern is that the EUTR may reduce demand for certified sustainable timber, with customers opting simply for legality verification to satisfy the Regulation. And an importer thought short supplies of African FSC-certified hardwoods, possibly due to Danzer’s certificate suspension, might increase the likelihood.
But another did not believe the risk was great: "Buying certified is now so embedded in public and big business procurement that we don’t see it being seriously affected," he said. Looking forward, the hardwood supply challenge is expected to continue, but the consensus is that this, in the words of one importer ‘is a nicer problem to have than the alternative’.
"It’s frustrating when you can’t get the timber you need when you need it, but it doesn’t dent our confidence that we’re on an upward track. Customers understand the position and most also accept prices have to rise. We’d much rather be here than where we were this time last year, twiddling our thumbs and scraping around for sales."
