The price differential between dark red meranti and sapele has widened significantly over the past couple of months – from around 10% to nearer 20% in favour of the former – but there has been little impact on UK buying patterns within a market that has been slow to rouse itself following the Christmas and new year break.
Some experts believe that, if there is to be a marked move away from the higher-priced West African species in the direction of Far Eastern hardwood, it is unlikely to occur immediately.
The price of dark red meranti dropped quite sharply towards the end of last year but subsequently stabilised in a broad price band from US$725-760 a tonne for 2in material. What has made this species even more attractive, however, has been the weakening – albeit modest – of the US dollar against the euro and other leading currencies. Furthermore, there are reports of freight rates to the UK having fallen by US$300 per 40ft container for prompt shipment, although it is stressed that this type of offer is likely to be available only temporarily and that ‘rates will bounce back again in March or April’.
While this year has begun with a reasonably healthy level of supplies in relation to the limited demand, there are suggestions that supply could tighten in the coming weeks as mills break for Chinese new year. ‘Immediate shipping may become a problem,’ commented one leading importer. ‘Certain sizes – such as 2.5in – seem to be less available than others.’ Another added: ‘There is a general feeling that the last of the cheap prices have almost gone.’
Meranti mini boom
With some suppliers trying to reduce inventories in advance of Chinese new year, it was hoped by several hardwood traders that the end of these celebrations in the Far East might signal at least a mini boom for meranti.
As for other Far Eastern hardwoods, it appears that keruing also stabilised in the final months of 2000 after suffering a price dip in the third quarter. Last year was generally slow for keruing sales, it was suggested.
The UK market is clearly conscious of the added attractiveness of meranti in relation to sapele but, according to one hardwood expert, ‘people are talking and looking at the moment rather than acting’. Indeed, while importers are reporting brisk activity, most agents are talking of a slow start to the new year, coming on top of a disappointing second half to 2000 for many.
The same contact explained: ‘The first half of last year was considerably better than the second half. Things went flat in the summer and there was an anticipation of a pick-up in September, but the market has just spluttered along since.’
An African hardwood specialist predicted that, once the market wakes fully from its Christmas break, 2001 will develop into ‘a tight year in terms of supply’. With a current price average of around FFr3,500-3,600/m³, sapele is already booked well ahead, with shipment dates of April/May now being discussed for new business. And while sapele is undoubtedly available in the UK, there are reports of some UK operators being sold out.
Some sort of shift away from sapele towards meranti is anticipated given the increased gap between their respective prices, although many experts believe sapele will maintain its dominance having established itself over time as the hardwood of choice. ‘Customers don’t seem to swap around because of prices like they used to some years ago,’ said one leading importer. ‘People now seem a lot more loyal to sapele.’
Dip in demand
No major changes were reported in the markets for iroko and utile over the past couple of months, although there was the odd suggestion of a noticeable dip in demand for the former.
The Ivory Coast is understood to be suffering from dwindling supply availability as well as continued civil unrest, while the hardwood market in Ghana is being affected increasingly by political factors. The latter is endeavouring to reduce lumber exports in favour of adding value, and there are reports that the number of sawmills is to be slashed by as much as 80%. This change of approach has seen the government imposing a minimum yield for each log while reducing concessions in some areas and placing more emphasis on secondary species.
And while Cameroon is said to have performed very well in terms of supplying hardwood over the last two or three months, the country is noted for delivering material in sudden bursts and following up with a period in which comparatively little is shipped.
Of course, the past few months have seen mounting concern over a US economy that appears to have gone off the boil after a prolonged period of boom. However, while there has been evidence of price weakness among some North American hardwoods, nobody is expecting a dramatic collapse.
As one contact explained: ‘It is still early days since the interest rate cut in the US and it is too early to gauge the reaction. But I don’t see any reason to expect hardwood prices to go into freefall.’
Rick Barrett, managing editor of the Hardwood Review, told the eighth annual American Hardwood Export Council (AHEC) convention in Brussels late last year that US hardwood prices could be expected to remain volatile during 2001 although use of these materials should continue to expand around the world. He also envisaged ‘huge problems’ for the US and the rest of the world as a result of increased energy costs.
A particularly cold and snowy winter in parts of the US has led to a protracted period of lacklustre production, starting in November last year and continuing into the early days of 2001. The Christmas break has been at least partly responsible for a hiatus in the placing of both domestic and export orders which, in itself, has provoked yet more caution among US producers.
The most audible rumours of price weakness surrounded hard maple, although the price levels suggested in most quarters are barely changed from the US$2,750-2,900 per thousand bd ft cif for 4/4 material quoted in our previous hardwood report last November. However, one contact this week insisted there is little difficulty in finding prices between US$2,700-2,750, with the price softness said to be particularly evident in the 4/4 and 6/4 thicknesses.
Weaknesses
The cherry market, meanwhile, appears to have lost little of its heat even though there are no new price increases to report. White oak is described as ‘stable’ to ‘slightly weak’ in 4/4 thickness, but ‘less available in thicker sizes’. Ash was also said to be showing some signs of weakness in 4/4 and 6/4.
On the news front, AHEC is paying US$50,000 to have white oak, red oak, ash and tulipwood tested under European structural timber code EN338 to establish strength classes (D ratings). AHEC has predicted that winning this classification could greatly increase the variety of uses for US hardwoods, given that many architects and specifiers would choose to use temperate species over the mostly tropical species available at present (TTJ December 2, 2000). Testing of additional species will take place once the initial four mentioned have achieved D ratings, it is confirmed.
As for Brazilian hardwoods, mahogany quotas are now beginning to arrive in the UK although sales are not expected to come close to levels of years gone by. One major importer suggested his annual sales were the equivalent of a single month’s business 10 years ago; another noted that, despite the lateness of mahogany arrivals, customers had not been pushing hard for the material to be delivered. ‘That tells me it has become a luxury item,’ he said.
There has been consternation in Brazil over the quota arrangements, with many of the larger shippers now having received their quotas while some of the smaller operators remain in limbo. The quotas are not as large as many had been expecting ‘and this is causing questions to be asked,’ according to a local expert.
The Brazilian cedar market remains steady with most business confined to the 2, 2.5 and 3in sizes. An agent commented: ‘Cedar is hard to get hold of and it’s not cheap – it’s still more expensive than sapele.’
Meanwhile, the block on exports of mahogany and cedar from Peru has been relaxed to some extent, with leave granted by the government to ship old contracts that were frozen late last summer, including quotas for the UK. There is a rumour that, longer term, hardwood exports from the country might be limited to machined stock, although this has not been confirmed.
Asked to peer into the crystal ball, most hardwood traders appear upbeat about UK market prospects for 2000, with several pointing to flood damage as providing avenues of business that would not have otherwise been open. An importer commented: ‘We are budgeting for a modest improvement in sales during 2001 – predominantly in the temperate timbers – as well as increased activity from Italian and Slovenian operators in beech and oak.’
Another contact reiterated his belief, expressed in a previous hardwood market report, that American steamed walnut was set for a particularly strong year on this side of the Atlantic.
UK kilning
Slightly less enthusiasm, however, was to be found in the UK kilning sector. While one contact noted a higher level of activity than anticipated for the early stages of this year, another expressed the fear that, as a result of the lack of investment in UK kilning capacity over recent years, operators in this country would find market conditions increasingly difficult in comparison to the ‘mega plant’ operators on the Continent.
He added that, while oil costs had dropped over recent months, they remained at a worryingly high level for those kiln operators who depended on it as an energy source.
