The hardwood market has been the proverbial curate’s egg over recent months, with some parts of the trade enjoying higher than anticipated sales during the summer months while others were left to lament a period in which brief flurries of activity were followed by longer periods of unwanted calm.
Asked for a prediction of future hardwood market trends, one source said: ‘If I flipped a coin, it would probably land on its edge.’
The comment was made even before last week’s tragic events in New York and Washington, which will surely have a massive but as yet incalculable impact on the world’s commercial and economic well-being.
Among those operators to experience healthy sales during the summer, one suggested August had proved to be his best month to date, with July following closely behind. Noting that demand was coming from across the entire range of regular customers, he envisaged mounting pressure for price increases for many North American and Far East species, and believed the upward movement for the former might be ‘quite aggressive’.
He based his view on the high prices having to be paid for lumber and the disappearance of significant capacity in the sawmilling, machinery and logging sectors – a recipe for supply constraint and higher prices down the line, he believed. This was happening at the same time, he added, as the US furniture trade was cutting back on its requirements because of strong imports from other countries, notably Japan and China.
One UK-based agent estimated at between 20-25% the production cutbacks realised by North American hardwood producers over the past 12 months. While pointing out that housing starts were still reasonably healthy in the US, he also acknowledged that the furniture trade was being decimated by competition from countries where wage costs are lower. Hardwood producers were therefore left struggling to find markets.
Price speculation
While several contacts echoed the view that production cutbacks would lead to shortages by the fourth quarter of this year, others were more cautious in their assessment of potential price increases for North American timber. Indeed, one importer described the market as ‘very bitty’ and suggested there were unlikely to be any significant price increases in the UK before January. Cherry and walnut were ‘special cases’ but ‘all the others are quite vulnerable’, with signs suggesting producers ‘haven’t been able to switch the tap off quickly enough’, he said.
With the odd exception, North American hardwoods appear to be on the weak side of stable. Ash has continued to see steady demand from the important UK market, but reduced interest from Japan and the US market had led producers to scale down their activities.
Considered by many in the trade to be under-valued at present, ash could quickly rise in value once production cuts begin to take a bite out of this ready availability.
Tulipwood is also said to be enjoying steady demand in the UK while at the same time exhibiting price weakness. Some degree of price stability has crept in over recent weeks in line with volume cutbacks by sawmillers and exporters. Meanwhile, both white and red oak are described as steady, while the hard maple price also appears to have bottomed out and is expected to mount some sort of recovery in the not too distant future.
Indeed, one importer suggested that forward supply for hard maple and white oak was likely to be difficult, not least because maple was seasonal and because white oak suffered from a long lead time between log and container. He anticipated particular supply problems in the premium sizes of between 1-3in.
Two species of North American hardwood are bucking this stable-to-weak trend – black walnut and cherry. Prices for the former were described this week as ‘very firm’ while cherry was termed strong on the back of limited availability. Indeed, over the past couple of months, the cost of green lumber at the sawmillers has risen sharply and this is expected to become reflected in sales prices down the line. Black walnut, meanwhile, has come into vogue not only in the UK but also in China.
The growing impact of China and other south-east Asian countries on North American hardwood export statistics was emphasised at the American Hardwood Export Council‘s convention in Guangzhou, southern China, during the summer. One speaker suggested that, at the current rate of growth, US hardwood lumber exports to the region could top 1 million m³ within five years after having stood at just over 400,000m³ last year and less than 100,000m³ in the early 1990s.
UK imports rise
Recent statistics issued by AHEC show that the UK increased its purchases of hardwood lumber from the US by 6% last year to US$93m, placing this country in fifth place on the world list of importers. The UK was the second largest market for American ash, third for white oak and fourth for cherry.
Turning to the Far East, the UN Convention on International Trade in Endangered Species (CITES) confirmed that, as from August 9, its 153 member states would no longer be able to import ramin in any form. This followed a probe by the Environmental Investigation Agency and Telepak Indonesia, which uncovered illegal logging of the hardwood on a massive scale.
More recently (TTJ September 1), all teak plantation forest management certificates issued to Indonesian company PT Perhutani were suspended after audits revealed non-compliance with Forest Stewardship Council certification criteria. The company has been the principal source of certified teak or lumber for the European market.
Meanwhile, some local furniture companies have said they may have to cease trading for lack of certified teak. Most market contacts are anticipating a firming in Far East hardwood prices over the coming months, with several pointing out that it was already ‘impossible’ to buy dark red meranti for October/ November at the prices prevailing just a month ago. ‘Suppliers are getting a little bit bullish,’ said one contact. Another ventured: ‘There is nowhere for the market to go but up.’
Patchy market
For the moment, however, the market is seen as patchy, with many customers ordering on an ‘as-and-when’ basis; some contacts even suggested that there was still a fair volume of material available in the UK. One agent reflected: ‘If customers want something, generally speaking they expect to have it pretty damn quick.’ The market had been weak for so long, another added, that customers are holding off on purchases in the expectation that prices will be cheaper the following week.
The keruing market, meanwhile, is described as very flat, reflecting a generally low level of activity in the truck market.
The relative volatility of the dark red meranti market appears to have pushed many customers in the direction of West African sapele, which continues to enjoy reasonably stable prices and supply, although there is some feeling in the trade that sapele prices are too low and that prices might firm in the near term. One agent pointed to difficulty in obtaining exact dimensions of sapele in some instances.
Activity in iroko and sipo is reportedly low, in part because of lack of easy availability. At the same time, a number of reports suggested larger volumes of framire entering the UK. ‘Framire is relatively cheap and it is becoming a popular timber in the UK,’ said a leading importer, although he added that care had to be taken on quality.
UK importers of West African hardwood are increasingly eschewing long-term contracts in favour of just in time’ purchasing from the Continent, several contacts suggested.
On the supply front, volumes coming out of Cameroon are being constrained in comparison to previous years by ‘proper implementation of forestry plans’, while the additional export tax imposed in Ghana has now ‘settled down’. One regional expert said: ‘It has not had much effect in the UK. There is a 15% tax on air-dried and 10% on kiln-dried, but 0% on further processed, so people are concentrating on further processing.’
Turning to Brazil, a ‘real blow’ has been dealt to supplies with news that world quotas are to be far lower than originally anticipated.
Meanwhile, there are reports that some late mahogany contracts are beginning to move and that some of the oldest contracts are now expected to be completed before the end of the year.
The season in Brazil began late and has been characterised by the apparent intent within the US to buy every piece of Brazilian mahogany available. ‘Mahogany is extremely bullish on price,’ TTJ was told this week.
UK traders are talking of difficulty in obtaining any meaningful supplies of mahogany. The purchasing process for the hardwood was also rendered more complicated by ‘all the caveats and provisos being imposed by suppliers’, said one source. ‘The US is desperate to get its hands on any mahogany and so the door is basically shutting in the UK’s face. A lot of people don’t want to touch it because buying mahogany ties up too much time and capital.’
Cedar demand
Cedar appears to be enjoying somewhat better availability, with ‘quite a few’ offers said to be coming through to the UK. Weaker prices are said to reflect limited demand.
The UK kilning sector has seen a number of company departures and capacity reductions in recent times, with the result that some of the operators remaining in the business have seen a sustained – although not massive – upturn in activity. One leading kiln operator reported having pushed through ‘a reasonable price increase’, before adding: ‘People have realised they have got to pay a bit more otherwise there won’t be any kilns left for them to go to in this country.’
