No definitive pattern of hardwood trading in the UK during the first quarter of 2007 has yet emerged, with many leading operators describing order activity as sporadic but generally below the levels of the same period last year. But, in common with 2006, importers and their customers are still struggling to satisfy all of their requirements in what has remained a determinedly supply-led market.
The resultant high prices are creating nervousness among buyers and promoting a widespread “hand-to-mouth” approach, TTJ was told. Overall, UK hardwood buyers appear to have accepted high price levels as a fact of life and expect 2007 to be another challenging year in terms of supply.
The American white oak market is showing no signs of running out of steam. Prices have continued to rise and shortages are reported in some thicknesses, with 1in and 1.25in said to be tightest of all. Several contacts alluded to a slight improvement in the supply of thicker sizes up to 3in. Overall, nobody appears to be anticipating any price weakness in the white oak market for the foreseeable future.
Black walnut, red oak
Similarly, the relatively low-volume black walnut market is also witnessing continued upward price momentum as any available supplies are rapidly finding a home. Slight firming is also reported in the tulipwood market, partly due to healthy demand from the painted furniture sector. Among the other North American hardwood species, developments have been more limited: ash and cherry prices have been fairly static over recent months, while UK orders for red oak have remained fairly low key. On a positive note, The American Hardwood Export Council (AHEC) has been pursuing its red oak “alien species” promotional push aimed at exciting wider consumer interest across Europe. Although few hardwood experts are anticipating an overnight impact, several sources reported a recent upturn in enquiries for the species. Indeed, one company confirmed that it had been sufficiently encouraged by interest levels to bring volumes into the country. “At least red oak is a topic of conversation now and we are converting it into some small business,” a spokesperson told TTJ.
Latest statistics from the US Department of Agriculture reveal that, in value terms, white oak made up 37% of the American hardwood lumber shipped to the UK last year, followed by ash on 9% and tulipwood on 7%. Cherry, maple and walnut each contributed a further 5%. Compared to 2005, the following import increases were posted: tulipwood 12%, white oak 8%, maple 8% and walnut 6%.
Increases forecast
Overall, UK imports of American hardwoods withstood strengthening competition from European material to record significant increases last year. Sawn lumber volumes advanced 5.6% to 106,000m3 and were valued at around US$80m, while veneer imports jumped 13.8% and were worth a total of US$5.6m. These increases were achieved “despite some shortages in a very tight market at the end of the year”, according to AHEC. The organisation’s European director David Venables added: “We expect to see further increases in 2007.”
Sawn hardwood lumber accounts for 75% of the UK’s total imports of US hardwood products, which include veneer, flooring, mouldings and logs. The total value of the UK market to US exporters was US$107m last year as against US$103m in 2005. Irish imports of US hardwood lumber climbed 28% last year to a record 35,000m3, and carried a value of US$28.3m. White oak accounted for 57% of the volume and 51% of the value of direct shipments.
In the global context, China now represents the largest export market for North American hardwoods. The Asian giant placed orders valued at US$328m in 2006 – an increase of 38% over the previous year; this equates to an average value of US$437/m3. The value of EU purchases advanced 6.5% to US$884m last year – equivalent to an average of US$694/m3.
Of course, the emergence of China as a major force on the world markets has impacted on a number of other key hardwood producing regions: its appetite for European oak logs and lumber is identified as one of the reasons behind mounting shortages. Thinner sizes – notably 1in and 1.25in – are already in short supply, with some experts anticipating that supply issues will extend across the range of thicknesses over the coming months. “European oak prices have gone up 5-10% over the last three months and they are looking set to go higher,” one told TTJ. Upward price pressure has been noticeable in 50mm thicknesses and above, another added.
Other factors tightening the supply of European oak are said to include strong fresh sawn orders from Scandinavia – particularly for 1in material – and a slowdown in logging activities in some countries, notably Croatia which is a major supplier into the UK market.
Tropical hardwoods
As for tropical hardwoods, prices of West African sapele have continued to rise in the face of strong orders from major buyers in the US and China. Availability from the Continent is said to be dwindling while many deliveries from Africa itself are said to be running very late. “Buyers have got to plan a long way forward,” said one contact, “because sapele is not readily replaceable even from the Continent.”
Despite arrivals of framire in the UK over recent months, this species is also still proving difficult to source and prices have remained firm; UK stocks were still being described this week as “tight”. By contrast, iroko is enjoying reasonable availability and purchase prices have been largely stable. As ever, sipo is proving hard to secure in large volumes and prices are continuing firm.
UK demand for wawa has been stable against the backdrop of a decent flow of material from Africa. Meanwhile, mills in Ghana have introduced large premiums on cut-to-size wawa in order to establish a wider differential to random sizes.
The tight supply of sapele has not produced a UK stampede in the direction of Far Eastern dark red meranti. After strong progress in the first half of last year, meranti values came off their earlier peaks in the latter months of the year and have made limited gains since then. With UK stocks at reasonable levels, several contacts reported evidence of “weak selling” of meranti in this market “at prices that bear no relation to replacement costs”. However, the hope was expressed that supply difficulties surrounding West African sapele and sipo would ultimately benefit embattled meranti agents, traders and importers.
Keruing supplies
Staying with Far Eastern species, very little keruing appears to be on offer to the UK, with many of the best logs heading to plywood mills or to other markets. And in a comment which could also be applied to a host of other hardwood species, one expert said: “It’s not a UK market any more, it’s a world market and unfortunately we are way down the pecking order.”
For many hardwood specialists, Brazilian species have been allowed to drop off the radar because of long-standing supply issues. Many of the country’s mills have disappeared while others are struggling with ever-increasing bureaucracy, such as delays in securing new concession permits.
Cedar is “very expensive assuming you can get it” because other, larger markets – such as the US – are generally to be found heading the queue for higher-quality material in particular. Meanwhile, the rainy season has dented supplies of some of the leading decking species, such as garapa. An expert commented: “I don’t expect to see too many garapa offers until the new season starts in the middle of the year.”
