We are perhaps experiencing the longest stable market conditions ever for tropical timbers – in spite of all the difficulties EU importing countries are facing as a result of the continuing crisis in the eurozone.
In TTJ’s last report we said end of first-half price trends for both sawn lumber and logs were indeterminate and this has proved true. It is still the case and there are no strong indications as to price performance through the third quarter.
That’s not to say there have been no changes, because although current prices for most of the major traded species are still where they were at the start of the year, a very few have drifted downwards.
For sawn lumber, iroko had its usual minor ups and downs; FAS GMS is around €30/m3 lower than in February and scants down €20/m3, although no doubt iroko will pick up again as demand ebbs and flows. Padouk has lost €50/m3 on lower demand but now seems to have stabilised. Sapele GMS had a stable half year after the years when prices were in decline; however, scants did drop €40-60/m3, while sipo was firm and khaya lost €20/m3. Okan lumber fell from favour at the end of last year and prices remain weaker but okan logs gained €30/m3.
Over the past months okoumé sawn lumber has had a very active market in China. Prices have held on to earlier gains and are still unchanged, although buyers are now being very picky about minor details such as colour variations and producers say they are receiving claims they consider are being put forward only to try for a price reduction. Some now insist on a buyer inspection prior to shipment.
Producers reported there was an influx of visiting buyers from Continental Europe during March and the level of business placed seems to have been sufficient to keep sawmills busy right through the second quarter. It was said that price negotiations were tough and competitive, although in the event this largely resulted in buyers refusing to pay any increase over the then going rates and so maintaining the overall stability in price and production levels.
Producers have faced both financial and physical difficulties as West and Central African governments are more insistent on enforcing regulations while not making it any easier to operate a business. Gabon business has been hit by a number of problems, such as damage to a road bridge linking the north to the southern ports which caused delays, with trucks waiting for several days to cross. A customs strike lasted more than two weeks and port congestion and changes in procedures restricted access and the smooth flow of timber exports. As a result, one large Malaysian-based operator decided to leave Gabon, offering a veneer mill, three sawmills and a very large forest concession area for sale.
A new Special Economic Zone has been opened for business, offering companies tax incentives for 10 years. It is reported a new veneer mill is being constructed and that a sawmill will also go ahead soon. Some producers say the cost of land within the tax-free zone is too high and they hope to negotiate a package deal.
Gabon’s newly-appointed minister for forests is committed to moving timber processors into further processing and is said to be insisting that mills update machinery to improve quality and remove unnecessarily difficult onerous labour conditions. These latest policy initiatives should put a stop to rumours of a relaxation in the ban on export of logs. Large investments are also planned for extensive rubber and palm oil plantations.
Cameroon strong and reliable
Cameroon continues as a strong and reliable exporter. Producers in neighbouring countries say it is very competitive, although here also there are reports of one large producer deciding to sell up and move on. Cameroon has already moved into downstream processing and demand for planed timbers is said to be strengthening. The government recently banned the felling and sale of bubinga. This is a high-priced sawn lumber, currently selling at around €1,200/m3 FOB, but so far the Cameroon ban has not triggered any price movements. Gabon banned export of bubinga in 2011. Cameroon does allow log exports, but only in certain promotional, secondary species and not primary species.
Timber companies continue to show interest in new investments in Congo Brazzaville. In the past the country’s timber industry was very much dominated by French interests, but today Asian-based companies are the prime movers and certainly the Congo government is reported as having a flexible attitude towards negotiations to establish new businesses.
A quota system is in force to limit the export of logs based on a percentage of processed timber. Currently this is 75% processed but is expected to be changed in due course to 85% processed for 15% log exports. Investors are also looking at establishing palm oil plantations in the central savannah and humid swampy areas. Plantations are not allowed in forest areas.
Congo Brazzaville has an advantage in that Pointe Noire, the country’s second largest city, is one of the best ports on the coast, with deep water berths able to take the large liner services and other ships that have problems accessing some other west coast ports because of congestion or shallower depths.
African log trade has been very stable and prices were largely unchanged through the first half. Iroko logs were down €30/m3, movingui €30/m3 lower, and makore lost €10/m3 while tali gained €30. These are normal price variations and certainly there is still sufficient latent demand for logs to mop up whatever volumes are available and, of course, the strong and consistent demand for sawn lumber is a key element in the overall price and volume stability. Markets are generally less volatile. The lower estimates for economic growth in China and India are of concern to West and Central African producers but so far have not seriously impacted on log and lumber trading. The Middle East continues on a firm buying trend and prices there are very stable.
As mentioned, European buyers have been active in purchases for the spring and summer. The next buying phase in September/October for autumn and winter stocks may pose more difficulty in forecasting demand. If the eurozone does manage to stabilise and implement strategies for growth it is likely that one route to economic recovery will be strong investment in infrastructure, construction and housing – all projects that will increase employment, bring benefits to timber and allied trades and can usually be started up quite quickly.
