UK hardwood stocks low but adequate

A general lack of demand in the UK, destocking among traditional importers and ongoing supply problems in West Africa have conspired to create “exceedingly difficult” conditions for the hardwood sector. Uncertainty over the forward order situation in the commercial joinery and furniture sectors is adding to the sense of unease among UK hardwood traders.

UK stocks are considered “low – but adequate for current levels of consumption”, with the notable exception of one or two West African species. Some UK buyers have been taking up the option of filling in supply gaps with landed stocks and so have resisted placing forward orders. However, according to one contact, “things will have to change – and soon”.

Another key factor at present is the strength of the euro, which has had an obvious impact on many of the West African hardwoods traded in this currency. Meanwhile, as one contact put it, “the US dollar is getting weaker, and so Far East hardwoods are effectively getting cheaper by the day”.

Tight supply

While the Far East meranti price has been generally firm, some West Malaysian shippers are said to have been offering reasonably limited volumes at 3-5% below the market norm because of a need to turn high stocks into cash. In general, however, supply in the Far East remains tight but adequate given the generally low level of demand around the world. That said, one UK-based Far East hardwood expert commented: “Any sudden increases in demand will soak up wood and leave people waiting a long time for their meranti.”

As for keruing, supply is short owing to the recent rains and to the decision made by many loggers that potential returns did not justify taking the wood out of the forest. As a result, the keruing price has been holding up reasonably well. Meanwhile, healthy demand for ramin in the Far East has not been mirrored in the UK.

Turning to Africa, the Ivory Coast remains tense and fighting is continuing despite attempts by the French and other African nations to calm the situation. However, according to regional experts, timber supply out of the region has become slightly easier over recent weeks, although volumes of iroko available to the UK market are falling some way short of demand. “Supplies from other African countries are bought well forward and there are no stocks anywhere on the Continent,” TTJ was told.

While attempts have been made to switch customers over to sapele or to other species in certain instances, some end users demand nothing but iroko and yet are encountering huge problems in sourcing material. The problems are thought to be particularly acute in the Irish market which, thanks in one instance to an accident befalling a vessel in the Atlantic, has been on a relative “starvation diet” of African hardwoods since the start of the year.

The combination of these factors has led to sky-rocketing prices for iroko. “I have closed contracts for record prices,” said one contact, who reckoned that iroko was now fetching around 10% more than three months earlier.

Material substitution

Despite the lack of a direct replacement for iroko in many end uses, some buyers are prepared to resist these high prices in favour of, for example, material substitution. Also, the absence of a clear picture emerging from the Ivory Coast is having an impact on order patterns. “We are getting offers out of the country,” said one trader, “but some customers are reluctant to book because they don’t know whether they will ever see the material.”

The framire price has also improved – albeit less dramatically – on the back of the situation in the Ivory Coast, while supply of utile is also said to be trailing behind demand.

Meanwhile, it was suggested that some customers have turned to wawa out of Ghana because of the difficulties attached to sourcing samba from the Ivory Coast. However, samba had been coming to the UK only in small volumes and so the benefit for wawa has been negligible.

Ghana itself is struggling for raw material as a result of government restrictions. Latest statistics show that a total of 27,000m3 of kiln-dried lumber – principally wawa – was shipped out of the country during the first quarter of this year, a little way behind the average for 2002 when 117,000m3 was shipped during the year as a whole. Exports to the UK were 3,000m3 in the first quarter compared with 13,500m3 for all of 2002.

The main West African hardwood species – sapele – has overcome muted demand across Europe to post price gains, although the market for this species remains somewhat more price-conscious than others. Stocks in the UK are understood to be reasonably low because buyers have been “feeding off the Continent where demand is depressed”. But even in the UK, demand for sapele is falling short of traditional levels for this time of year.

Even here, UK traders were reporting supply issues. One contact confirmed that he had just received a sapele shipment that had been booked for July last year. As one African market specialist commented this week, “stock is king in the tropical hardwood market”.

It is argued that the economic downturn across most of Europe has hit exports of American temperate hardwoods generally harder than those of their tropical counterparts, not least because US timber is used most extensively in commercial joinery projects and have suffered at the hands of project postponements or cancellations. At the same time, the end of a particularly severe winter in the US has eased the supply situation. A UK trader observed: “It was a dreadful winter and I have got late contracts – but nobody is chasing them.”

Weak dollar

For the moment, UK demand for North American hardwoods is said to be “plodding along at a low ebb”, with the usual caveat that black walnut is enjoying reasonable demand and slightly hardened prices. US domestic demand was described as patchy on the back of reduced demand for furniture and other finished goods, while Spain was mentioned as one of the few countries where demand for North American material is relatively strong.

Looking at the UK situation in particular, cherry and walnut were the only North American species reported this week to be enjoying firm prices. The likes of hard maple, ash, white oak and tulipwood were all said to be experiencing low demand but little weakness in price.

US production cutback

A regional specialist explained: “Prices have been stable because the Americans have been successful in cutting back production to achieve an equilibrium between supply and demand. Where there is any hardening in a price, it tends to be supply-led rather than demand-led.”

A UK importer pointed to the relative weakness of the US dollar against most other currencies as a reason why North American hardwoods were “very competitive”. He said: “We are currently selling quite a lot of material.”

Despite the fact that European hardwoods are already offering a degree of competition to their North American counterparts, several contacts insisted this week that the former would never come close to replacing the latter because of volume and quality issues. However, larger volumes of hardwood – as well as a greater variety – are said to be coming from eastern Europe into the wider European and Asian markets, and to be eating into traditional North American hardwood sales territory.

As for Brazilian hardwoods, reasonable UK demand was reported this week for cedar as well as for hardwood decking. Meanwhile, there have been more rumours that the Brazilian authorities might be considering limited shipments of mahogany, although demand for this species has grown somewhat cold after years of supply problems and restrictions.

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