The current market conditions for West African producers induce a sense of déjà vu, as our report of 11 months ago reveals an almost identical situation: European markets are dull and not very active, but buyers for China and India are very busy.
Prices, of course, are not identical, as there were some changes through 2005: log prices advanced slowly on a broad front, plus there were some extra spikes in prices for just a few particular species. These were often quite large movements up or down in response to the usual supply and demand fluctuations.
Lumber prices had a rather more bumpy ride. There was a strong upwards trend from March to June, but by November a few minus signs had appeared. A new feature has been the quite sudden and strong buying interest from South African importers and large end users. It appears some of the major players have decided that South-east Asian supply constraints, high freight charges and steeply rising prices for sawn lumber made it necessary to review buying strategies for the long term. It will have been noted that West African freights have moved down in recent months with more vessels on the trade and more flexibility in schedules and method of shipment.
Some substantial agreements with larger West African sawmills have been concluded for South Africa, while some smaller mills were somewhat daunted by the volumes of lumber required in a limited number of species. Few concessions can guarantee continuity of large volumes of single species, especially, for example, in Cameroon where there are close limits on the area that can be logged each year irrespective of the actual size of the whole concession. Okoumé seems almost to be the sole exception where producers in Gabon and northern Congo Brazzaville are capable of logging very substantial annual volumes, mostly now exported as logs. This is soon to change in Gabon where there are government plans to increase further processing by limiting log exports progressively over the next three to five years.
Right now, Gabon producers are waiting to hear if the state selling organisation SNBG will give up its virtual monopoly on export sales of okoumé and ozigo logs. This was planned to be effective from January 1 but there have been rumours of doubt as to the actual implementation of the limited new role for SNBG as a technical and control entity only.
Sapele surprise
Looking again at prices, the surprise package is that sapele logs did firm up in December after a very long period of weakness and low priced bargain sales. Sapele lumber prices have not yet moved up but reports are that German buyers have been mopping up the lower priced stocks, perhaps in anticipation of higher prices to come. Iroko logs yo-yoed up and down and are now once more marginally firmer after falling some US$30/m3 in October/November.
Log exporters report dull European trading but very consistent business continuing to China and India. Prices overall are very firm and likely to remain so as West African exporters note the steady rise in South-east Asian log prices.
Selangan batu export logs are in very short supply and have moved up from US$270/m3 a couple of months back to a current US$345/m3 while for others, such as keruing and kapur, there is heavy demand and prices have increased, up US$20-30/m3 in the past few weeks.
Sawn lumber stability
Currently, prices for sawn lumber are stable. Some quite good price rises were seen through the first half of 2005: ayous (obeche) stands around €30/m3 higher, and azobe has been a very strong performer with increases of between €55-77/m3. The star species is doussie, rising by €140/m3 for FAS GMS and by €118/m3 for FAS scantlings late in 2005 and it is still very firm.
Iroko lumber is the most volatile, putting on €30/m3 in mid-2005, but by the end of the year shedding in the order of €100/m3 for FAS GMS and €60-70/m3 for strips. Little doubt it will bounce back as soon as demand improves, because the supply is limited and becoming more difficult to locate even in the more remote forest areas.
Padouk has also fared well, with steady demand seeing prices still moving up, and sipo is trading some €60/m3 higher than this time last year. Okoumé lumber finally managed to make some gains, by €20-30/m3, due to increasing acceptance in Italy as an alternative to ayous, and especially through the now very strong, regular demand for large volumes for South Africa.
A relative newcomer to the market is okan, now much in demand as an alternative to ekki (tiama). Prices have risen as demand has grown for European and South-east Asian destinations where there is some expectation that okan will be also become an alternative for merbau.
Moabi and movingui had some moderate price hikes but lost some of this as demand fell away at the end of 2005. However moabi is on the rise again, despite some resistance from German buyers. Mainstream Cameroon millers are pleased that the government has begun to regulate the proliferation of small, portable bush mills. They are now required to pay taxes and follow forestry rules and limits on logging volumes.
Mixed news
For the larger mills in the region there is mixed news. One major operator now has full Forest Stewardship Council certification and another large mill is expected to follow soon, while a recent Asian takeover of a previous French-owned large operation has led to one mill being put on the market. Rains have hampered production in Gabon, with one new mill reporting only 30% of normal production capacity because of log shortages.
The latest edition of the Ghana Gazette timber newsletter reports a massive increase in sales of plantation teak lumber to India from January to August 2005. Other than this, only veneers appear to have performed better than in the same period of 2004. Air-dried lumber exports continue to decline as government policy concentrates further on higher value products, though the figures appear to show that the value of these also declined.
Although European markets have been rather dull over the past three months, there has been steady demand from importers covering for smaller volumes of their favourite lumber species.
Demand for China is very consistent at ongoing price levels for logs and lumber, with buyers for India and South Africa very active and prepared to offer long-term volume commitments.
There is little doubt the reduction in the import tariffs for sawn lumber into India has stimulated considerable new business for West Africa and, looking at market prospects overall, rising prices for South-east Asian lumber and supply restrictions looming in South America, there is a strong measure of confidence in good demand and firm prices for West African exporters through 2006.
