The UK consolidated its position as the largest European export market for UK sawn hardwood in 2016. Its imports rose 11% to 103,500m3, exceeding 100,000m3 for only the second time in the last decade.
The long-term trend in rising US share of the UK market also continued. It accounted for 32% of all UK sawn hardwood imports in 2016, up from 31% in 2015 and around 21% a decade ago. This seems remarkable in the year of the Brexit vote, which created immediate economic uncertainty and a sharp fall of the GBP against the USD.
Largest gains in US sawn hardwood exports to the UK in 2016 came in white oak and tulipwood which dominate sales to the market (Chart 1). There were also gains for walnut and red oak. Exports of ash were down slightly, but performed reasonably well considering stringent phytosanitary controls imposed on the species by EU plant health authorities from January.
US sawn hardwood exports to the UK increased again in the first quarter 2017, reaching 27,100m3, 3% more than the same period in 2016. Although UK white oak imports have been slower, that’s been offset by rises for tulipwood, walnut, ash, and red oak.
An insight into factors driving the continuing resilience of US sawn hardwood exports to the UK is provided by comparing monthly trends in US export data to the UK and the USD-GBP exchange rate.
This shows that in 2014 and 2015, export volumes to the UK tracked the exchange rate quite closely. However, this coupling began to break down early 2016 and became even weaker after the Brexit vote. Exports to the UK increased between July and September 2016, despite the GBP weakening 20% against the USD.
According to UK importers, this decoupling of exchange rate and trade trends was due to a combination of factors. In the second half of 2016 importers speculated correctly that import prices for American hardwoods would continue to rise and the GBP to weaken against the USD. This speculation, combined with unexpectedly robust UK hardwood consumption, encouraged importers to build stock between last July and November. Lack of availability of substitutes, particularly European oak, added incentive to buy American. Demand for European oak lumber elsewhere in Europe from a range of sectors, including barrel manufacturing, flooring, joinery and furniture, and for logs in Asia, has meant availability has been tight. UK importers say that 1” American white oak has remained competitive compared to European oak despite exchange rates, while prices for 2” are about the same.
AHEC market development campaigns have also boosted UK demand for American tulipwood, which is now very popular for manufacture of kitchen components, mouldings and other interior applications, and has substituted less available light tropical species like ayous.
American hardwood is now used in the UK mainly for higher end commercial fit-outs and private bespoke projects and products. There’s also regional concentration, with demand focused in South East England, particularly London which dominates the commercial sector.
UK prospects for US hardwood in 2017 are mixed. Record low interest rates have resulted in continued spending, but a weaker pound. And currency strategists say sterling is likely to remain volatile against the dollar until the Brexit deal is clearer.
Meanwhile UK construction is growing faster than expected, according to the Construction Products Association (CPA), and activity is expected to remain strong in the first half in all the key sectors: private housing, commercial, industrial and infrastructure.
However, later in 2017 and next year growth is likely to be concentrated in sectors where US hardwood is less used, including housebuilding and large transport and energy infra-structure projects. A downturn is forecast in projects requiring high upfront investment, such as commercial offices. The high-profile niche of prime residential construction in London is also expected to slow.
Prospects for American ash in the UK and other European countries was recently boosted by the EU’s decision to recognise a “system approach” involving certified kiln drying to control Emerald Ash Borer in wood exported to the EU.
Previously US ash had to come from restricted pest free areas, or be supplied entirely square-edged and bark-free. The new ruling allows exporters to ship certified kiln dried ash into the EU with some residual bark and wane.
