West African exporters say that markets for logs and lumber are dull. There have been no significant price changes over the past month. Volumes traded are only moderate and buyers are exerting downwards price pressure – which is being strenuously resisted by producers.
For logs, only China is seriously in the market right now. Buyers for the Chinese market have been pressurising, without success, for a reduction of 15-20% in the prices of okoume logs from Gabon and have been buying some okoume from Equatorial Guinea and Congo Brazzaville at lower prices. In July the state log buyer, SNBG, asked producers to slow down harvest volumes to steady the market and this policy seems to have helped keep the prices stable.
Gabon is expecting rains very soon which may take out some volume from the market and assist once more in holding prices unchanged through the fourth quarter. Other factors affecting production levels include the estimation from some observers that the commercially operable forest reserves in Equatorial Guinea will be exhausted within two to three years and, less permanent, Congo Brazzaville producers remain at loggerheads with their government over the massive increase in surface tax. Some even stopped production temporarily in protest while arguing for a reduction. Surface tax is a land tax levied on the area of concessions and rises in the francophone West African region are increasing from Cfa5 per ha to Cfa600 per ha.
Financial advice
The World Bank and International Monetary Fund have been advising governments to increase tax revenues from forest and timber based industries and companies already affected by higher taxes in Gabon and Cameroon complain that, with no prospects for selling price increases, their margins are very slim indeed.
The Asian market for peeler species is also quiet though there are some buyers around for red species. Competition among producers for this business is very strong but prices have held firm. Spain and Portugal are rather quiet and Spanish buyers are being much more particular about quality and size and are selecting only the larger log diameters even at their normal low priced end of the market. Portugal is virtually out of the market for iroko. This may be caused at least partially through increased imports into Europe of Brazilian hardwoods as lower priced alternatives for iroko.
The only species in real demand is azobe and prices are forecast to rise by around 10% during the next two or three weeks.
The internal difficulties in Cote d’Ivoire and the halt in exports from Liberia have taken a fair slice of logs and lumber out of the market but, perhaps surprisingly, even this reduction in availability did not affect buyer sentiment and exporters were unable to push prices higher.
Traders report that Liberian Niangon is being replaced by small volumes sourced from Gabon but, in the main, by moabi and sapele as alternatives. Another alternative which is achieving good market penetration is ayous being replaced by okoume in the Italian market. This business is now well established.
Importers and traders in tropical timbers in France, Germany, Belgium and Italy all seem to agree that market conditions will remain dull and they forecast no changes for the coming months. The Netherlands market remains depressed, with building activity still in the doldrums, and the usual September upsurge in timber purchases did not happen this year.
“Neither exporters nor importers are expecting any significant changes in demand or price levels for the West African trade through the fourth quarter” |
Stable lumber prices
West African export lumber prices were stable through the third quarter, with no significant changes up or down. Mills remain moderately busy and certainly the problems in Liberia and Cote d’Ivoire have diverted some business to Gabon and Cameroon. Azobe millers are finding business is brisk, but all complain that, at the current price levels, they are not doing more than breaking even currently.
Although we have reported the long-term stability in lumber prices it is interesting to compare current fob prices for francophone West African sawn lumber with those of this time last year. There have been a few demand and price spikes through the year but overall in the major traded species there have been rather more losses than gains. Of 23 species monitored regularly, nine are now lower, four higher with the rest unchanged. Sipo and iroko GMS and izombe fixed sizes have been the biggest losers, currently around 20% lower in price. As distinct from the GMS, iroko strips are €30 higher than in August 2002. Ayous is €12 higher and moabi and tali are two others which have gained ground. However, most other species, including sapele, framire, padouk and okoume, are at the same levels as one year ago. Surprisingly, khaya is some €30 lower and abura GMS €15 down.
No change
Neither exporters nor importers are expecting any significant changes in demand or prices levels for the West African trade through the fourth quarter. China continues as the dominant player in the log market, with okoume much the largest volume. With the increasingly tight log supply situation in Malaysia, it is likely that the West African share of China’s tropical hardwood log imports will increase over the next few years.
For sawn lumber, the very firm prices and high freights for Far East meranti, coupled with the general tightening in supply, will contribute to the stability for the sawn hardwood market.
Cameroon and Gabon sawmills are managing to keep busy, but lumber prices and demand are not expected to improve. Stocks in Europe are reported on the low side, but adequate for the less than buoyant demand.
Lots of belts have had to be tightened in the past year in both producer and consumer countries and no-one in the trade is optimistic of any dramatic improvement in margins.