The most significant factor in the market early in 2015 was the slower rate of growth in China’s economy with an almost instant dampening in demand for logs and lumber in this the largest market for tropical timber imports.
Assessments of stock levels and pending shipments compared with expected demand seem to have indicated that in some species there was landed stock in China’s ports and timber storage sufficient to last for several months. Hardest hit has been okume and this also left African producers with unshipped volumes of logs and lumber and facing substantial falls in price.
At the same time, compounding the okume lumber situation there was the beginning of a shift in species in the strong Middle East market as some West and Central African producers offered mixed red coloured species, undercutting prices of both okume and competing Malaysian meranti.
On the plus side, some producers have developed a foothold for sawn okume in some alternative Asian markets and okume plywood and veneer have seen increased demand in recent months.
Over the past two or three years buyers for China had become gradually more interested in sapele sawn lumber where this extra demand added to the pressure and triggered some strong price increases through 2014.
This demand too came to the same sudden halt at the start of 2015 and sapele and sipo prices dropped swiftly by up to €70/m3. In the past few weeks demand for sapele has begun to recover with buyers for Europe back in the market and prices have stabilsed. Sipo prices have not fallen further though demand is still slack.
In past years such quite sudden and dramatic changes in market demand and major species preference may well have caused a general price meltdown but now producers are able and willing to avert this through curtailing production or even temporary mill closures, tailoring output closely to expected demand.
As we forecast earlier this year (TTJ January 2015), producer mills had already decided on a cautious approach to marketing in the early months of the year.
This certainly is the current situation for producers in Gabon and Congo Brazzaville. Mills have closed temporarily and prices for almost all the most traded species have been held firm.
In broad terms this situation through the first six months of 2015 has led to two developments.
Firstly, in some markets producers have found that buyers are now much more willing to contemplate lower and mixed grades and more varied specifications in order to lower product costs. Amongst the benefits from this for producer countries include use of less well-known species, lower harvesting and log costs, plus increased yield of saleable sawn lumber from each log.
The second change has been increased interest especially from China for the top quality and very high priced, rarer specialist timbers including species such as bubinga and padauk.
Often, because of log export restrictions buyers for China purchase the logs and have them processed to specific dimensions locally in-country ready for export. At the other end of the scale even China has now started to accept some low-end mix of grades and species.
These developments have left the middle range of log species to continue to hold the market price stability that was well established during 2014 with the majority of prices changing very little if at all through the first half of 2015.
The government of Cameroon earlier in the year announced that as from January 2016 the log export quota system would be rigidly enforced. Presently there is a quota for the primary species and only what are called ‘promotional’ log species are allowed for export.
Volumes have been significant and this is not easy to control. Sawmillers have welcomed this move to once more restrict log exports, which will ensure a continuous and adequate supply of logs for this country’s very successful lumber export businesses.
In Congo Brazzaville, it is reported the final signatures are going ahead for development of the last available forest concession areas that are located in the remote far Northern region.
Here there are large areas of protected National Parks and extensive swamps. Road transport to the nearest ports is between 1,000km to 1,500km and is being supported by the government’s extensive, soon to be completed road building programme that will link the region with access to the Southern ports as well as through westwards across borders to the recently enlarged port of Kirby in Cameroon.
New concession holders are given a relaxed 40% log export quota during a fixed timetable when sawmills and other processing facilities are under construction.
Following this period the already in place very strictly controlled overall quota of 15% log export to 85% processing come into force.
In the current market conditions, the log market is quiet and reports that even the massive and long established log ‘parc’ at Point Noir has few logs waiting for shipment.
After the long period of civil unrest, there has been a resumption of export of sapele logs and lumber from the Central African Republic. It is small volumes for the time being but expected to increase slowly in the coming months although not likely to be high enough volume to disrupt the current fragile market prices.
Equatorial Guinea is exporting okume logs that are said to be more red in colour and dense than from other countries in the region and more suitable for decorative sliced veneer rather than as peelers.
There are occasional rumours that Gabon will resume log exports after being banned since 2010 though this would seem to be very unlikely. Reports are of economic difficulties and long outstanding VAT repayments.
Some sawmills have closed because of the fall off in lumber export business and others are holding down production in order to keep prices stable. Italy has been and is a major customer for Gabon ayous and recently has purchased some okume lumber.
Production of azobe has increased, the major customer being Netherlands and this has caused a halt in sales and a price fall for okan that had been a substitute for certain uses.
Other European markets are said to be slow, as is usual during the summer holiday months, while exporters report that buyers are becoming increasingly nervous about more stringent and frequent EUTR inspections and are demanding even more documentary proof of legality through the supply chain.
This leads back to the slow progress in producer countries putting in place the FLEGT VPA system.
ITTO has just published a very comprehensive review of the implementation of this process explaining the complexities and problems involved. Although Europe is a significant importer of tropical timber the current fashion in most EU countries shows a clear emphasis and preference for pale coloured temperate hardwoods.
While this European preference prevails, exporters concentrate on the available much larger non-EU markets so that there is less incentive for industry to exert pressure on their own producer country governments to expedite the long and costly FLEGT VPA process.
China’s slow-down in Tropical Demand
A review of the current market situation reveals that by far the most significant influence is the slower uptake of tropical timbers by China. Business with China is ongoing and is showing some early signs of very small recovery and although volumes are low is appears prices are now stable.
Vietnam is actively buying particular species to feed their growing and highly successful furniture export business. Middle East markets are very strong and there are no signs of any downturn although as always prices are highly competitive for these buyers.
After more than a year, South Africa has recently resumed some imports from West and Central Africa because currency rates have become less favourable to US dollar imports of meranti than euro price based African okume. This is another very price conscious market with importers very quick to change sources and species for even small price movements.
According to producers and exporters the European markets are dull, dull and dull. France has been possibly the most active market so far, favourite species niangon moabi and movingue had moderate to good price increases and douka/makore also was higher priced with good demand from European buyers.
Other higher prices were gained by doussie, pachyloba and belli so there has been some balancing effects to offset the severe downturns in other species.
Germany is always in the market for wenge though in log form this and bubinga are banned for export by Cameroon. Sipo and sapele have had slow but steady sales in Germany and UK, helped by the substantial price fall early in the year.
The US is a steady buyer of khaya, and is a market that could respond to increased marketing initiatives by African producers.
