Summary
• September did not produce the usual post-holiday sales pick-up.
• White oak remains the strongest seller.
• Sales of sapele, iroko and sipo have been consistent.
• Resistance to price rises is increasing.
• Upcoming freight price rises are predicted to be ‘drastic’.
Flummoxed. that’s how one agent described his take on hardwood trading patterns over the last quarter.
“Nothing has been normal in 2009,” he said. “While the rest of the timber market has been talking downturn and recession, January to June really wasn’t that bad for us. And since then trends have become really curious.”
In July, he said, his company sold huge amounts – “two to three months’ worth in a single month”.
“Perhaps it was the result of some comp-anies, which had heavily destocked, getting to the end of their inventories and restocking for September, but it really was mega.”
But since the unexpected July boom, he added, business has tailed off. That may have been predictable over the August holiday period, but the traditional slack time has extended into the autumn.
“I’ve spoken to a number of leading importers who are also saying things are very quiet,” said the agent. “One view is that hardwood has been sustained this year by contracts signed before the downturn, and is now belatedly going into recession.”
Sales are just in time
Other sources also said that sales are increasingly on a just-in-time basis and volumes are reduced from where they would usually be this time of year.
“People are tending to come in and buy just a few packs rather than a half or full truck load,” one contact said.
Looking at particular species, the perennial favourite, white oak, is reported still to be fairing best, with the rider that there are shortages in some specifications, specifically 5/4, 6/4 and 8/4. One importer said this is due to producers trimming capacity.
Tulipwood, poplar and walnut were also reported ahead of the pack, but demand for cherry and the rising star of recent years, maple, has dipped. One agent said that ash seemed to be knocking maple off its perch, which made it doubly unfortunate that the species is so badly affected by the emerald ash borer beetle in North America.
On the tropical front, the best performers were reported to be sapele, iroko and sipo.
Another contact said that the price premium on certified material is increasingly affecting its sales.
“There are people who would have previously taken certified timber, but now aren’t because they’re watching the bottom line.”
Little price movement
Overall, prices are not reported to have fluctuated markedly recently, with one exception being dark red meranti which has seen a 10% hike in Asia in the past two months. Other than this, the biggest increases are reported in 6/4 and 8/4 white oak.
One importer noted that some US white oak producers are now trying to raise prices again, but there is growing resistance as there is little likelihood any further increase could be passed on to customers and people can “pick and choose their suppliers”.
There is talk, too, that African suppliers will try to increase prices as supply tightens in the upcoming rainy season.
“But, if you’re prepared to wait for them to produce new contracts, then you’re OK,” said one contact, adding that his African lead times were two to three months.
Supply tightens worldwide
Generally, hardwood supply is said to be tightening globally and one agent said “you have to shop around a lot more, especially for specialities, FSC products, wide items and anything in a colour or width sort”.
“You can turn the tap on relatively quickly on 4/4 ash or 4/4 white oak, but thicker products take longer,” he said.
One importer felt this trend could lead to renewed upward price pressure, but another said that the difficulty of passing on rises, which if anything is set to increase, would act as a counterbalance to this.
Anything traded in euros has already become another 3-4% more expensive in the last two or three months, with businesses, like tourists, now working on a sterling/euro exchange rate of pretty much one to one. If the pound weakens further, one importer warned, “suppliers everywhere will find a lot of resistance in the UK”.
A cost rise that will have to be taken on the chin by someone in the supply chain, however, will be forecast increases in freight rates worldwide. One contact said that “huge” rises were expected in rates from both Asia and Africa, while another predicted that prices “could double any moment”.
Looking forward the “flummoxed” agent said there were still no clear signs as to which way the hardwood market will go.
“Because business patterns are so unusual, all we’ve got to go on is gut feeling, but mine is that if things don’t pick up in the next six weeks, then they won’t until the new year,“ he said. “We might get another July ‘bubble’ a bit later, but why would we just before the Christmas slowdown? Having said that, we’ve been predicting all this year what we think the market’s going to do logically and the opposite happens!”