Not for the first time, the UK hardwood sector has divided itself neatly into two camps when asked about the current state of trade, with responses ranging from “very good” to “very disappointing”.

One contact, whose company’s volume and turnover figures for the first three months of this year were “almost identical” to those recorded in January-March 2004, suggested a few reasons for this yawning difference of opinion about the state of the market. “There is certainly more reliance on buying landed stocks ‘just in time’ rather than buying forward, so people with stocks are probably enjoying the better times,” he said.

Even though his own company was largely upbeat about market conditions, he confirmed that a reasonably strong first quarter had been followed by a slightly disappointing early April, which he attributed in part to holiday disruptions as well as to the uncertainty and caution produced by the announcement of a general election. But, keeping to the spirit of contradiction, several other contacts pooh-poohed any suggestion that an election has any major bearing on market developments.

Regional differences, size of company, range of products/areas of activity and customer base profiles were offered up as other reasons why one company may be experiencing completely different market conditions from another. Any evidence of sluggish sales activity towards the end of the first quarter could also be blamed in part on customers’ desire to keep stocks at low levels in the run-up to the end of the financial year.

Long-term change

So what general conclusions can be drawn about the hardwood business? Firstly, most people would appear to acknowledge that a long-term change in buying trends is having a significant influence on the UK hardwood sector. Customers are tending to buy smaller volumes than in the past, trimming their orders in many instances to satisfy more immediate material requirements. For this reason, many experts believe that a sudden upturn in demand would lead to widespread shortages.

Secondly, different consumer sectors are having to operate in radically different market conditions. From feedback, it appears that UK-based hardwood sellers are fielding reasonably good demand from joinery and decking producers, whereas demand from furniture manufacturers has been far more patchy.

Thirdly, it is clear that supply difficulties are persisting for certain key hardwood species. Starting in North America, a large proportion of the companies contacted this week reported problems in securing 8/4 white oak, attributing this situation to a combination of wet weather in the US and strong demand from the domestic market. Any new offers were said to be demanding “considerably more money”. White oak strips also appear to be in short supply, prompting the comment: “I have not been able to fulfil the orders I’ve got – it has always been difficult but it has now got exceptionally difficult.” Supply problems were also acknowledged for 4/4 white oak: a glut of orders in March is understood to have left this specification “desperately thin on the ground”, although several contacts suggested the situation had improved of late.

Against this backdrop, white oak has enjoyed firmer prices across the board, with one source talking in terms of recent 5-10% increases for the “FAS and prime grades – particularly in 6/4 and above”. Price improvements were also claimed for North American hard maple, with feedback suggesting that the current high levels could hold for several months to come. Ash is said to be attracting an increased number of enquiries and sales of 4/4 are understood to be particularly healthy. That said, prices of ash, cherry, walnut and tulipwood have been comparatively stable over recent months, despite the fact that China “has been hoovering up tulipwood like it has been going out of fashion”, TTJ was told. By contrast, red oak has been widely described as “weak” and attracted the comment this week: “Prices are soft because it is so plentiful, and it doesn’t really fit with UK purchasers’ requirements.”

Freight rate increases

The widespread enthusiasm surrounding North American hardwood has been tempered somewhat by general concerns surrounding bunker surcharges, container availability and the cost of fuel. A specialist in North American hardwoods noted the increasing difficulty in passing on freight rate increases to his customer base, adding: “The days of firm freight pre-paid are numbered.”

&#8220Sapele has become a commodity item and the cheapest price wins the business. Everybody is struggling to make money on it”

Turning to the Far East, lack of availability has also been the key feature of the keruing market. “It’s almost a collector’s item,” TTJ was told. “Prices have gone through the roof and, even now, the US and Japan are buying whatever’s available. Mills are reluctant to cut the sizes generally required by the UK market”.

Supply of bangkirai, the premium decking hardwood, has also been made more difficult by local demand for tsunami-related rebuilding projects and strong orders from China and India which are both willing to pay “top dollar”. According to UK hardwood contacts, these factors have led to late shipment issues.

Availability of dark red meranti has been a little easier, although there was disagreement over the cause of price increases during the first quarter. Some said they reflect “a lack of material rather than heavy UK demand”, while others blamed the rise almost entirely on freight rate movements.

From the African hardwood perspective, iroko continues to be the focus of firm pricing, not least because of the dearth of direct alternatives. That said, buyers are showing an increasing reluctance to place orders until they have a specific requirement. “The iroko price is way out on a limb,” a trader said this week. “Volumes have dropped and people are using it only when it’s directly specified.”

By contrast, sapele margins have become a source of widespread angst, leading one trader to comment: “It has become a commodity item and the cheapest price wins the business. Everybody is struggling to make money on it.” TTJ was also told that, while dry sapele prices were weak, kiln-dried levels were actually quite firm. Meanwhile, framire supplies have improved and the sipo market has showed little variation.

Contacts noted that hardwood shipments appeared to be normal out of the Ivory Coast despite frequent reports of unrest and uncertainty within the country. South Africa’s president Thabo Mbeki is involved in attempts to revitalise the peace process in the country.

Brazilian market

The rainy season has dampened the Brazilian hardwood market and supplies are expected to remain limited for the next few months. Costs in Brazil are on the increase and sellers are reluctant to talk just yet about prices for material that may become available for shipment in June and July.

Despite the low number of UK enquiries for Brazilian cedar, one contact said he was still unable to source sufficient material to satisfy orders. Cedar and decking prices are firm, while virola was described as “static”. Several contacts also reported increasing interest in FSC material, although one added: “Buyers are interested until you quote a price, and then the interest diminishes rapidly.”

As mentioned in previous reports, it had been hoped that some old stocks of Brazilian mahogany might be made available for export. There have been suggestions that good news may be around the corner, but one trader who has booked a couple of boxes said: “Word is expected any day, but they haven’t said which year.”

As for European hardwoods, the weakness of the dollar has helped create a sizeable price differential between the oaks produced on both sides of the Atlantic, although the European material is still selling quite well. European beech is plentiful and relatively cheap. As one source put it: “You can virtually name your price and specification.”