¦ Hardwood volumes rose slower than prices in 2010.
¦ Customers are still not ordering forward.
¦ Sawmill and kiln capacity cutbacks and rising industrialising country demand are causing supply concerns.
¦ Ivory Coast unrest is causing concern over framire availability.
¦ London Olympics projects are generating orders.

At the tail end of last year a hardwood importer told TTJ that if 2011 was a repeat of 2010, he’d be happy.

It wasn’t that business had been spectacular. Latest Timber Trade Federation statistics showed hardwood imports for the 12 months jumping 18% to £240m. But traders say this involved a good element of price inflation, notably in the first half. “We didn’t see a big, big hike in demand or volumes,” said an agent.

Business also continued to be short term, with customers trimming stocks, especially in fringe species.

However, the consensus is that sales volumes did steadily rise in 2010, albeit less than value, and the sector felt more secure than the previous 18 months.

“There was no comparison with a dire, volatile 2009,” said the importer. “And the fact that 2009 made us all adjust expectations downward, made 2010 feel even better.”

But as to whether 2011 will shape up to keep the hardwood sector happy with more of the same, or be worse or better than the last 12 months, is unclear. Approaching the end of the first quarter, the jury is still out.

A couple of traders reported a flurry of activity in the first couple of months. “After a quiet start, we’ve been running around all over the place,” said an agent/broker. “Customers were obviously replenishing stocks and we sold a lot of American white oak in particular, but also more unexpected items, including a couple of boxes of meranti, which for us is almost unheard of.”

Solid enquiries

A UK and Continental specialist also said he’d seen an encouraging “pick-up in interest”, adding up to £100,000 of “solid enquiries” in January and February.

“We’ve had encouraging noises from customers, ranging from a very upbeat Norfolk craft furniture maker, to a hospitality fit-out business that’s just signed a £3m hotel bedroom contract,” he said. “We may benefit from it some way down the line, but housing starts are reported to be improving too, so overall we’re quite positive.”

But given the number of factors impacting the market, or expected to in the months ahead, other traders cautioned against basing predictions for the year on the first quarter.

“Last year the effect of government cuts never really transpired,” said an importer/ distributor. “But there’s growing concern that these will eventually feed through, particularly through a reduction in public sector building, and a likely interest rate rise could compound things. In fact, while it’s nothing dramatic, we’ve recently detected a bit of a slowdown. Whether this is just a blip, spending cuts starting to have an effect, or down to customers coming to the financial year end and a budget approaching remains to be seen.”

Further evidence that the market is still not confident of moving into a period of sustained upturn, say traders, is that customers remain risk averse. That translates into continued short-term ordering and buyers being extra demanding.

“People who used to take boxes of Random Lengths are now ultra precise on spec and it’s harder to close business,” said an agent.

There are also market concerns on the supply side and “getting enough timber into the pipeline”. This, said traders, is partly down to increased demand elsewhere in the world notably China, which, according to one importer, “is becoming a much more sophisticated hardwood market as well as a huge volume buyer”. But the key factor is still lower production, due to suppliers globally mothballing or closing mills in the downturn.

“It takes time to bring capacity back on stream and many suppliers haven’t reached the tipping point where they’re confident to start,” said an importer. “From our perspective too, with customers still ordering little and often, summoning the nerve to buy volumes remains difficult. So bringing enough wood to the table will be an issue through the year.”

African supplies

Processing capacity cutbacks seem to be a particular issue for kiln-dried African, according to the European specialist.

“Some mills have mothballed kilns, others have jacked them in totally, so it’s much harder to negotiate deals on KD,” he said. “That’s why we’re building up our business contract kilning African hardwoods for importers buying green or shipping dry instead.”

Adding to African supply concerns currently is the deteriorating political situation in Ivory Coast. According to traders, this is affecting availability of iroko and cedrella, but especially framire/idigbo.

“The last shipping lines are expected to pull out of Ivory Coast soon,” said an importer/ distributor. “Some timber may go overland, but supply won’t be the same. Framire prices have already risen and we’re expecting increasing shortages from April/May and advising customers to switch to sapele. As it’s the superior timber, we expect them to do this anyway as framire catches up in price.”

Adding another unknown into the UK hardwood market for 2011 is what is going to happen to sales agency/distributor DLH UK. Late last year the international DLH Group announced it was winding the UK business down and it was expected to close in the next few months. Consequently one agent/broker said it had already picked up ex-DLH custom.

Recently, however, James Latham plc, DLH UK’s biggest customer, announced it was negotiating to buy its assets.

“It’s unclear how this will affect competition, whether Lathams are buying it to maintain supply lines, or as a continuing sales operation,” said an importer.

Sales trends

As for species sales trends in this uncertain market, the safe performers, American white and European prime oak, remain the volume sellers, although an increasing quantity of a one-face-clear European FAS oak is also reported to be coming into play. The latter is not winning all-round approval. It’s not backed by specific grading rules, so, said one importer, “is open to being played around with”.

American walnut also remains strong and American ash seems to be generally holding up despite the emerald ash borer beetle infestation in the US and Canada. The latter is continuing to spread, but the better news is that a new US National Hardwood Lumber Association-devised phytosanitary certification regime, where companies primarily self-audit kilning procedures, is being put forward for EU approval with the help of The American Hardwood Export Council. The new system, say industry sources, will be more efficient than the current government-administered scheme and improve delivery reliability.

Meanwhile, demand for maple is reported as weaker, but cherry, which has been off its peak for some time, seems to be picking up.

“We’ve had significant orders recently, including one for door frames for a complete office refurb,” said an importer/distributor.

Several companies also reported tulipwood to be doing well as a painting grade and mouldings alternative to European redwood, which has recently risen in price.

Of the tropical species, meranti sales are generally said to be weaker, but demand for sapele is good and firming as framire prices rise. And one importer/distributor said he’d like the trade to take the opportunity to give the species a further push up market.

“Sapele’s a fabulous wood, which has long been under-valued,” he said.”People treat it liked baked beans, something they have to have in the basket. But it’s worth a lot more.”?

In home-grown, finger-jointed sweet chestnut and British Douglas fir are both reported to be taking cladding market share from western red cedar.

“That reflects the importance of carbon footprint to specifiers,” said the European specialist.“The buzz words are ‘local sourcing’.”

Meanwhile, price movements reflect the varying market fortunes of different species. “It’s been a real mixed bag,” said an importer. “Sapele and walnut have been firming a bit recently, framire a lot. Meranti, white oak, cherry and maple are weaker, and iroko and ash have been steady, as has poplar, after softening a bit over Christmas.”

Olympics demand

A growing plus for hardwood demand in 2011, according to a number of traders, is increasing orders for 2012 Olympics projects, notably for interior joinery and door blanks. Hotel and other hospitality venue refurbishment linked to the Games is also forecast to generate growing business.

But given the uncertainties over the wider economy and impact of tighter public spending, the hardwood consensus is that hard and fast predictions remain difficult to make.

“We’re looking for growth, but through taking on some more sales guys to gain market share rather than expansion of the market itself,” said an importer/distributor.

Another trader said that, like 2010, “steady as she goes will be good enough”.

“We’re hopeful we can continue to make progress, but it’s a nervous optimism,” he said.

Another importer took a similar line. “There doesn’t seem to be a concrete reason to predict either an upturn or downturn. We’re just trading week to week, month to month and accepting that the market is what it is.”