Summary
• Demand from China and India is steady.
• European business remains subdued.
• West African producers are gaining market share in the Middle East.
• Sawn lumber production has increased.
• Lumber prices have held firm over the past two months.

There’s been no use in looking for excitement in the West African timber markets since TTJ’s last report but this is not to say that producers and exporters have not beeen busy with existing orders and with good forward demand.

Although the feeling has been that European business would remain depressed, volumes have held up reasonably well while any slack in the market has been taken up by very steady demand from China and India as well as from Middle East buyers where West Africa has been taking an increased share of timber imports.

Middle East countries are very much a developing market for West African exporters, following on from their more traditional supplies to North Africa. Some exporters have sawn lumber orders ready for shipment to Libya that have been held up during the conflict and there will be a much increased demand for a rebuilding programme when hostilities cease.

After the sizeable and swift jumps in price for some selective, premium sawn lumber species through the second quarter, prices have settled into a quieter phase. Over the last two months most lumber prices held firm but without change and just a very few small adjustments that possibly reflected particular specifications rather than an indicator of market sentiment.

Price movements

Sipo GMS FAS moved €20/m³ higher as did sapele scants FAS while sipo scants FAS were €40 higher. Padouk is still a hot favourite, especially for China, with the GMS putting on a further increase of as much as €150/m³. Doussie was also in high demand and not in good supply, resulting in an up to €100/m³ rise for both GMS and scants. Iroko lumber remains stable and managed just a €10/m³ increase over two months. Okoumé, an increasingly popular timber now for Middle Eastern buyers and a favourite for South Africa, has just managed to hold on to the earlier higher prices but is looking a little weaker as some South African importers have begun to change over to lower cost locally grown plantation softwoods.

The only downside for the sawn lumber sector has been for padouk boules where high stocks in India have temporarily deterred importers committing forward and prices are marked down by as much as €120/m³ log measure boules. Sawn okan, also marginally out of favour in Europe, is also a little weaker, losing around €20/m³ on lower demand from China.

Increased production

On the supply side, West African sawn lumber production has increased, notably in Gabon where producers have completed the construction of new sawmills and reopened mills mothballed during the 2008/9 downturn. This new production has found ready markets and Cameroon also has been able to increase lumber production, accelerated by the reimposition of log export restrictions. This is also the case in Congo Brazzaville though the restrictions are perhaps less stringent. The increased competition in sawn lumber, plywood and products exports may have affected Ghana as statistics show the country’s exports have not performed well over the year.

Looking back at those earlier strong price increases for sawn lumber, one or two West African producers and exporters have been contemplating the “what goes up must come down” school of thought and forecasting a weaker trend towards the year end. Other observers point to tighter supply globally, with no producer country showing any signs of reducing prices as production and transport costs continue to rise. Everyone is watching the economic situation in Europe and the US and looking for any sign of a slowdown in India or China. So far economic growth, however small, continues in some western consumer countries.

Recent news that Brazil’s strong local markets are more attractive for producers with a forecast lower availability and incentive to produce lumber for export is also good news for West and Central African exporters.

Log supplies

In past years the emphasis was on log business and log prices, with huge volumes traded for exports to consumer countries. While the log trade is now much smaller in volume and less volatile in pricing, there is still strong demand and still pressure to tap into any new sources in order to ensure long-term supply up to at least the current much-reduced total volumes. The newer log supplies from Liberia and Democratic Republic of Congo are well established but as yet only in limited volume. DRC does have vast resources but transportation distances are very long, port facilities are limited and some areas are subject to internal conflict.

In contrast to sawn lumber prices, log prices are stable and unchanged over recent months. Trade with Europe continues on the decline and is unlikely to pick up until log buyers in Spain and Portugal are able to return to the market for the lower grades which were their staple purchases over many years. Ayous/obeche logs are in demand for Italy and prices are firm, with a plus of €10/m³ last month. Iroko logs were in good demand because of strong performance in the sawn lumber and prices for LM grade were higher by around €20/m³.

Plantation teak prices change very little over time but recently were stronger on high demand and have increased by €25-30/m³.

New regulation

West African producer countries are now much more focused on what has to be done to comply with the EU Timber Regulation which comes into force in March 2013.

A meeting is to be held this month in Point Noire, Congo Brazzaville for West and Central African forest authorities and producers, traders and exporters to discuss and gain information on the ramifications of the EU Timber Regulation and how best to comply.

Time is short, but it does appear the FLEGT licence route may well become the least complex process for major export countries.