Having held their breath over prospects at the start of lockdown, UK hardwood traders seem now to be heaving a sigh of relief. Business may not back to normal, and there’s anxiety about the effect of the second Covid-19 wave, but the sector has seen sales improving since May.
“In April we were at 40% of normal turnover, but we hit 60% in May, 80% in June and July was a good month, not on budget, but ahead of last year,” said an importer distributor.
“It’s not business as usual yet, but we’re in a better place than anticipated four months ago.”
Another importer agreed.
“Our recovery to 85-90% of normal sales was remarkably swift,” they said. “In September, while growth continued, it did start to plateau. Local Covid lockdowns, and talk of a rise in unemployment as government winds down pandemic support measures are resulting in customer caution. So we expect it will be tougher to claw back that final 10-15% and that we’ll be that much below budget for the year. But we’re still more positive than we were.”
The strongest hardwood market currently is reported to be home improvement and DIY. “Consumers unable to go on holiday are investing in their houses instead,” said an importer. “So we’re seeing good sales to staircase, kitchen, window and cladding manufacturers and landscaping.”
Among the least buoyant areas is shopfitting.
“More robust stores used lockdown to refurbish, but shopfitting overall has taken some steps backward,” said an importer distributor. In terms of product, another said they’d seen best recovery in modified, engineered and semi-processed items.
“Lumber sales, temperate and tropical, have been slower,” they said. “North American is improving, but we’re not yet at levels we’d like to be.”
While demand generally has been on the increase, however, so too, it seems, have supply issues due to pandemic fallout.
“It’s harder to buy wood from a lot of places than to sell it,” said an importer.
“Sawmills reduced output due to Covid. Importers also reduced or stopped buying for a period. So there’s a lot of inventory catchup to be done, but there isn’t one continent where you can simply get your product wish list. You might hunt down what you want eventually. But it’s not a case of simply asking suppliers ‘can you just put on a load of this or that?’.”
Another importer reported supply gaps. “We haven’t got every thickness we need on the ground and don’t expect to have for weeks,” they said.
American white oak is a particular problem, with one importer describing the supply situation as “the worst ever”.
“There’s a cocktail of reasons, besides mills reducing throughput due to Covid workplace measures or temporarily shutting during lockdown,” said an importer. “The UK is predominantly an FAS market, and to produce this, mills need to sell lower grades. However, demand for these has dried up in key Asian markets and US industrial grade consumption has been suppressed due to manufacturing slowdown.”
They added that the US stave industry has increased white oak consumption too.
“It creams off the best logs, impacting sawmills’ capacity to supply the higher grade lumber the UK likes,” they said. “That’s on top of a recent general decline in log quality. One mill reckoned where once 40% of throughput was FAS, it’s now 15%.”
Another importer said positive responses to white oak enquiries were sharply down and some suppliers were not even responding. The end result is that prices are up 10% since July, with a further 5-10% rise expected soon.
Adding to US supply issues, it was reported at the recent London Hardwood Club (LHC) webinar that some southern mills have switched from hardwood to softwood due to surging construction consumption, with US 2020 housing starts forecast at 1.5 million.
“They’re not getting hardwood prices, but that’s offset by volume,” said one participant.
Of other US hardwood species, red oak is reported to be doing slightly better in the UK, but it still has a fraction of white oak’s market share, despite being half the price for four quarter FAS.
Trade in maple and cherry is described as middling, but there was a welcome for AHEC’s decision to make these species, plus red oak, the focus of its recent Connected project (see pp71-73).
“It’s important to grow utilisation of the less popular species and key to communicate their potential to specifiers,” said an importerdistributor. American ash is trading reasonably. Gaps are reported in some specifications, but prices are said to be quite weak.
Lower grade walnut prices were reported softening, but superior grades are firm with supply gaps in certain dimensions. Tulipwood prices are up 5% in the last five to six weeks, with lead times lengthening.
While the pandemic disrupted supply from Croatia and Italy, particularly prime grade, European oak availability is now reported as reasonable. However, one importer said the timber is not “just sitting there”.
“Mills are saying we’ll have to wait for the next kiln-charge to drop and that won’t be for a month,” they said. “It’s hand-to-mouth.” Concerns were also expressed at the LHC webinar that, with falling Asian demand for lower grades, European oak suppliers may insist UK buyers take lesser qualities to get premium material. Prices have been stable, but at recent French log auctions, higher grades were up 5% on the year.
European beech producers had also been suffering from poor demand for lower grades, but with Middle East and North African buying now increasing.
The impact of Covid-19 in Africa to date has been less severe than in Europe. Leading FSC timber and forestry businesses, such as CIB-Olam and Interholco in the Republic of the Congo, have invested in medical facilities and equipment against increased incidence of Covid (see pp49-50).
That said, African supply has tightened due to mills taking pandemic precautionary measures, plus, said one importer, the UK’s favoured species sapele being “less abundant in current harvesting cycles”. Consequently, the LHC meeting heard, the UK is “well stocked on sapele, but not overstocked”.
Importers also report continuing disconnect between sapele cost and selling prices.
“The cost price is firm, and the pound weakening against the euro has had an inflationary effect, but the market absorbs it,” said one trader. “Clearly some people need to turn stock into cash.”
Indicators are that sapele prices will gradually pick up, followed by sipo, which had been weakening. Iroko prices had also been falling, but are now reported stable.
Due to mills’ Covid measures, plus importers earlier asking for orders to be held back, lead times on African hardwood generally have extended.
Meanwhile, according to LHC webinar speakers, the UK remains resistant, compared to the rest of Europe, to secondary African species. Similarly, engineered African products are not seeing the uptake they’re enjoying elsewhere in Europe. Although Danzer sister company Interholco, which has 5,000m3 annual capacity at its IFO finger jointed laminated scantlings plant in the Republic of the Congo, remains hopeful UK end-user attitudes will change and reports supplying trial bundles (see pp44-45).
It was also reported at the webinar that, with completion of road links to the Cameroon port of Kribi, it is taking pressure off the congested port of Douala. However, the cost of storage and other services at the latter remains high and heavy rains have further disrupted transport.
The webinar heard that Brazil’s output of FSC-certified timber is set to increase, with more federal and state forests aiming for certification. UK customers were said to particularly favour FSC cumaru and ipé for exterior applications, and in lesser volumes garapa and massaranduba.
Asian prices are described as volatile, and freight rates from the region have been rising.
“The Malaysian ringgit’s fluctuation against the dollar has made the situation very unpredictable,” said an importer. “Prices are now level with three months ago, but they’ve been up and down several times in the interim.”
At the LHC webinar, meranti supply was also said to be tight due to lockdown and wet weather impacting harvest.
The event was additionally addressed by the UK Competent Authority, the Office for Product Safety and Standards (OPSS), on the UK’s change to the UK Timber Regulation and UK FLEGT regulation from their EU counterparts on January 1. In response to a question, however, the OPSS said it needed to check whether timber placed in bond before January 1, but which doesn’t enter free circulation until later, will be subject to EU or UK regulations.
The consensus among importers in early October was that adding Brexit to the equation, trade deal or no trade deal, on top of the pandemic, made even short-term forecasting difficult. But the mood wasn’t downbeat. One expressed the wider view.
“It’s a cliché, but we’re cautiously optimistic. We didn’t anticipate demand recovering this quickly, so we’re hoping it continues to defy expectations,” they said. “In the meantime, it’s a case of keeping suppliers and customers close and managing business as tightly as you can.”
