While some experienced a seasonal dip in December, the general consensus among UK hardwood suppliers was that demand through the last months of 2020 into the first of 2021 was good to exceptional.
“It’s been full on,” said one importer distributor. “If we couldn’t make money in this environment, we never could!”
The brake on businesses doing still better has been supply. The problem was highlighted in the last hardwood report, but it’s reported to have worsened and prices have risen accordingly.
“A range of factors have coincided, from Covid-19, of course, to poor weather delaying harvest from some sources and soaring Asian freight rates. Throw in rising demand globally and it’s the perfect storm,” said an importer. “With North American, in particular, we haven’t experienced a supply situation like it.”
Another importer agreed. “If we could get the wood, we could sell it. Trouble is we can’t get sufficient wood.”
After slumping to 30-40% of normal levels when the pandemic struck from March into May, hardwood suppliers say sales quickly moved on to an upward trajectory. Most say they haven’t deflected since.
“Demand took off like a rocket, doubling, tripling, quadrupling,” said one international trader.
An importer experienced the same “wood fibre frenzy”.
“We’d usually expect to do 60-70% of normal monthly trade in December. Instead we did 120%. We hit the ground running in January and February’s looking OK too.”
The much-publicised surge in the home and garden improvements sectors is seen as one factor behind the buoyant market.
“Consumers stuck at home in lockdown and on furlough are converting their properties to a living-working space or taking the opportunity for some refurb,” said an importer. “While some may be wary about spending due to post-Brexit job uncertainty, others also have surplus money to invest from not going out or taking holidays – and UK annual holiday expenditure is around £60bn.”
Another reported “booming business in anything to do with construction and gardens”.
The general joinery sector is also busy. “Shopfitting, understandably, is flat, but other joinery customers say they’re flat out,” said an importer distributor. “As a result we’ve got the lowest bad debt we can recall, customers aren’t shopping around as much and we’re getting a better margin.”
An international operator reported similar levels of construction and home improvement activity elsewhere in Europe.
“We saw first signs of growth in Holland and Belgium, next France and Germany then the UK,” they said.
The fact that hardwood demand is growing internationally is one reason for tightening supply.
“The key buyers, in particular, are back in the market big time,” said an importer. “China has come back from Covid exceptionally fast and US construction is running white hot, with an increase of 200,000 housing starts in 2020.”
Adding to constraints on availability of North American in particular is that supply lines have been unable to get back to pre-pandemic output levels. “Capacity was already reduced by curtailments due to the US-China trade dispute, then the pandemic hit,” said an importer. “US mills’ ability to increase output now is still constrained by Covid-19 safe work practices and many report significant numbers of personnel in isolation.”
The pandemic-induced slump in US demand for industrial grade hardwoods from depressed manufacturing, oil and mining industries has also limited mills’ room for manoeuvre.
“Producers need to sell the rest of the log to supply the FAS material that the UK and the rest of Europe want. They can’t just stack the industrial grades in the yard,” said an importer. The hard North American winter, they added, has further hit supply.
Scarcest of all is US white oak. “We’ve bought well and got enough wood coming through to support the business for the time being,” said an importer. “But goodness knows if the situation persists. In terms of being able to place forward contracts, white oak is virtually non-existent and, if nothing changes, gaps will open up.”
The consequence is what one importer described as “unparalleled price inflation”.
“White oak is now 40% more than a year ago,” they said. “If a mill says on Monday a box of timber is coming out of the kiln on Friday, you’re told that’s when they’ll give you the price as it will have gone up again by then.”
The barrel stave sector also continues to stoke inflation. “We just can’t compete with Jack Daniels on price,” said an importer.
While white oak inflation might be exceptional, North American prices are up across the board.
“According to the US hardwood lumber export price index, based on a basket of 12 species, prices overall are up 18% since October,” said an importer distributor.
Another company quoted prime US walnut up 10% in three months and maple and white ash 15% since Christmas.
“Even bread and butter poplar/tulipwood is up 15% since January, so four quarter is now the price of four quarter red oak a year ago,” said an importer.
European supply has been less fraught, but there are issues.
“European prices are climbing, with oak up another 5% already this year, and indications of more to come,” said an importer. “Suppliers used to issue a 12-month price list, now its quarterly and we’re expecting another few per cent rise in the next one.”
One importer also reported problems with Croatian oak.
“Previously lots comprising a mix of A, B and C grade logs from state forests were put out to tender, you got a proportion of each and prices inched up a little every quarter,” they said. “But now A grade is being placed at auction, with prices 50-70% above what was expected.”
Brexit is also impacting trade from the Continent. European hauliers have been reluctant to take on UK deliveries due to fears of new customs procedures causing port hold-ups and lack of back haul loads. Given the perceived risk, they’ve upped rates accordingly.
Some importers have had no issues with the switch from the EU Timber Regulation to the UK Timber Regulation. Others, however, have experienced some reluctance among European suppliers to provide due diligence supply chain details now required on imports from the EU.
Another importer said they were now sourcing only FSC or PEFC-certified material from the continent, whether originating in the EU or re-exported from elsewhere. “We feel we can’t otherwise sufficiently mitigate the risk, for instance, that timber from Italy doesn’t originate from somewhere like Romania or the Ukraine,” they said.
“We’re also seeing that the trade assumption that EU supply chains are relatively low risk is not necessarily shared by the UKTR Competent Authority,” said an importer distributor.
Another considered the “real impact of the UKTR to be in its requirement for full supply chain mapping”.
“It seems to move away from the risk-assessed stance of EUTR to a more mandated approach,” they said. “For low-risk countries and species it’s nonsensical and we expect a lot more unhappiness about this at both ends of the tunnel.”
The expectation is also that some smaller companies importing from the EU and now finding themselves ‘operators’ responsible for due diligence under the UKTR, where previously they were ‘traders’ under the EUTR, opting instead to buy from bigger UK-based importers to avoid the administrative burden and risk. “They’ll also want to avoid the rigmarole, if they need to return timber for any reason, of having to export it under the terms of the EUTR,” said an importer.
African supply is reported to have been affected later and less than elsewhere by the pandemic. However, mills implementing Covid-safe work practices has added to existing logistical problems and extended lead times.
“On orders for kiln-dried placed this February, we’re looking at January 2022 delivery,” said an importer.
Prices across the key species are reported up 5% this year, but more is expected to come for sapele due to less being available in current harvesting cycles. “We’re hearing the same from Ghana, Cameroon and the Republic of the Congo, so price pressure will increase,” said an importer.
One company said their Asian supply was currently on hold due to “off-the-chart” freight rate increases resulting from the disruption to shipping and particularly container distribution caused by the pandemic. While a container from Southeast Asia cost US$1,500-2,000 a year ago, companies now report being quoted US$12,000-16,000.
In Brazil, pandemic lockdown has disrupted the issue of forest concession permits and thus supply. Combined with rising global demand, the result has been price increases in all primary commercial species.
Despite the demand and supply situation across the range of hardwoods, some importers report continued reluctance among UK customers to try alternatives. Others, however, are seeing some uptake of secondary varieties. One importer had seen customers opting for tiama as a sapele alternative, another “small volume, but steadily increasing” demand for angelim vermelho, angelim amargossa, eveus, tatjuba, jutai and araracanga.
The general trade view is that it will remain harder to buy than to sell hardwood for some time.
“The key will be investment in supplier relationships,” said an importer distributor. “We’re finding that the suppliers we stuck with when we had multiple options to buy are now sticking with us now they’ve got multiple options to sell. Importers who spent less time cultivating supplier connections may now find themselves not getting as much material as they’d like.”
