Several of the UK-based hardwood importers contacted this week suggested that 2005 was ending on something of a high note after a largely lacklustre middle portion of the year. According to the majority of UK specialists, however, this has been “a tough trading year” for tropical hardwoods thanks to strong competition and a continuation of the shift in purchasing trends. “Compared to years gone by, people are now buying on a more ‘little and often’ basis. They are tending towards gap-filling, buying more from landed stocks and from the Continent.”
As for the temperate hardwoods, North American white oak has remained a particular focus of tight supply and strengthening prices. Supplies of 8/4 and above are proving especially difficult, while prices for the species as a whole were described this week as “firm to firming”. A regional expert commented: “We are entering the winter months and so prices can only really go higher. Importers are not resisting the higher levels because they know the realities of the market.” Owing to material shortages and to freight rate fluctuations, many suppliers are not prepared to quote prices further forward than two months, it was also noted.
Red oak
While white oak has been grabbing the North American hardwood headlines for some time, red oak has been struggling with an entirely different set of circumstances. As a result of the flood of finished products from China, demand in the US for rough sawn red oak has declined significantly and prices have duly deteriorated. According to some contacts, these developments have thrown up “a real opportunity” for UK importers – not least because red oak is “an easy species to machine”. The scope for expanding consumption of red oak formed a discussion point at the recent American Hardwood Export Council conference in Barcelona. A delegate later told TTJ: “One of the reasons why red oak is not a big seller in the UK is that it’s classified as non-durable.”
Among the other North American hardwoods, the hard maple price has continued to firm during the autumn and, with winter weather expected to arrive at any time, this upward trend is expected to persist until well into next year. Meanwhile, an improvement in domestic demand has helped to create a firm tone in the tulipwood market.
Black walnut prices have also continued to climb and supply is deemed to be tight for good-quality material, partly because of demand from the voracious Chinese market. One source noted quality issues surrounding the species and added: “A lot of people expect too much of it because they have paid high prices for it.”
Earlier in the decade, North American cherry emerged as an outstandingly popular buy, thereby fuelling substantial upward price momentum. Market analysts consider that prices have not fallen back sufficiently over the last couple of years to attract strong demand from the UK. That said, the last couple of months have brought reasonably stable market conditions.
By comparison to most of the other North American hardwoods, the ash market is “flat” and exhibiting signs of weakness. Some exporters – notably in northern US – have been prepared to cut prices in order to relieve pressure on their inventories. However, the onset of winter weather might serve to tighten the supply picture in the near future, it was observed this week.
Hurricane impact
Staying on the theme of weather, it has been suggested that the heavy rains associated with Hurricane Katrina have already had a significant adverse effect on logging activities in key hardwood producing states of the US. Of course, the process of repairing the damage wreaked by Katrina and the other hurricanes that hit the southern US in recent months is creating significantly increased domestic demand for all types of construction materials, including hardwoods.
Buyers of North American hardwoods appear to be increasingly interested in securing FSC-accredited supplies and are prepared to pay a premium of up to 10% in some instances. Similarly for Far Eastern dark red meranti, purchasers have shown a willingness to stump up more for MTCC-certified material, although the premium is generally a more modest 2-3%. Meanwhile, availability of MTCC-certified material is continuing to improve.
Meranti prices have been climbing steadily for some time although supplies in the UK are widely considered to be sufficient to satisfy current levels of demand. However, with the arrival of the rainy season, supply could become a more difficult in the near term. “Prices should continue to rise steadily into January and February next year,” said a regional specialist.
Tsunami projects
Earlier this year, supply of Far Eastern constructional hardwoods such as keruing became particularly difficult as material was diverted into re-building projects relating to last December’s devastating tsunami. While some UK operators have reported “almost non-existent offers” of keruing, others have suggested a gradual improvement in its availability over recent months – although prices have not returned to previous levels. One expert commented: “Prices have not looked back – keruing is still 5% higher than it was when supply was more difficult.”
Broadly speaking, supply of African hardwoods is matching unspectacular UK demand.
The most significant development has been the weakness in the shipped dry and kiln-dried iroko market, which has been blamed to some extent on a lack of buying activity in the key Irish market. “Specials and cut sizes are now far easier to get hold of,” TTJ was informed this week. “European buyers seemed to go on holiday in July and not come back, so there is quite a bit of stock around.”
The sapele market has been stable by comparison, with the species appearing to attract growing interest from the US and China. Prices weakened for a long period after Chinese buyers stepped back from the market, but many of them have now returned. One source said: “The Europeans are having to compete with the Chinese again. Forward prices on sapele have gone up by 12-15% recently, but the effects won’t be seen over here until April or May next year.”
Framire is a popular buy in the UK but an element of oversupply and reduced buying activity in Italy have led to some cheaper prices on the ground and going forward. Meanwhile, UK sales of wawa from Ghana are believed to have fallen by around 20% this year due in large part to penetration of the picture frame and mouldings markets by plastic alternatives from China.
Brazilian supply
Brazilian mahogany has disappeared off the radar for many hardwood buyers while supplies of cedar have also remained difficult in recent months. Some suppliers of the latter are reportedly encountering further bureaucratic hold-ups in relation to certificates of origin, resulting in a dearth of offers coming through to the UK. The appreciation of the Brazilian real in relation to the US dollar has added to the pressure on mills; indeed, several contacts alluded to reports of producers either shutting down or laying off employees.
In these circumstances, UK orders have tended to focus more on South America’s secondary hardwood species such as ipe and jatoba, although the Brazilians “are asking some horrific prices”. According to one regional specialist, the prices of some of the leading secondary species have increased by around 15% in the last six months.
North American white oak prices may have increased but the species remains highly competitive in relation to European oak, not least because of the effect of the euro/US dollar exchange rate. At the same time, it has been suggested that difficulties in obtaining thicker sizes of white oak from the other side of the Atlantic have generated an improved demand for its European counterpart. “Forward prices are higher than ex-stock,” TTJ was informed this week.
Supply of oak out of Germany has reportedly become more difficult because of significant Chinese purchasing activity.