• Log export quotas in several countries have reduced supply.
• The ITTO reports a proposed MOU between Guyana and Democratic Republic of Congo.
• Buyers are showing more interest in boules and clean-cut timbers.
• Some sawn timber prices have risen markedly.
• Tropical plywood prices have risen 30%.
• China and India are active buyers.

West African timber producers were justified in their cautious optimism in market development through the first half of the year (TTJ market report, January 2011).

True, the first month or so consolidated the slow, but well-established, upwards movement in prices coupled with firm demand, but there were some price spikes for premium species that perhaps foreshadowed the current situation. By the end of February the sawn lumber sector had begun to stir, with some fairly hefty price hikes for a few favoured species.

The civil conflict in Ivory Coast in February and March, which triggered UN trade sanctions and eventually halted all shipping, undoubtedly caused European buyers to seek alternative sources for their sawn lumber at a time when many sawmills in the region had orders in hand for at least two months’ production.

Log prices

In contrast, log prices had scarcely stirred in spite of all sides now clearly understanding that the Gabon log export ban, imposed more than a year ago, would stay in place and that Cameroon was reintroducing the log export quota system that had been relaxed during the difficult trading conditions of 2009/10. Once again, Cameroon would allow log exports of only secondary, promotional species, while premium species would be reserved for in-country processing.

Shortly afterwards, Congo Brazzaville also reinstated log export quotas, prompted as some observers believed by pressure from the World Bank, which for some years has been encouraging tropical timber producer countries to curtail log exports in favour of eventual total processing in-country.

The slow decline in the European market for logs means France is probably the largest importer, while German importers make some more selective purchases.

There are some reports of limited log exports from Liberia and some shipments from Democratic Republic of Congo (former Zaire). For DRC the long-distance transport and difficult port facilities may well limit log export volumes even over the long term. An ITTO/MIS report mentions a proposed memorandum of understanding (MOU) between Guyana and DRC, a perhaps unusual partnership given the disparity in species in the forests and distance between these two countries. Possibly there may be some synergy that will come to light if the MOU is ratified.

Major log buyers

Meanwhile, China and India remain the major log buyers. Vietnam is well back in third place but is still a steady buyer for certain species as its furniture manufacturing industry is expanding with the benefit of lower costs for skilled labour.

The few log price changes have been confined to a small number of species and at best only around €10-15/m³ increases since January for tali, iroko, bilinga, and ovangkol, while okan was out of favour and shed around €10/m³. Sapele logs also stayed weak and moved lower by up to €20/m³.

China appears to have managed the lower overall log supply from the region without serious upset, and it’s possible that Papua New Guinea, its largest supplier of tropical logs, will be able to fill some of the gaps.

A new development in buyer interest in processed timbers from west and central African suppliers has been in the production of boules and clean-cut timbers. The recent increase seems to be focused on logs processed by cutting through and through, then removing the wane and sapwood. This clean-cut product is not graded or further processed and sawmillers say this is a less wasteful, lower cost and more profitable product than having to conform to tight grading requirements for European buyers. As a result, some producers report they are not cutting sawn lumber for European markets.

Chinese demand

By February China had already indicated a growing long-term trend towards increased imports of sawn lumber and sawmillers in the region had been confident enough to resume work on previously mothballed new mill construction and on increasing production capacity at existing facilities.

By the end of March and beginning of April, sawn lumber exporters reported that buyers for China were comfortable in accepting the higher current price levels. The earthquake and tsunami disaster in Japan made it quite obvious that very large volumes of timber and timber products would be needed for the vast rebuilding programme where most private house construction is based on timber.

The effect on timber trading became obvious very quickly as tropical plywood prices increased by 30% over the past few weeks, while the already firm prices for tropical sawn lumber in some species made unprecedented gains. A prime example is okoumé lumber which is selling for the same or higher price than sapele. In order of precedence the smaller price gains have been in azobe and sipo, up €30-40/m³, while okan standard & better dropped €30 on complaints about stability and seasoning problems. Sapele failed to hold and fell back the €30 gain it had made earlier. Moderate increases have been doussie, up €37; makore scants and iroko up €60 and €50; and moabi up a modest €40 although this was on top of an earlier gain of €100/m³.

The big movers put on what can be termed an unprecedented and rapid jump in price, even after some already hefty increases through April. Bubinga, much in demand and now banned for export from Cameroon, increased by another €200/m³ in May. Cameroon also placed a ban on export of wenge, saying it was necessary to give time to reassess the forest resource levels for increasingly rare and valuable species. Bilinga moved up €80; padouk put on a further €230/m³; and okoumé lumber went up again on strong and growing demand and stands at €70/m³ higher than at the start of the year.

Although ITTO reports European traders noting a shortage of “lighter tropical species” it is surprising that importers still aren’t considering okoumé as an alternative. A large new sawmill has come into production in Equatorial Guinea, and it is reported that the main product is sawn okoumé for export. This is expected to relieve pressure on the limited forest resource base by removing the incentive to export logs.

European buying slow

China and India are very active and indicating a continuing upwards trend in demand, whilst European buying is slow and cautious and likely to remain in this phase through the rest of the year. Spain, Portugal and Greece in particular are markets where exporters had outlets for the lower grades of logs and lumber. The renewed interest by buyers in other markets for increased imports of boules, flitches and ‘clean sawn’ timber seems to be absorbing what might have been a problem in using some lower grades.

So far, it is less clear when sawn lumber prices will stabilise and whether all the recent increases for some premium species will be sustained.

The market overall does look strong for west and central African exporters and there is a good deal of confidence for producers at least up until the end of the year. Log export prices seem to be of less importance now that governments have curtailed or banned log exports and importing countries have adapted quickly to new circumstances as they arose.