Come December 31, those involved in the UK hardwood business are likely to be reflecting on a year whose early promise failed to be realised.
The first six or seven months of the year provided widespread grounds for encouragement but, following the traditional fall-off in activity during August, the market never re-discovered its earlier momentum. One source recalled: ‘August went quiet as we would have expected, but what we didn’t expect was that the market wouldn’t pick up in September. October was even worse.’
With the remainder of the year now likely to remain quiet given the imminence of the Christmas period, hopes are being pinned on 2001 ‘starting with a bang’ for the hardwood trade. This is no vain hope, according to one contact, because there was a precedent set for a January boost not so many years ago.
In the meantime, Far East suppliers have been dropping their prices over recent weeks and months in a bid to stimulate interest in a UK market which, unfortunately from their perspective, appears to have sufficient stocks to meet immediate needs. The price of 2in dark red meranti has gone below the US$800 threshold, with some UK operators putting it as low as US$750. In truth, said one expert, ‘nobody can be sure what the real market level is’.
The Far East mills are particularly keen to offer material into the UK at present because of the dearth of interest from much of mainland Europe, where the weakness of the euro in relation to the US dollar has sent many potential hardwood buyers scurrying to ground. The UK market is by no means buoyant, but at least it does not have to contend with the same degree of currency weakness.
In other key markets, demand for Far East hardwoods is falling well short of brisk. As reported recently (TTJ November 4), Australian buyers are tending to import smaller volumes and are turning more to pines, local species and MDF.
All this said, the current low price for dark red meranti in the UK is generally viewed as a temporary phenomenon. With the monsoon season likely to cause logging disruption between now and early February, the supply demand equation is expected to become better balanced and prices are therefore likely to rise early in the new year – possibly ‘quite dramatically’, according to several experts. Stocks are finite and, once these have been moved, there is a genuine expectation of a price upturn.
African competition
Another contributory factor to the tough times being endured by dark red meranti has been the increasing market penetration by West African sapele, the price of which has held relatively steady at FFr3,500-3,600/m³. Supplies are said to be available ‘for anyone who is willing to pay the price’, despite the civil unrest that has caused disruption in the Ivory Coast and the increased environmental restrictions imposed in Ghana.
The situation in the Ivory Coast was reported to have returned to something approaching normality in recent weeks whereas, at its height, the unrest prevented timber industry employees from going to work.
Shipments are understood to have recommenced although it is not yet clear exactly how much West African hardwood is on its way to the UK.
The problems in the Ivory Coast and Ghana have pushed more hardwood clients in the direction of Cameroon, although there were also reports this week of increased interest in buying hardwood from Nigeria.
Traditionally, many UK companies have fought shy of dealing with Nigeria, partly because of the unreliability of material quality and supply compared with that available from other countries.
According to a regional expert, sapele represented ‘almost a fictional market’ since ‘people will quote for February and March – but not before’. He believed that the sapele price had all but peaked and that clients were now ‘keeping low stocks to see how the meranti/sapele situation is going to pan out’.
Utile is said to be difficult to source, with a price corresponding to ‘whatever the exporter wants to charge’. Meanwhile, demand appears reasonably strong for iroko with the price generally reported at between FFr3,600-3,800/m³ for random parcels, although there was the odd report of weakness and a slightly lower price range.
There was also an isolated observation relating to idigbo. The contact suggested that interest in this African hardwood had increased of late, possibly because of its relatively low cost compared to other hardwoods and to the ease with which it could be coloured if required.
Black walnut
Another hardwood species that appears to be finding increasing favour in the UK is steamed black walnut from the US, with several contacts reporting an increase in demand during the course of 2000. However, latest export figures from the US Bureau of Census pointed in particular to the increased volumes of cherry, maple and white oak imported by the UK in the first half of this year. It added that the trend for ash continued to be strong following a ‘dynamic’ 1999, with the UK now the second largest importer of the species behind Canada.
UK imports of other, lesser known and non-specified species increased by 46% over the same comparative periods. This category includes US birch and hickory – both of which are being used in flooring.
According to the same statistics, American hardwood exports to the EU as a whole increased during the first six months of the year compared to the same period last year. Hardwood lumber shipments improved by 8.6% to 455,405m³ and hardwood logs by 50.5% to 171,947m³. White oak volumes increased by 6% to 183,000m³, tulipwood by 29% to 57,700m³ and cherry by 8% to 35,000m³. However, the highest increase of 35% was reserved for maple (40,300m³).
US hardwood exporters are having a similar experience to their counterparts in the Far East in that they are hearing barely a whisper out of the euro-based markets of mainland Europe. Demand in the UK remains ‘excellent’ for the likes of cherry and maple with the former said to be commanding anything up to US$3,600-3,700 per thousand bd ft cif for Pennsylvania origin 4/4 material. Little, if any, slackness is anticipated in the cherry price given the scale of domestic/ export demand and the low production levels compared to other North American hardwoods.
Hard maple has shown some signs of weakness over the past few weeks, with the price for 4/4 material now put at US$2,750-2,900 per thousand bd ft cif. According to one source, ‘the Far East is a big consumer but it’s got indigestion at the moment’.
As for other North American species, the thinner sizes of white oak are said to be exhibiting price weakness as exporters endeavour to ‘clear some of their stocks’, while tulipwood has also eased slightly over recent times. Demand for red oak on the other side of the Atlantic is helping to keep prices for the species at high levels in the UK. Meanwhile, ash is described as ‘not very convincing at its current price level’ in the UK.
US economy
Looking to the immediate future, it is often said that the US economy remains buoyant during a presidential election year. And yet, with the election – or at least, the voting – now over, few contacts in the US see much, if any, diminution in the strength of the domestic market for hardwood over the next six months.
‘Grim’ was just one of the pejorative – and more printable – words ascribed to the Brazilian hardwood market this week. Availability of both mahogany and cedar is low in the UK, thanks in part to the quota problems being experienced by many of Brazil’s exporters. Some of those who have received their quota allocations are still not in a position to ship material, while others are said to be deeply unhappy with the quantities allocated to them.
Given that the mahogany season is due to run out in the near future, the delays associated with quotas and permits could hardly have come at a worse time. One contact went as far as to suggest that this deepening of the administrative mire in Brazil has effectively ‘put a nail in mahogany’s own coffin’.
With the Americans apparently willing to pay considerably higher prices for mahogany than the UK, the same contact added: ‘Prices have got to such a level that people in this country will not buy it unless it is specified for special purpose. You can’t base your business around it and so, while I would expect one or two people still to stock mahogany, I also expect a lot of people will be trading out of it.’
Meanwhile, authority to resume exports of mahogany and cedar from Peru was expected to be issued by mid-November – but will apply only until the end of the year. Peru imposed a ban on exports of the two species in the late summer but is now expected to allow exporters to offload some of their old stocks. Of course, the situation in Peru has merely served to exacerbate the supply pressures now being placed on Brazil.
In similar vein, the passing of 2000 will not be any source of great regret to UK kilners. Although volumes handled during the course of the year are described in some quarters as ‘not too bad’, the sector has been hit by rising overheads with one leading UK kilner calculating that his oil costs alone had more than doubled over the past 18 months.
UK operators have also been affected by the trend towards use of larger, hi-tech kilning operations on the Continent. ‘If you look at the major movers of tropical hardwood,’ said one kiln operator, ‘it is cheaper for them to have it kilned in Europe.’ UK operators, meanwhile, are able to retain business often on the basis of offering a more flexible service capable of coping with small and/or mixed volumes of timber. At present, they are seeing quantities of sapele and iroko being bolstered by the likes of Estonian hardwood and square edged oak from eastern Europe.
The loss of kilning business in the UK is a reflection of ‘a manufacturing base shot to pieces’, according to one contact, who pointed to recent business failures and said he expected further ‘fall-out’ in hardwood-related operations over the next six months.
Solid support
Speaking recently at the Hardwood Club of London (TTJ October 7), Oxford Forestry Institute associate member Professor Eberhard Bruenig suggested the well-being of the hardwood sector could be improved by the mounting of a ‘pro-solid timber’ campaign focusing on the aesthetic properties of quality hardwood as well as the widespread misconception that natural forests cannot simultaneously support timber production and biodiversity.
Prof Bruenig expressed concern that the potential of the world’s forests to produce high grade hardwoods was being under used, with better timbers being harvested alongside lesser grades and wasted in lower quality applications.
