Summary
• European markets are particularly slow for West African shippers.
• Trade with China is holding up better.
• Producers in Congo Brazzaville are said to be working at less than 50% of capacity.
• By the end of January price reductions had been forced through.
For two or three months West African exporters managed to hold on to reasonably steady and largely unchanged prices for export logs and lumber while elsewhere prices crumbled as the volume of trade fell away in many of the traditional markets.
Sales to Europe were the first to weaken. Italy showed the trend by mid-2008 as the furniture industry became affected by the incredible growth in China’s furniture exports to the US and world markets.
Later in 2008 Vietnam became more actively involved in exports of furniture and other wood products and that, at the same time, opened up a relatively small but important alternative market for West African timber exports buying bilinga, tali azobe, padouk and belli; however, trade volumes are being held back by a shortage of containers.
China continued to be an active volume buyer, trade which to a great extent is supported and fostered by the now very substantial outright ownership or partnerships in West African timber producing companies. India, too, is a staunch and ongoing buyer of West African product, mainly heavy hardwoods.
By the turn of the year, all buyers had applied a squeeze on prices. They were very stubborn and unyielding through long price negotiations, effectively forcing through some considerable price reductions on many of the more regularly traded species by mid- to end-January. There are also some who are against the trend price increases where even moderate demand runs up against the much lower production volumes caused by concession and mill closures.
This situation has quite suddenly escalated with the announcement by the Gabon Forestry Department of a ban on the harvest of four species – ozigo, moabi, douka (makore) and afo. Although there were rumours of this possible action back in the fourth quarter of 2008, this will have significant effect on those concession holders, especially in the eastern sector, where there is a large reserve of these species.
Waiting for information
The true effects are not yet apparent in Gabon as the Forestry Department has been on strike for three weeks because of disputes over pay and conditions, so annual quotas for concession holders have not yet been issued. As a consequence, concession holders do not yet know if they will be allowed extended harvest areas, extra harvest volumes per hectare, forest tax relief or indeed any compensation at all for what, to some, could be a decisive factor for financial viability of a concession area.
Operators with log or lumber stocks of the four species have until the end of March to clear all stock. Moabi is a regular buy for French importers but, with France overstocked, the sawn lumber price firmed up only a nominal €10/m³ for scantlings, while GMS was unchanged and log exporters are asking €10-15/m³ more for whatever stock is still in the pipeline.
There is some demand for the existing stocks of douka (makore) logs where producers increased prices by up to €30/m³. Most other changes are downwards, usually by only a nominal €3-10/m³ but, in contrast, demand from Vietnam for bubinga logs pushed prices up by €8-10/m³ and bilinga also up by €10-15/m³ on buying for India. Some of the less familiar species not usually traded into Europe showed very small gains of €2-5/m³.
Sawn lumber prices reflect the reality of the market, with both gains and losses. The gains are purely on demand for species that are now much less easily available and the losses are where there are larger volumes with a regular customer base. Some on longer term contracts are subject to price pressure because of the more difficult and highly competitive trading in the importing countries. Padouk, khaya, okoumé and okan are down by €10-30/m³, sapele is still very weak as old stocks are gradually absorbed and very low offers are accepted. Sipo has come into moderate demand and exporters are trying for €10-15/m³ higher for new business. Some exporters report demand for izombe, azobe and agba, perhaps proving that good marketing, looking for new markets and concentrating on customers’ special needs can keep business ticking over during even this severe downturn.
Plywood and veneer exports
Although export permits for most wood products have declined, Ghana has been looking at increasing ply and veneer exports to areas other than the US and more traditional markets, but prices are only just able to meet the minimum allowed by the government.
In the producer countries most reports are of further mill closures and cuts in production and labour. In Cameroon, the major producers are very quiet and trade is at a low level. The small, portable forest mills run by local villagers are still working. The large, permanent sawmillers say this production is wasteful because of inaccurate sawing which is corrected by planing off the excess. And, because they pay low or no forest taxes, their sales prices tend to undercut and destabilise the market.
Producers and concessionaires in Congo Brazzaville are said to be working at less than 50% of capacity and, if anything, are reducing output. A recent report from Equatorial Guinea says President Nguema is tightening up on the timber industry, halting log exports completely and using the increasing oil revenues to finance new roads, public buildings and other infrastructure.
Plywood and veneer manufacture in the region is facing more difficult markets; some veneer mills have closed and ply mills are working at way below capacity. African exporters and traders say markets in Europe are very depressed. Many French importers have stock levels higher than they would like at this time of the year when onward sales are very slow and German importers are complaining that orders for the regular business of shipping by ferry the just-in-time truck loads to UK importers and merchants has almost dried up. Spain, Portugal, and Netherlands all report very low trade and buyers do not want to begin negotiations for new import contracts until the prospects for the building industries start to show signs of revival.