During 2006, supply has become the most important issue occupying minds in the UK hardwood trade. The past 12 months have seen a progressive tightening in the global supply of the limited range of hardwood products that dominate this trade. Prices for white oak, sapele, meranti, framire and tulipwood have all risen dramatically, while iroko prices have fallen only slightly from the very high levels in 2005. Demand, said John Bagshaw, managing director of International Timber, has become less of an issue: “For the first time I can remember, we are not in a demand-led market,” he said. “The market is very much supply-led, with prices being increased at source.
“It’s been a very difficult 12 months,” he added. “We are seeing rising prices in hardwood from source and these have not been passed through quickly enough into the market, which has squeezed importers’ margins.”
With regard to species trends, the single most important feature of the UK hardwood trade is the overwhelming fashion for white oak, now stronger than ever. In each of the past three years, white oak has accounted for around 35% of the total tonnage of UK sawn hardwood. During this period, UK imports of white oak have strengthened dramatically from the US, France, Germany, Italy, Canada, Austria and Romania.
American white oak is equally fashionable in the US, so supplies have been tight this year and prices have been rising rapidly. Although underlying demand in the UK has remained good, some UK importers have resisted the higher prices, putting a drag on trading activity.
European oak prices have also been rising this year, but the pace of growth has been slower than for American white oak, helping to boost the competitive position of the European product in the UK. At the same time, more European mills are offering square edged product and are gaining a reputation for their willingness to provide high quality material specifically tailored to UK buyers. So although prices for European oak tend to be higher than for American white oak, some manufacturers are switching to the European product because they claim it provides higher yield. Nevertheless, many UK manufacturers continue to value the longer lengths offered by American white oak suppliers.
Meanwhile American red oak is still not making the impact in the UK suppliers feel it should. Demand does not seem to be responding to relatively low prices, prompting David Venables, American Hardwood Export Council European director, to say: “If ever there was a time for buyers to consider another viable oak option, which offers good performance, it has to be now.”
Recent sharp price increases have yet to dampen UK demand for tulipwood, which is reported to be selling extremely well. This species has always been valued for its ability to take stain and thereby mimic more expensive hardwoods. Now AHEC reports that some UK designers are beginning to appreciate tulipwood for its own aesthetic properties.
Importers lucky enough to be able to lay their hands on American black walnut report that it is “flying out of the door”. However, the overwhelming fashion for white oak in the UK may have affected demand for other American species including hard maple, cherry and ash.
Tropical demand
Overall, tropical hardwoods have tended to lose market share in the UK in the last three years, due to lack of supply, fashion trends and environmental concerns. However, African sapele has continued to increase market share in the UK for tropical hardwoods, reinforcing its position as the dominant redwood used for joinery, with the majority now sourced from Cameroon.
The UK’s sapele market has done a complete about-turn during 2006. Whereas last year many importers were loaded down with excess stock and were selling sapele at low prices, supplies have become increasingly restricted this year.
Short availability of sapele is a reflection mainly of strong demand in other areas of the world. With supplies of Asian and Brazilian hardwoods increasingly restricted, buyers are focusing more on Central African hardwood. The Chinese are now taking greater volumes, particularly for flooring, while US buyers have made a significant shift to sapele in response to a sharp decline in availability of Brazilian and West African mahogany.
Iroko has been selling well in both the UK and Ireland during 2006. Iroko prices went high last year but have now eased slightly and stabilised. Regular supplies of iroko flowed out of Ivory Coast during the first half of 2006, but expectations are that supplies will tighten during the second half of the year. It is now the rainy season in West Africa and the political situation in the country remains extremely fragile. Framire from the Ivory Coast has also been selling well as a cheap utility joinery wood in the UK, with demand now running ahead of supply.
The supply situation for Asian hardwoods has become increasingly difficult over the past two years. Efforts to reduce harvests to sustainable levels and clamp down on illegal logging have coincided with a massive increase in wood demand in China, India and Vietnam. Between February and June this year, Malaysian lumber prices were pushed up by around 35% across the full range of species. Forward prices for dark red meranti offered to UK importers are now around 25% in excess of equivalent sapele prices. Meranti prices seem to have hit a ceiling but there seems little likelihood of any significant easing given the current supply situation.
Brazilian hardwood
Meanwhile UK imports of Brazilian sawn lumber have continued their downward trend. The Brazilian hardwood industry has been hit simultaneously by dramatic rises in production costs, a strengthening currency undermining export competitiveness, and government efforts to crackdown on illegal logging. This year dock worker strikes and massive delays in the preparation and shipment of consignments have led to further decreases in exports of wood products. The small volumes of Brazilian wood now imported to the UK comprise lesser known species that have been FSC certified and are being marketed particularly for public sector projects where certification is increasingly a requirement.
Supply is now the major preoccupation in the UK decking sector. Availability of preferred species such as balau/bankarai from the Far East and Brazilian garapa and massaranduba is very restricted and prices have been rising dramatically.
While most contacts suggest they have had little difficulty selling on the limited volumes of hardwood they have been able to source, the perception is that overall UK hardwood consumption during 2006 will be lower than in the two previous years.
Underlying this rather negative assessment is a concern that traditional sources of demand for rough sawn hardwood – the joinery and furniture manufacturing sector – are being constantly eroded as an ever-growing proportion of hardwood is entering the country as fully finished product. Certainly, the statistics indicating continuing rises in UK imports of wood furniture – particularly from China – and the large numbers of liquidations in the mass production joinery sector during 2005, suggest there are real reasons for concern about long-term prospects. Reports from the architectural joinery sector indicate that there are large pockets of sluggish demand, particularly in shopfitting and commercial fit-outs.
The other side of the coin, according to John Bagshaw, is that the scarcity of raw hardwood timber means furniture and joinery companies may have to accept certain species as engineered product. “The UK is behind the rest of Europe in the acceptance of finger-jointed and laminated product and I think this will inevitably have to change,” he said.
But it would be a mistake to be too gloomy. Most joinery firms report reasonable levels of business in the residential market and are more confident about the future given current housing forecasts and heightened construction activity in the run-up to the 2012 London Olympics. Furthermore, the decline in the furniture and joinery sector has been most pronounced in the higher volume low-end sector. UK manufacturers are focusing more on higher value bespoke products, just those for which hardwoods are particularly valued.
And there are tremendous opportunities emerging in the construction sector. At a recent conference on “Timber in Architecture” organised by the Architects’ Journal, Alex de Rijk, an expert in modern design concepts and emerging construction techniques, said that “steel was the construction material of the 19th century and concrete the construction material of the 20th century. Timber will be the construction material of the 21st century”. The major challenge now facing the UK hardwood industry is to turn architects’ and planners’ growing preoccupation with sustainability and energy efficiency into a real rise in demand for hardwoods.