24 | Sector Market Update: Hardwood
Above left: Interest in red oak increased when white oak prices were high
Above right: Some report less sapele is available from current harvesting areas Below: European oak is more readily available and prices have softened
◄ But some reported signs of increased market caution from the second half, or early autumn. “We had a decent first six months, some volume drop in July and August, but then September picked up and in October we’ve been very busy,” said an importer- distributor. “But there’s no denying the economic headwinds. We’re not destocking, we’re keeping our commitments and getting trade through. But there is some pressure on margins and signs of customers downgrading a bit, going for cheaper options rather than premier.”
Overall, said an importer, they’d had a good first nine months.
“But the last three haven’t been as good as the first six,” they said. “July and August were slower and September and October failed to regain momentum. It was obvious things were tightening up and, with enough wood in the system, there’s more competitive pricing around.”
Latest developments in North American trade were described as “increasingly complex”.
“The US had a fantastic two years, but is now seeing demand contract in key markets. The heat’s off domestic sales, China and
Vietnam aren’t great and Europe is more sluggish,” said an importer. “With prices and demand headed down and costs rising, there’s now a lot of sitting and waiting for things to improve across the supply chain to avoid selling at a loss, although others are having to sell to keep things moving.”
An outcome of the situation is a wide spread of prices for the same product – “as much as 30% from top to bottom” according to one importer.
The US hardwood price reduction most frequently mentioned is in white oak, notably 4qtr. Eight and 10qtr were reported down just 5-6% over the last six months, but with 4qtr 25%-40% lower.
It’s thought white oak inflation could impact interest in red oak, which was rising when white was at its price peak. “We’ve more recently had red oak in our inventory, which we didn’t have two years ago. Sales were still only 10% of white oak’s, but it was a start,” said an importer. “But enthusiasm could be dampened now white oak is only a bit more expensive than red, rather than twice the price.”
The next biggest price reduction among US species is in 4qtr tulipwood, reported down 20-30%. Ash has been more stable, but walnut has also weakened.
In the UK, US price reductions have been offset by the weakness of the pound against the dollar. But that is seen as set to change if sterling’s recovery persists and the concern is this will leave some with expensive stocks on their hands.
While some report an improvement in US logistics, others say they haven’t fully recovered from pandemic disruption, with labour shortages the key issue.
“Pre-Covid I could call the US today [mid- October] the wood would be in the container next week, on a ship the week after and we’d get it mid-November,” said an importer. “Now
TTJ | November/December 2022 |
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it’s more likely around Christmas. It means it’s difficult to keep inventory as tight as you used to.”
Importers reported no discernible impact to date on the European oak market of the war in Ukraine and embargoes on Russian and Belarusian imports. Availability issues seem to have resolved and prices are reported to have come off 5-6%. An importer said an anticipated rise in log prices may cause some inflationary pressure, but how much of that is passed along the supply chain will depend on demand. The relative stability of the market is attributed to weakening European consumption and, by one importer, to some customers switching to US oak when European oak supply problems were at their height and not switching back. European beech availability is said to be tighter due to “huge export demand”. Prices are reported up 8-10%.
Where the impact of the embargoes on Russian timber is seen is, of course, in Siberian larch. But the result of it being barred from the UK and the wider European market is not what one importer-distributor expected. “We thought we’d see more upgrading to modified timber and western red cedar, which is more available and 10-15% cheaper than it was at its latest price peak,” they said. “But more commonly buyers are switching to white wood and adding a black finish.”
African is another story. Sapele prices are reported up 10-15% in the last four to five months, with other species also rising and further firming expected due to increased energy costs. “African mills seem very vulnerable to the fuel crisis. There are shortages and intermediaries between suppliers and markets are exploiting the situation and pushing prices up further,” said an importer. Already long African lead times have
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