18 | Sector Market Update: Hardwood
SUMMARY
■Latest economic forecasts are denting market confidence
■Stocks on the ground are too high, triggering price cutting
■The key US hardwood issue is the white oak price surge
■African trade is characterised by late contracts
ACROSS THE LINE JUST GETTING The UK hardwood sector is experiencing testing times. Mike Jeffree reports
Not depressed, but downbeat probably best sums up prevailing market views in the UK hardwood trade.
“It’s challenging,” said one importer. “We’re still getting over the line each month budget- wise, but it’s at 11.55pm on the last day.” The testing environment is put down to the state of the wider economy, plus the market hangover of two buoyant years fired by the pandemic home improvement boom. “It’s been a roller coaster,” said another importer. “During the Covid crisis when people couldn’t travel, they bought that new kitchen and converted homes to live/work spaces. Now that work’s done, the money’s spent and consumers are facing inflation that may have come off its peak, but remains high.
Plus we have the steepest interest rates for years to combat inflation. Householders are coming off fixed rate mortgages and wondering how they’ll pay food and energy bills.”
Latest economic forecasts are further denting market confidence, with the Bank of England predicting inflation won’t decrease to its target 2% until 2025 and KPMG that GDP growth will be just 0.4% in 2023 and 0.3% in 2024.
Another importer was more positive. They felt the market was starting to turn, but said the pick-up currently remained “gentle” and stocks on the ground were still too high. “There is still residual wood from the high cost days to work through,” they said.
Another trader agreed and said the stock position was triggering price cutting. “Cheap offers keep coming and going. Sapele has been a particularly tough sell recently, with stocks being liquidated at prices that don’t reflect cost.”
The wider UK construction industry slowdown is also, of course, a key contributor to the current hardwood trading climate, with the Construction Products Association forecasting output down 7% in 2023 and growth of just 0.7% next year. “Reflecting the state of building, our staircase customers say they’re down 30- 40%,” said an importer-distributor. “Also as a consequence, merchant customers are down, even the big boys, with Travis Perkins issuing a profit warning. When merchants are quiet, we’re all quiet.”
Looking at supply and cost, the key US hardwood issue concerning businesses, following steep deflation last year, is the white oak price surge.
“The price of 8qtr is up around 75-80% this
year, so we’re back to Covid levels, while 4qtr has risen 35-40%,” said an importer. “And it’s difficult to get hold of. White oak is 15% of the US hardwood forest, and everybody wants it. China seems to be turning to it more, and the US domestic market is strong. The American stave industry is also doing ridiculously well! At the same time, suppliers say there’s less coming out of the forest, particularly the higher grades the UK wants. And anything that’s remotely usable in the stave industry is being pulled.” Importers say the market is also wary of following white oak prices up.
Above: Sapele remains the dominant African species TTJ | November/December 2023 |
www.ttjonline.com
“During the pandemic, it wasn’t an issue as demand was brisk. Prices kept going up and
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