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Wood Products Prices in The UK 

16-31th January 2008

Report from the UK

European hardwood market off to slow start in 2008
Forward demand for meranti lumber and scantlings in the
Netherlands and Germany is subdued at present due to
relatively high stocks, with most business now focused on
higher density more durable products. Due to low levels of
demand, importers report no problems in securing
adequate stock despite a major reduction in production
levels in the Far East. Forward prices for South East
Asian wood products offered to EU importers have
stabilized in recent weeks, the current relatively low level
of demand balanced by the tight supply situation.

Prices for meranti tembaga, a popular joinery species in
the UK, which weakened significantly during the second
half of 2007, now seem to have stabilized. Large stocks of
this species built up in Port Klang in Malaysia in the third
quarter of last year, but these stocks are now reported to be
much reduced. Although sapele remains the favored
tropical hardwood joinery species in the UK, prices for
meranti tembaga are currently very competitive against
sapele encouraging some movement back to the Malaysian

In recent weeks, EU imports of bangkirai decking have
remained slow with high stocks continuing to be reported
at the North Sea ports of Rotterdam, Hamburg and
Antwerp. There is some expectation of a slight pick up in
orders in advance of the Chinese New Year in February as
importers aim to ensure delivery in time for the 2008
spring season, but volumes of new orders are expected to
be down on previous years.

Expectations amongst European importers are that lumber
prices from South East Asia may rise after the Chinese
New Year due to tighter log supply in the rainy season and
rising costs. There should also be a pick up in demand for
garden products in the spring months. Already some
meranti lumber shippers have made minor upward

Prices for African logs and lumber have generally
remained firm and stable in European markets in recent
weeks, with slow demand balanced by tight supply.
Supplies of high quality redwood logs, which are favored
in Europe, are now limited as increasing emphasis is
placed on value-added processing in the main supply

Existing landed stocks of kiln dried sapele sawn lumber in
the Benelux countries are reported to be relatively good so
that at present European distributors are having little
difficulty obtaining material. However, reports of tight
sapele lumber supply in the leading supply countries
suggest that replacement costs may well rise, feeding
through into price increases on the EU market in coming

Forward prices for iroko sawn lumber on offer to
European buyers have been a little weak in recent months,
with demand relatively subdued and mills in Cote d'Ivoire
concentrating heavily on processing of this species. But as
Cote d'Ivoire mills have concentrated on iroko, supplies of
Cote d'Ivoire framire ?which has become a popular
joinery species in the UK ?have become more restricted.
As a result prices for framire have remained firm.

European importers report that very little white wawa is
now coming out of Ghana, with much of the available
wood now comprising darker material with stain. Buyers
seeking the whiter material are tending to shift to samba
from Cote d'Ivoire. However, EU demand is now less than
in the past as European manufacturing capacity in relevant
sectors (for example window frames) has declined under
the influence of Chinese imports.

Ocean freight rates from key hardwood supplying regions
into the European market have risen in recent weeks. The
Far East Freight Conference raised rates by USD600 per
40 foot container on 1 January 2008 adding around
USD25/m3 to the cost of shipping from South East Asia
into the EU. Ocean freight rates increased significantly
from Africa at the start of the fourth quarter of 2007. Also
freight rates from North America into Europe increased by
USD500 per 40 ft. container in early January, adding
about USD18/m3 to shipping costs.

Following a decision taken at the European foreign
ministers meeting in Luxembourg on 15 October 2007 to
introduce economic sanctions against Myanmar, a full
import ban on teak is expected to come fully into force in

UK timber trade faces uncertain prospects in 2008
Economic activity has been slowing in the UK in recent
months, undermining confidence in the timber importing
and manufacturing sectors. The Economist Intelligence
Unit forecasts that real GDP growth will slow from 3.1%
in 2007 to 1.9% in 2008. New house starts are falling,
while concerns are also mounting over the international
credit crunchí», jitters in the stock market and rising costs,
particularly for energy. The governmentí»s weak fiscal
position suggests that there is now less scope for public
sector spending on further improvements in public

The UK joinery sector reports adequate workloads at
present, but there are significant concerns about the
prospects for the rest of year as economic indicators have
taken a turn for the worse. Joinery companies recently
interviewed by the Timber Trade Journal suggest that
their labor, energy and material costs had risen by between
7% and 10% last year. This has had an impact on
profitability in the sector with the British Woodworking
Federation reporting that it lost 2% of its core membership
last year as several companies fell victim to bad debts.

But it is not all doom and gloom. Joinery companies
operating at the higher end of the UK market report a
reasonable flow of orders, particularly from the top end
commercial and retail sectors. One mass producer also
reported a pick-up in demand for timber windows and
stairs at the end of last year, although the demand for
doors remained flat. This company is now pushing up
prices for its windows and doors by around 5% to absorb
rising costs.

UK agents report mixed views on the current level of
hardwood purchasing in the UK. While some note that the
current economic situation has dampened purchasing by
importers and distributors at the beginning of the year,
others report a good level of demand in the opening weeks
of 2007. One leading hardwood agent said they had been
very busy in the last 3 weeks with strong sales in all the
leading species, including white oak, sapele, framire,
meranti, ash and walnut. This agent speculated that his
good order book may be short-term due to importersí»
restocking after curtailing purchases at the end of last year
and may not be indicative of how the market will progress
in the coming weeks. Certainly, the UK softwood market
is quiet at present, indicative of slow construction activity,
a factor which is likely to filter through into weaker
hardwood demand in coming months.

Sterling prices for many hardwood species imported into
the UK have firmed up since December as both the US$
and Euro have strengthened against the UK currency.

Environmental issues continue to be a major focus for the
UK trade as a whole. The UK governmentí»s Central Point
of Expertise on Timber (CPET) has been preparing the
ground for the April 2009 deadline whereby all wood used
in UK government procurement must either be verified
sustainable or covered under the terms of a Forest Law
Enforcement Governance and Trade Voluntary Partnership
Agreement license. New guidance for procurement
officers is due to be published in February. The UK
government has also just launched a public consultation on
possible new laws at national level to prevent illegal wood
imports into the country.

Concerns mount in the Spanish door sector
Spainí»s construction sector is stuttering, raising fears for
the hardwood importing and manufacturing sector.
Spanish housing prices rose 17% in 2004 and 9.1% in
2006. Final figures for 2007 are not yet out, but are
predicted by the Spanish government to be only around
5%. Spanish interest rates have jumped three points in as
many years, there is a glut of housing on the market and
Spanish banks worried by the sub-prime crisis in the
United States are now much tighter when it comes to

Spainí»s construction sector has been a major driver of
demand for hardwoods, including for doors, flooring and
other joinery applications. Already there are signs that the 

slowdown is impacting on key manufacturing sectors, with
reports of redundancies and slower sales amongst Spainí»s
major door manufacturers. The problem is compounded in
the door sector which is very dependent on the domestic
market and which has not succeeded in developing a large
export market. There is also mounting pressure from
Chinese and other overseas competitors.

Spanish door manufacturers are seeking to respond to
these problems by moving up-market, focusing on design
and product quality to sell a higher margin product. This
might bode well for hardwood consumption longer-term.
There is also some optimism that the slowing demand
from new-build projects may be partially off-set by rising
interest in hardwood interiors and flooring for renovation



LM       Loyale Merchant, a grade of log parcel  Cu.m         Cubic Metre
QS        Qualite Superieure    Koku         0.278 Cu.m or 120BF
CI          Choix Industriel                                                       FFR           French Franc
CE         Choix Economique                                                        SQ              Sawmill Quality
CS         Choix Supplimentaire      SSQ            Select Sawmill Quality
FOB      Free-on-Board     FAS            Sawnwood Grade First and
KD        Kiln Dry                               Second 
AD        Air Dry        WBP           Water and Boil Proof
Boule    A Log Sawn Through and Through MR              Moisture Resistant
              the boards from one log are bundled                      pc         per piece      
              together                      ea                each      
BB/CC  Grade B faced and Grade C backed MBF           1000 Board Feet          
              Plywood   MDF           Medium Density Fibreboard
BF        Board Foot F.CFA         CFA Franc        
Sq.Ft     Square Foot              Price has moved up or down

Source: ITTO'  Tropical Timber Market Report

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