and the UK
Sawn lumber demand slows in all leading EU markets
European demand for tropical hardwoods remains subdued
due to uncertain economic conditions in all the main
markets. The strong euro has meant particularly slow
buying of African species and given dollar denominated
species an edge. Importers stocks of African hardwood
species are generally high and it is becoming increasingly
difficult for importers to pass on replacement prices.
The problems of the European hardwood market are not
only impacting on tropical hardwoods. Even American
hardwoods ¨C which should be benefiting from the
weakness of the dollar against the euro ¨C are experiencing
a significant downturn. According to the April issue of the
US journal Hardwood Review Global ¡®European demand
for US hardwoods declined last month amid slowing home
construction, faltering economic confidence, and
increasing competition from Asian wood manufacturers.
Most Italian, British Portuguese and Belgian importers
reduced purchases only marginally. However orders from
Spanish, German, Irish, Dutch, Swedish, French and
Danish yards and end-users were sharply lower¡¯.
In the UK, demand for sapele, the favored joinery species,
is reported to be weak. Importers¡¯ stocks are in excess
demand and there is a lot of selling below replacement
cost. Interest in the forward market is limited with most
buyers satisfying short-term need from existing grounded
stocks in the UK and on the continent. Although sapele
forward prices have remained reasonably stable, there are
some reports of shippers dropping prices in order to
stimulate demand. Subdued levels of consumption of other
African hardwoods in the UK including framire and iroko
have changed little in recent weeks.
CIF dollar prices for meranti tembaga on offer to UK
buyers have risen 2-3% in recent weeks as shippers have
sought to compensate for the stronger ringgit against the
dollar, the rising costs of production and freight and as
supplies have tightened in the rainy season. However the
strong euro means that meranti still maintains a significant
price advantage over sapele. Although many UK
manufacturers of doors and windows remain firmly
wedded to the quality and consistency of sapele, those
buying for more general utility joinery applications have
switched to meranti in recent months. Nevertheless,
uncertainty over construction sector prospects has meant
that UK forward demand even for meranti remains weak.
There are some suggestions of reasonable demand for
keruing in the UK despite firm prices although
consumption is limited by supply constraints.
A major feature of the UK hardwood market in recent
years has been the strong fashion for European oak. This
trend seems to have changed little this year. European oak
continues to be strongly favored even as the strong euro
has meant high prices in the UK compared to American
white oak. The UK market for the latter has been suffering
this year due to a distinct lack of shipping space from the
eastern US to the EU.
The Irish market ¨C which in past years has been a major
source of demand for iroko and sapele lumber ¨C is now
very subdued on the back of a major slowdown in
The German hardwood market remains slow, an inevitable
consequence of the sluggish building sector. A recent
report in the German economic journal Die Welt notes that
the German government has ceased giving subsidies for
owner-occupation and this has contributed to a downturn
in house building. Trade experts suggest that the use of
timber windows may decrease by roughly 20% this year
compared to last. This is already being felt in weak
demand for dark red meranti sawn lumber and lamscants
in Germany. Although stocks of these commodities are
believed to have come down since the start of the year,
consumption is so slow that few are anticipating any quick
return to the forward market.
According to the German trade journal EUWID, forward
purchasing of African hardwoods in Germany remains
slow. When necessary importers are tending to buy little
and often from existing landed stocks in Germany and
Netherlands which are reported to be adequate to meet
current levels of slow demand. EUWID notes that ¡®one or
two importers are even talking of a pronounced oversupply¡¯.
As in the UK, the problems have been particularly
pronounced for sapele, with some importers reducing
prices of this species for onward sale in Germany in an
effort to off-load excess stock. However EUWID also
notes that German demand for African whitewood species
including ayous, samba and koto used in the mouldings
industry and for sauna-building has tended to be more
buoyant than the market for redwood species.
Economic growth in the Netherlands has been undermined
by the strong euro and several large Dutch banks have had
to write off major losses in the US. The Economist journal
predicts that following growth of 3% in 2006 and 3.5% in
2007, GDP growth in the country will decelerate to 2.1%
in 2008 and 2% in 2009 because of lower export growth.
Although this situation has not yet significantly dented
overall business confidence in the Netherlands, the timber
trade seems to be suffering from a bout of uncertainty.
Forward orders of Malaysian meranti and merbau are very
slow, particularly as importers are very keen to avoid the
severe problems created in 2007 due to over-stocking.
Although meranti stocks are much lower than they were
last year, Dutch importers are cautious in their dealings
with the forward market. Nor are they encouraged by the
current low levels of consumption in the EU.
The Netherlands timber trade is also feeling the cold from
the domestic building sector which remains a major cause
for concern. Although house prices continue to trend
upwards, the building activity continues to be hindered by
excessive red tape. As a result many end users are trying
to maintain only minimum stocks and to restock only
when absolutely necessary.
Poor economic conditions in Italy and Spain are acting as
a significant drag on tropical hardwood markets in both
countries. The Spanish door sector, a major source of
demand for tropical lumber and veneers is under intense
pressure from declining home construction and increasing
competition from Asian manufacturers.
Dollar CIF Northern Europe prices for good quality
Bangkirai have remained largely stable in recent weeks.
There are some reports of solid demand for good quality
product despite the general lack of good weather at the
start of the spring season. However demand for lower
quality bangkirai has been weaker and stock levels are
reported to be high.
EU plywood market remains subdued
There has been little change in EU market for hardwood
plywood in recent weeks. Demand remains quite subdued
and CIF prices are reasonably stable. A UK contact
suggests that although Southeast Asian mills are looking
to increase prices to the EU due to higher costs of logs,
glue, utilities, freight and labor, slow demand has meant
the market has not been receptive. In mid-April, the
German trade journal EUWID reports that prices for
Indonesian raw plywood in 4x8 foot format are averaging
Indo 96 +25 to +27.
In the UK, a barrage of bad news relating to the housing
market and global financial crises has hit business
confidence this year. Furthermore, overbuying at the end
of 2007 in response to supply concerns has meant that
existing on-ground supply has generally been sufficient to
meet subdued demand. Stocks of Chinese plywood are
regarded as particularly high compared to the level of
demand. One contact also suggests that Malaysian
plywood stocks in the UK are high, leading to intense
competition for sales between the major UK importers.
There is now a lot of cross-trading between importing
companies - rather than enter to forward market, smaller
companies are finding it cheaper to buy from existing
landed stocks of the larger distributors.
There is a sense that current plywood prices on the ground
in the UK do not adequately reflect replacement cost while
lack of forward buying might eventually lead to shortages
if order levels improve. However there is little expectation
of a significant improvement in market sentiment in the
EU policy developments on illegal wood trade reach a
EU policy developments relating to illegal logging and
timber procurement are reaching a critical stage. Two EC
Communications are due to be released in May 2008, one
covering Additional Legislative Options, the other
covering Green Public Procurement (GPP). The first is
expected to recommend a law that would impose a
requirement for due diligence on European operators in
the wood sector, including importers, manufacturers, and
distributors. These operators would be required by law to
conform to industry Codes of Conduct or equivalent
company based programs involving comprehensive risk
assessment of suppliers. The second Communication on
GPP forms part of an EC initiative designed to provide
Member States with the necessary tools to raise the
quantity and quality of GPP in the EU. Expectations are
high that the Communication will improve the current
incomplete and inconsistent EC guidance on public sector
timber procurement which has contributed to the
development of a confusing array of policies at national