Market update on the Hardwood sector

Demand is reported as good to exceptional, but the supply situation, particularly, but not exclusively in North American, is proving exceptionally challenging. Prices are rising accordingly.

While the sector reports sales slumping to just 30-40% of normal levels at the outset of the pandemic, since then, they have grown exponentially. Some companies reported a seasonal dip in December, others said they continued to climb and that they hit the ground running in January.

The much publicized surge in home improvement is seen as a key factor driving consumption, with importers reporting high demand for anything to do with construction, refurbishment and the garden.

Joinery customers, bar shopfitters, are also said to be flat out.

Due to the level of market activity, one importer said they were experiencing the lowest levels of bad debt they can recall and securing healthy margins.

A key reason supply is so tight is that hardwood mills worldwide have struggled to gear up production as markets emerge from lockdown, or been cautious about increasing output. North American suppliers were also hit by the harsh winter, with the hangover from curtailments implemented during the US/China trade dispute additionally curbing capability to satisfy demand.

The fact that demand is growing globally is also putting pressure on supply, with rising Chinese and US consumption noted in particular – and the US housing market was reported to be running ‘white hot’, with an additional 200,000 starts in 2020.

US white oak is reported to be posing the most supply problems. One importer said that, in terms of placing forward contracts, it was ‘non-existent’.

Lead times on African were reported to be extended as the result of pandemic safe work practices slowing output and huge hikes in freight rates are impacting supply from Asia. From containers costing US$1,500-2,000 last year, importers say they’ve recently been quoted anything up to US$12,000-16,000.

The European supply situation is not as fraught, but one importer said A grade oak from Croatian state forests has recently been placed at auction rather than put out to tender with B and C grades and that prices have subsequently jumped.

The price of US white oak is reported 40% up on a year ago and rising. Prime US walnut is up 10% in the last three months and maple, ash and tulip wood all around 15% since Christmas.

European oak and sapele are both reported to have risen 5% this year, with further increases expected.

Freight rates from the EU have increased as hauliers hedge against the risk of post-Brexit port and customs hold ups and a lack of back haul. Importers also report some EU suppliers reluctant to provide what they consider commercially sensitive supply chain details required under the UK Timber Regulation due diligence rules.

It is also felt that some smaller and intermittent importers will opt to buy EU-sourced timber instead from bigger UK operator importers to avoid the admin of new UK import rules and risk of breaching them.

Meanwhile one of the leading EU-based hardwood suppliers to the UK, Vandecasteele, has set up business here, Vandecasteele Timber Ltd, to handle customs, UKTR due diligence and phytosanitary requirements for UK customers.

source: ttjonline.com