9th September 2020

Wednesday  9th September
Joint Meeting of the LHC & NHD (TTF) Chairman – Rupert Walker

A very good ‘Zoom’ attendance (60 plus) from both UK and overseas members & guests.

West Africa – Ken Walsh of Danzer UK

Whilst producers in West and Central Africa are working with social distancing and the other Covid 19 health and safety guidelines we are all now used to this has not yet significantly impacted logistics.
The incidence of the virus is increasing but thankfully is not resulting in the level of serious illness and death we have experienced in Europe. Two possible explanations for this are a younger average population and that a less virulent strain of the virus could be in circulation there.

We are currently in the rainy season in Central Africa which restricts both access to the forest and sawmill production levels. As log piles will be relatively low the majority of sawmills in Cameroun and North Congo will close for annual maintenance for around 4 weeks over the next two months which will further curtail production.

Whilst congestion is less of a problem the Port of Douala continues to provide challenges for exporters with its red tape and cost structure getting ever more onerous and you wont be surprised to hear that similar problems already exist in the newly opened Port of Kribi.

As far as supplies ex West Africa are concerned, Ghana and Ivory Coast are no longer significant players with very limited volumes of third party legality verified KD Iroko, Sapele and Framire.

Container freight rates to the UK and Northern Europe have been very stable throughout 2020 and not really on the radar with no real suggestion of any movement in the near future. The real revenue driver and therefore the point of focus for the shipping lines remains southbound cargo.

I will now get a little more species specific and in doing so I am referring only to third party legality verified/FSC certified product:

Many sawmills are receiving lower volumes of Sapele from the forest than in previous years and this is forecast to be the case for at least the next 2 to 3 years. This is resulting in an even more micro managed approach to marketing to maximise revenue ‐ for example:

⦁ those with FSC 100% certified forest concessions will focus on markets where the premium for this is most available.
⦁ those with kiln dryers will restrict the availability of shipping dry production in order to fill their own dryers.
⦁ secondary species will become more important in order to ensure that minimum financially viable forest extraction quotas are met.

KD Sapele pricing has remained relatively stable this year whereas shipping dry pricing dropped by 2/3% but is now showing signs of getting back to pre Covid levels.

Moving forward it is reasonable to expect that pricing will at least remain stable with the potential to increase.

Sipo availability continues to be in line with supply. Pricing for both KD and shipping dry have fallen by up to 5% with a propensity to follow Sapele pricing if it starts to rise.

Iroko is currently more available in general with KD pricing remaining firm but shipping dry pricing having fallen by around 5%. At this time we have no expectations of any variation in price moving forward.

Obviously sales in all species were negatively affected by Covid 19 restrictions but I must say that they have recovered very well since lock down restrictions have eased and are again trading at near normal levels.

Tropical timber continues to attract a lot of unfair and ill judged criticism which is having unintended consequences. In my capacity of current Chairman of the TTF NHD I am working with Dave Hopkins and his team to get a more balanced, well informed and positive message across regarding the global and local benefits that supporting the legal and sustainable harvesting of tropical forests provide to people and the planet. We will be updating members of various initiatives in due course.

Europe – Ben Jenn of NHG Timber

Over the summer months there was a very strong demand for Railway sleepers from the UK DIY market due to Shut Down and home improvements. The beginning of the year saw a positive, optimistic market for 2020 for SE European White oak after the general election result and initial demand showed positive signs and levels of enquiries not seen since 2015/2016.

Due to Covid European production slowed quite quickly as producing counties started to lock down. Supplies from Croatia and Italy were initially good but it became harder to get loads moved and orders were postponed. Cooperation and flexibility with established producers and contacts meant that loads/orders were adjusted to suite the customers requirements. Increased demand for fixed width stock for external decking & cladding products has good over the summer months and more demand for thinner material (26mm) due to shortages from North America.

High grade White Oak log prices have risen but demand for the low grade sawn material from the far east has fallen back. The log supply in Croatia appears to be in balance with the demands of the market with the new logging season about to start.

North America – Rupert Green of Green Timber

Sawmills & producers in North America faced challenges in the 1st quarter of 2020 following a cold wet winter (2019/2020) with snow still on the ground in the North East going into late March/ early April. This coupled with slow export demand for Red Oak over the same period production slowed and common grade Red Oak was slow to move. In late February the trade duties for China were postponed for 12 months which saw an increase in export activity going to China. At the same time and due to Covid ‐19 producers found it difficult to find markets for industrial timber products

(Pallets, Logs Mats, Railway ties or sleepers) and sawmill residue (sawdust, saw chips & mulch) along with new protocols for running their operations with social distancing and reduced production crews. As a result logging & production slowed down during late winter and into the spring.

Year to date data shows 65% of Red Oak exports (all grades) are to China followed by Canada and Vietnam in 3rd place. In the same period 30% of White Oak Exports were to China followed by Vietnam which is also the largest export market for Tulipwood (Yellow Poplar) which is key because of the volume of the lower grade it takes.

Overall volumes to China in the 2nd qtr of 2020 were 66% higher than the average of the previous 3 months but showed signs of slowing in June.

Some hardwood sawmills in the south eastern Appalachian States (VA, NC, SC and GA) switched into cutting SY Pine due to good/rising prices and high demand from domestic residential construction & DIY markets due to ‘shut down’.

American White Oak (uppers) are in short supply and will continue to be going into the Autumn and the new logging season. 4/4 will be the first size to see increased availability,
ticker sections (5/4 and up) will be tougher to find and prices in all thicknesses will remain firm/ see increases due to limited availability, reduced yields un the upper grades and strong demand for white oak logs for both export and other uses.

Tulipwood (Yellow Poplar) prices have firmed up over the summer months.

In 2020, New US House starts are at 1.3m – 1.4m units and above to average of aprox 1.1m, there is migration/relocation to the more southern US states.

Sea Freight/Containers – Shipping lines have reduced their services form main east coast US ports across the Atlantic due to lower volumes in general freight, rates remain low due to the low price of Crude Oil, there has been industrial action on the Canadian Railways and at the port of Montreal over the summer months.

US$/GB£ ‐ The pound has bounced back from its low of late March but continues to be affected by Brexit and ongoing trade negotiations with Europe.

South America – Hank Marchal of Robinson Lumber

Guyana – Rainy season is May and June and into July. The logging companies use the same roads as the mining companies which as an impact on moving logs from the forest into the sawmills.
Covid restrictions on movement of workers and a 6pm to 6am curfew is causing delays in production.

Suriname – Struggling to compete with Brazilian producers in the same species due the 25 year low value of the Brazilian Real.

Bolivia – Delays with shipments due to documentation checks and boats skipping ports.

Peru ‐ Sawmills production down to one shift from two or three, log supply is OK but 2021 production is already sold and factories are clearing out old stock/short blanks for China ect.

Brazil – Prices in most species are down due to the weakness of the currency (Real) and the import costs for general goods have risen and volumes reduced which is having an effect on export container availability.

Due to the rain season logs that were usually available in June & July are now landing at sawmills in September, this seems to be a recuring theme.

The supply and availability of FSC material is improving, more logging concessions have certification and at the same time there are increased enquiries from European buyers. FSC Ipe for decking is more widely available.

EU Exit - border controls, UK Global Tariff, UKCA marking presentation

Head of Technical and Trade, Nick Boulton gave a presentation on Brexit. The presentation highlighted key changes that members must be aware of ahead of the UK leaving on the 31 December 2020. Information is available on our TTF website.

Link to presentation see head of page

UK Timber Regulation Online presentation 
Adrian Hawkes and Deanne Hughes from the Office for Product Safety and Standards (OPSS) gave a presentation to the committee on the UK Timber Regulation and the End of the Transition Period.  

Important information includes: 

⦁ UKTR: Under UKTR operators will be classed as an operator for placing goods on the UK market for the first time. Traders will be classed as a trader for buying and selling goods on the UK market. 
⦁ Obligations: Operators must exercise due diligence when placing products on the UK market. Traders must identify the operators or traders who placed the goods on the UK market and whom they supplied.   
⦁ EU imports from UK: EU businesses importing from the UK will be Operators. To comply with EUTR, the EU business may request documentation required from the UK exporter. 
⦁ Due Diligence: Members asked if a product arriving from outside of Europe into the EU market and then into the UK market would still need to undertake due diligence. The answer is yes UK businesses would still have to perform due diligence on the whole supply chain.
⦁ Placing products on the market: The committee asked if a product is placed before the end of the transition period would it be under EUTR or UKTR. Members of OPSS stated that if it is before 1 January 2021 then it will be under EUTR. On the 1 January 2021 and afterwards members will have to abide by the UKTR. 
⦁ Northern Ireland: The committee asked about Norther Ireland and the rest of the UK. OPSS stated there will be unfettered access between Northern Ireland and the rest of the UK and more detail will be provided soon. 
Actions: The OPSS will ask HMRC and DEFRA if members need to undertake due diligence when goods are in a bonded warehouse. The TTF will relay their answer once it has been provided. 

Link to the presentation see head of page

TTF Due Diligence tools presentation
Xiao Ma from the Timber Trade Federation presented a presentation on the new TTF due diligence toolkit in collaboration with the Soil Association. 
The committee learnt how the interactive tool will help members who import and export timber and timber products understand, conduct and report due diligence under the EU/UK Timber Regulation. 
Download the Toolkit   see head of page

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