The European hardwood import trade is now very focused on stock reduction and receiving delivery of outstanding contracts. While hardwood stock levels across the main European markets have whittled down during the course of 2008, the general view is that they are still adequate to meet current very subdued levels of demand.

There is very little forward purchasing across the board at present, resulting in rather vague price quotes for some products. Forward prices for most African hardwoods, which are invoiced in euros, are generally regarded as stable, although there continue to be some reports of downward pressure on sapele lumber prices due to excess stocks and weak demand. However, African hardwood agents suggest that tight margins in the African supply chain place strict limits on the ability of shippers to reduce sapele prices much further. And many importers are also now more skeptical of the value of reducing prices for onward sales since experience is showing that in the current European market even significant price discounts do not greatly increase the outflow of products.

There has been rapid strengthening of the US dollar against the euro in recent weeks. In normal trading conditions, this trend would stimulate more forward buying of dollar-denominated stock in Europe as importers take steps to cover their future position and to exploit the progressive increase in the euro value of their stock. However, due to market uncertainty and weak consumption, there is very little evidence that the recent shift in exchange rates has encouraged any pick up in European forward buying of dollar denominated stock. Instead, shippers in the Far East and South America are coming under significant pressure from European importers to reduce prices. European purchasing from both supply regions has remained extremely slow, with importers only seeking to cover their most basic requirements. Despite efforts to cut-back on production, importers report they are able to place orders for most products and grades from the Far East without encountering any major problems.

With respect to future market development, the general feeling is that there is very unlikely to be any real change for several months with very little forward buying until at least the first quarter of 2009.

Source - FORDAQ