South Africa: Slow construction spending undermines wood demand

South Africa: Slow construction spending undermines wood demand

Subdued demand in the construction sector is impacting pricing. In the pine market there has been a bout of aggressive discounting by mills as some roof truss plants are standing idle.

American hardwoods are still moving but there has been some discounting, especially of 25mm white oak, and the volumes being purchased have fallen as some furniture manufacturers are using more veneered boards.

Analysts report that stocks are building up at panel producers due to falling consumption. The meranti market is also soft, driven down by the weaker property market There has been some discounting as traders reduce their stocks in line with market requirements. The market for okoume faces the same challenges.

Regional marketing a real challenge

When South African domestic markets are quiet eyes turn to regional markets but there are few prospects it seems. Analysts report that in Zimbabwe there is an acute shortage of cash notes again. There are reports of drivers being unable to get notes to pay the road tolls - everyone is turning to credit cards. More importantly importers are really struggling to have access to funds. Angola still faces a revenue crisis even though oil prices have moved firmer recently. In Zambia the government is insisting they use their own pine and eucalyptus resources rather than imported wood.

Malawi has extensive plantations and is not a significant market for South African producers. Malawi produces wide range of products from its plantations and the country has hardwoods such as panga panga (Millettia stuhlmannii), ebony and kiaat (Pterocarpus angolensis). In addition Malawi has some rubberwood plantations.

Also in the east, Tanzania is basically self-sufficient in timber and they sell teak to India. What was once a lucrative market, Mauritius, is now very quiet as the property market has basically stalled.