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Brazilian Hardwoods Market Trends
¡¾2002.06.29¡¿

Brazilian hardwoods

Rains end, but mahogany chaos continues

The rainy season ended in the Brazilian Amazon during May and logging is underway. With the exception of mahogany, supply of tropical hardwoods is not expected to be a problem over the next few months. Prices for sawn lumber of most Brazilian hardwoods remain stable. Domestic demand is good and export demand is showing signs of improvement in Europe and Asia. The U.S. market is still quite subdued but is expected to improve over the next few months.

In the U.K. there is steady demand for a number of Brazilian hardwood species, but volumes are relatively low. Tatajuba sawn lumber is selling as an iroko substitute in the U.K., while massaranduba has gained a foothold as a decking timber. Interest in cedar in the U.K has waned over recent months.

No new mahogany this year

The Government restrictions on harvesting, transportation, production and trade in Brazilian mahogany continue. No mahogany logs are expected to be harvested in Brazil this year. The only available supply will be the restricted volumes still remaining at the mills. Discussions continue over how these stocks should be handled. IBAMA is again engaged in a review of documents to establish the legal status of this lumber, tracking back to the forest all mahogany stocks held in Brazilian ports and all recent shipments to the U.S. and Europe. A report summarising the legal status of the mahogany stocks was due to be issued by the end of May.

A series of meetings were held in early May to discuss the future of the mahogany trade. The meetings involved IBAMA officials, AIMEX (the exporting association of the Brazilian state of Para), importing industry representatives, environmental groups and scientists. Informal reports from these meetings indicate that the outcome was fairly inconclusive, being undermined by the failure of IBAMA to make a presentation on their stance in relation to the mahogany industry. Environmental groups and some other participants put together an informal action program whereby all remaining stocks of mahogany in Brazil may be declared "legal" and sold at a premium, with the money raised used to create a fund to support the independent certification of future mahogany logging activity. However this plan was drawn up in the absence of large industry representatives and may be beset with legal and technical problems.

Meanwhile, mahogany shipments into the U.S. have been held up at the ports for three months as the American CITES authorities have been awaiting confirmation from IBAMA that the stocks derive from legal sources. In the U.K., Greenpeace was in court at the end of May appealing against an earlier court ruling that the British government¡¯s decision not to seize Britain-bound shipments of mahogany did not contravene CITES legislation. The three judges presiding over the appeal case decided to postpone their verdict until the first week of June.

Limited availability of supplies has meant rising prices for South American mahogany. According to ITTO, the price of kiln dried genuine mahogany in the United States remained stable during the first quarter of this year, but then moved up by 1.3 percent in April. Prices are now almost 8% higher than March 2001, and over 40% higher than six years ago. The combination of high prices, market uncertainty and environmental risk factors has led to declining interest in mahogany both in Brazil and in major export markets.

Stable domestic market

The domestic market for Brazilian tropical hardwood is stable. Prices in local currency have been steady, although they have declined in US dollar terms due to recent strengthening of the real. Domestic market prospects for the rest of the year are reasonable. Brazil¡¯s economy is likely to benefit from a sustained US recovery and remain relatively unaffected by the crisis in Argentina. According the Economist Intelligence Unit, after a poor first half, Brazilian economic growth is expected to strengthen slightly during the year to reach 1.5%, the same as recorded in 2001, before accelerating to 3.8% in 2003.