Contractors and distributors are sometimes perplexed by the fluctuations in the pricing and availability of exotic flooring from Central and South American countries. Importing exotic flooring is complicated, and the past year was even more challenging than most. Previously, we had been able to provide fixed prices on a semi-annual basis with some species, but that changed rapidly in 2009-we could not even offer the same pricing structure for more than 45 days in some cases. Here's a quick glimpse into why the supply and pricing of exotic flooring can be so volatile.
Contractors and distributors are sometimes perplexed by the fluctuations in the pricing and availability of exotic flooring from Central and South American countries. Importing exotic flooring is complicated, and the past year was even more challenging than most. Previously, we had been able to provide fixed prices on a semi-annual basis with some species, but that changed rapidly in 2009-we could not even offer the same pricing structure for more than 45 days in some cases. Here's a quick glimpse into why the supply and pricing of exotic flooring can be so volatile.
Procurement Complexities
2009 was very difficult for a variety of reasons, including the slumping U.S. economy, the dollar losing its value in South American countries, low lumber supply and a punishing rainy season. It is imperative for us to always have a backup plan when sourcing for different species, because procuring exotic flooring at any time is not cut and dry. There is the usual rule of supply and demand, but importers also have to take into account what local powerhouses some mills are within their regions. Some lumber companies in certain regions in Brazil basically set lumber prices since they control as much as 70 percent of the local lumber production capacity; this creates a false price point. Just by shifting efforts to a different region (e.g., Curitiba vs. Belem), importers can see a price difference of up to 15 percent. This might not seem like a huge difference, but when shipping several loads per month to different regions, this difference grows exponentially.
We have always seen a strange balancing act between what arguably are the two largest hardwood lumber exporting countries in South America: Brazil and Peru. The countries share a vast area of tropical forest. Each country seems to have its own strengths; jatoba is the flagship of Brazilian flooring exports, while recently we've seen a great increase in growth of the Peruvian cumaru exports.
Perplexed by Pricing
A struggle last fall was trying to keep up with the U.S. dollar losing its value against the Brazilian real day after day, which generated an immediate price increase from most suppliers in Brazil. This coincided with the slowing U.S. economy, so even if importers were able to justify the price increases, the market simply could not bear it. Additionally, the largest importers still had large inventories and were liquidating them to generate cash flow.
We have seen more movement in recent months in the demand for solid exotic flooring within the U.S. and Canada, and the downward spiral of the exchange rates for the U.S. dollar seems to have stopped. Mill owners are no longer in panic mode, and although many of our suppliers reduced their inventories by more than 40 percent, in some cases prices seem to have stabilized.
The Lumber Challenge
Lumber is very scarce at the moment for two main reasons, the obvious being the rainy season throughout the Amazon region and a very strong purchasing campaign from our Asian neighbors. Another factor is that most mills reduced or were forced to reduce their purchasing capacities for logs and timber to manufacture wood flooring. Unfortunately, this has happened as we are starting to see some reactivation in the market. As importers, this might be tricky to manage: How do we tell if this is just a short cycle after a "dry season" in the market?
Is the Turmoil Over?
Importers must have real customer service and make sure that we have several mills available to meet our demand. In the past, when we could not find a competitive price in Brazil for cumaru, we would source from Peru or Bolivia. Right now options are running out and demand is growing every day. We can just hope for the best, keep a positive mindset and try to be as competitive as possible.
