Pressure on the UK timber industry to meet strong demand from all markets continues unabated – but despite increased production as mills use capacity to the full, the overall picture is still one of tight supply and rising prices.
And it does not look like that is going to change any time soon.
The delicate balance between supply and demand and the ease with which it can be upset by outside factors, especially in a global industry like timber, has been amply illustrated over the last year or so.
Imports account for around 80% of UK timber consumption, with the bulk of that being softwood, mainly from Scandinavia and eastern Europe. Last year’s wet summer and subsequent mild winter caused logging problems, and this impact on supply was exacerbated by rising demand from, particularly, China and India.
Canada has stepped up its supply to the UK, and there is talk of one Eastern Seaboard mill taking on a 14,800m3 vessel for regular shipments. However, the US and Japan remain the main focus for most Canadian mills, and with the collapse in demand from the UK in 1991-92 still fresh in their minds, they will need to be confident of long-term business that won’t come to an abrupt halt if Scandinavian prices dip, before they will switch production lines from imperial sizes to the metric dimensions required for Europe.
For the UK forest products industry, events affecting imports have led to increased market share as they meet rising demand from existing customers and try to help new customers seeking material to augment their imported stocks.
Fencing demand
Demand for certain fencing products, fuelled by the high winds early in the year, outstrips supply by some margin. Mills are using secondary conversion capacity where possible to produce the sizes required, and markets seem prepared to pay the extra cost for this in order to maintain their supplies. Lead times for treated material have moved out considerably.
Specific difficulties with the availability of fencing panels led to the issues of timber shortages and rising prices being covered in the general media earlier this spring.
One BBC television report said that after 15 years of relative stability, the price of imported timber had risen 30% in the last 12 months. One source told TTJ that the figure could be as high as 50% and that redwood is still firming, although the rate of increase for whitewood may be easing as a result of increased Canadian supply.
While UK mills have been able to achieve increases they are overall far more modest than those quoted for imports. It’s true that there has been a sharp year-on-year rise of perhaps 30% in the specific case of fencing panels, but on carcassing, for example, the percentage increase “may have moved into double figures, but only just, and even so that only puts prices back to the level they were 10 years ago”, according to one source.
That is despite continued buoyant demand for carcassing, aided by the strong performance of timber frame in the construction sector. UK mills have also received a growing volume of enquiries for unseasoned carcassing due to shortages of this material from the Baltic states – but given their heavy investment in kiln drying capacity this business is not causing great excitement.
In fact, significant investment continues to be made in the UK sawmilling sector and added-value is a key focus – such as moving from rough sawn KD carcassing to planed/machined product.
Pallets and packaging
Most mills also report good order books for pallet and packaging specifications, with demand still strong from this market and expectations that this will remain the case for the rest of the year.
There is no problem finding ready markets for co-products – chips, sawdust and bark – either, and with still greater potential if the use of such material for fuel continues to develop.
Prices for UK-grown timber have to remain within a competitive margin of prices for imported material, and there is some feeling that UK prices may now have peaked as a result of significant volumes of softwood arriving from Germany. Over the last three or four months, the country has moved from being a relatively insignificant supplier to accounting for 6.5% of imports (compared with Sweden at 34%).
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“The revised strategy fails to grasp that woodland management needs to be economically sustainable” |
In the conditions being seen in the current market, the importance of all elements in the supply chain is thrown into sharp focus.
Provisional statistics from the Forestry Commission on UK Wood Production & Trade indicate that total sawn wood production reached a new high of three million m3 last year, up 4% on 2005, of which sawn softwood production was 2.95 million m3.
Demand for logs from the private sector has never been stronger, especially in Wales, where the industry has traditionally been more reliant on public sector supply compared with Scotland, and the significant downgrading of supply forecast by the Forestry Commission in Wales is a major source of concern.
A meeting held earlier this year between the industry and private growers in Wales was well attended and helped to clarify the different perspectives of public and private sector suppliers. In the latter case, specific problems such as the cost of access roads were highlighted, but the underlying issue is that private growers view their forests as appreciating assets and do not necessarily put offers to market even if the stand is mature and ready for felling, unless they need to generate income for other plans.
Certainly, experience over recent times is that although prices offered for roundwood have increased, many in the private sector are still holding back. Some may be doing so in the hope of still greater returns, but there is a limit to what mills can pay since they have to ensure their products are competitive against imports. And if resale prices from the mills have peaked as is thought to be the case, it could mean that the prices offered for roundwood have also topped out.
In the meantime, the UK Forest Products Association has also had further meetings with the Forestry Commission in Wales in an effort to encourage them to streamline the new procurement process that was introduced last year and is considered overly and unnecessarily complex by the industry. The Commission is listening to the concerns and taking them under consideration and the industry is waiting to see if changes will be made.
England strategy
There are no reports of problems with log supply in Scotland, nor in England. However, looking at the longer term picture the launch last month of Defra‘s revised Strategy for England’s Trees, Woods and Forests has been greeted with disappointment by the industry.
Whereas the revised Scottish Forestry Strategy, launched at the end of last year, recognises the role and importance of industry, it “barely gets a look-in” in the English version, according to one source, despite the time and effort the industry spent contributing to the consultation.
ConFor issued a press release confirming the industry’s “lukewarm” response, saying that overall the strategy “fails to grasp that woodland management needs to be economically sustainable and attractive to the owner – environmental and social sustainability cannot truly be achieved without economic sustainability”.
The forest resource in England is growing, but currently less than one-third of the annual increment is being harvested. With more than half of England’s woods not managed and three-quarters being privately owned, the UKFPA is supporting ConFor’s plans to hold workshops in England to bring industry and private growers together to discuss the way forward and seek ways to address imbalances in supply and demand.
Haulage and contracting
Other factors in the supply chain are also highlighted by the current busy market, including both haulage and contracting resources.
In the latter case there is a “desperate need to recruit and retain harvesting contractors” said one source, and no time to wait for school leavers to be trained.
To address this, a group of UKFPA members in Scotland has worked with Barony College near Dumfries to establish an eight-week intensive course for forest machine (forwarders and harvesters) operators. Those on the course, whose supporters include John Deere Forestry, which has provided machinery, are either already employed in the harvesting sector or wish to become so and with experience of, for example, driving diggers or lorries.
The aim is to give them the skills to get quickly up to speed with operating harvesting equipment and, three-quarters of the way through the course, reports from those monitoring progress are very promising. When the course finishes, the question is whether it can be repeated in Scotland – and also replicated in England and Wales.
With demand strong and confidence high that this will continue for some time, there is no doubting the sense of these initiatives in terms of addressing current and longer term challenges throughout the UK supply chain.
