The tail-end of summer has been punctuated by a wave of consolidation in the Irish merchants sector. Wolseley kicked things off by agreeing a £120m takeover of the 18-branch Brooks Group, followed shortly afterwards by the Grafton Group announcing a €336m purchase of Heitons.
The sale of Brooks heralds a new wood distribution strategy for its Finnish parent UPM, which now aims to focus on sales to merchant chains and industrial end users rather than distributing itself.
Other recent news includes the serious fire at Glennon Brothers Longford mill, which will stop log processing there for six months, while in the north Balcas Timber Ltd is to close part of its Magherafelt sawmill because it cannot compete against “intense” low price competition from the Baltic states and Russia.
The Irish economy remains buoyant – a factor well summed up by the latest update from AIB Global Treasury Economic Research, appropriately called “Approaching Nirvana”.
It predicts house completions to rise by a further 10% in 2004 to around 75,000. This comes after last year’s 68,819 record.
GDP is forecast to rise by 5.5% in 2004 and by 6% in 2005, while inflation is likely to average around 2% this year – half the rate of 2003.
Meanwhile, finance minister Charlie McCreevy, who has presided over the creation of more than 400,000 jobs and introduced tax cuts, is heading to Europe to become an EU commissioner with responsibility for the economic portfolio.
Good times
Merchants have been feeling the benefit of the good times, despite the weather being remarkably wet this summer.
One merchant described demand as “phenomenal”, with decking sales three times last year’s level. “People do seem to have a lot of money in their pockets and they are spending it. They have taken DIY to their hearts,” he said.
Sales of timber garden products have also been holding up, despite the rain.
Another merchant described whitewood prices as reasonably stable but redwood “weak” due to oversupply.
However, there are some concerns about some imported wood coming in unseasoned.
Russian timber has been back on the market this year and a lot is being offered to merchants. But question marks have been raised about its packaging and suitability for machining.
The housing market is continuing to drive the economy, and it’s not hard to see why. The current level of house completions is now roughly half that of Britain, which has 12 times the population. But the general consensus seems to be that 2004 will be the peak. House prices have been levelling off, while rental prices have dropped significantly – between 20-40% depending on who you listen to.
Timber frame
The rise of timber frame continues to be a major talking point but the benefits to the merchanting sector seem to be dubious at best, with most of the timber being imported direct.
An agent said timber importers are very concerned if timber frame manages to reach a 50% share of the new housing market. This figure is still years away given the current rate of growth.
On the panels front, OSB has had a reasonable year, with the market continuing to rise at a steady pace.
The MDF market is at last seeing some price increases, with specialist lightweight and flame retardant boards doing well.
The growing DIY market is seeing more and more people becoming familiar with MDF. But the furniture sector is described as “flat”.
One board producer said MDF prices have been firming up for the first time in about 18 months. “There is hope of further increases in September and October, but it depends on demand,” he added.
Chipboard has been enjoying a better year, with demand outstripping supply. A significant uptake of planed chipboard within the UK and some rationalising of capacities in continental Europe may have helped. The contact said he hoped for a growth in value-added chipboard prices, such as MFC, “hopefully by the end of the year”.
Coillte recently held its first auction after the summer break. So far in 2004 it has offered a total of 1.579 million m3, with 1.366 million m3 sold.
Standing timber offered represented 1.016 million m3, (898,000m3 sold), while 563,000m3 of harvested logs were auctioned and 468,000m3 sold. These figures are behind 2003 levels, when about 1.6 million m3 had been sold by this stage. But Coillte says this has been offset by reduced demand.
A spokesperson said: “Things are tight in certain parts of the country but we think there is sufficient supply to meet demand. Demand in standing sales has not been as strong as we would have hoped for. The most pressure is with harvested and roadside sales.”
He expected demand to pick up in September, following sawmills’ summer wind downs.
