Last year was one to forget if you were an Irish sawmiller, with summations of 2023 ranging from “bad”, to “progressively worse as the year went on” and to “probably one of the most challenging years we’ve had for a long time”. Even the most glass-half-full contacts said that 2023 was characterised by “disappointment”, “struggle” and “uncertainty”.
The second half of the year was particularly tricky, with merchant and distributor customers destocking right the way up to Christmas as demand fell.
“For the first time in four or five years there were some winter deals in Ireland and even that didn’t generate huge demand,” said one fencing and pallet sawmiller. “The fencing merchants just didn’t buy anything from September to Christmas, although some of the bigger manufacturers did some deals, bought some stock and probably kept the mills going.”
The string of storms over Christmas and January caused a spurt in demand for fencing, with those who had taken advantage of the winter deals benefiting from their restocking and others, who had completely destocked, caught “hibernating”. Those who “didn’t really wake up until mid-February” found they were scrambling to buy material.
The larger mills with the added carcassing dimension also pointed to the destocking phenomenon, although some were less phlegmatic than others in their comments to TTJ.
“The fall continued right up to the end of the year,” said one particularly despondent contact. “Demand kept dropping, prices kept dropping, construction demand in the UK was absolutely abysmal, as was pallet and fencing demand. Stockists were slow to stock because they didn’t know when the prices would stop dropping and they didn’t want to be caught with high [and relatively expensive] stocks. Sawmills had high stocks and were concentrating on reducing them as much as possible by carving production. There was nothing good to report to the end of the year.”
He made the point that most wellstructured companies had been able to absorb the hits because of the previous strong years and, of course, mills have fought hard for whatever business has been out there.
“There was some reduced demand from the [existing] customer base, so we’ve tried to stay ahead of that,” said one major sawmiller. “We’ve increased our customer base and taken on some new groups and new independents in order to keep the mill busy and to make sure we are supplying product into the UK and the Irish markets.”
As a result, the mill actually grew its volume year-on-year and 2023 “was one of our most successful years in terms of volume out of the gate”.
The caveat, he added, was that “prices crashed last year and our accounts look a lot different than they did before”.
“It’s been difficult on that side but what’s important for us is to move timber, and we did that last year.”
Thus far – and generally speaking – this year is progressing in a more positive fashion.
“This time last year we were disappointed with the volume of [construction timber] sales relative to our expectations,” said one major sawmiller. “That’s not the case this year. We’re seeing predictable and steady construction timber sales. They’ve grown year-on-year and we’re pleased with how the market is going. We’ve seen our inventories come down and we’ve had enough confidence to ramp up production a little.
“Part of that is because everybody in the marketplace brought their inventories down to survival levels at the end of the financial year – which is the calendar year for most people – and now there has been some restocking. So, we’re not whooping and yelling and we’re not totally confident yet but there has been a decent volume of sales this year.”
Mid-February saw talk of some price rises and there’s no doubt in the contact’s mind that this also galvanised buyers into action.
Sales in the last two weeks of March “excelled” and saw a momentum shift and, as noted, the mill is now back to full production and cutting steady volumes of KD carcassing for the UK and Irish markets in rotation.
Ireland’s construction sector does seem to be relatively buoyant, particularly in the timber frame sector. This is attributed largely to an increase in building of social housing and the skills shortage, which makes offsite manufacturing a more attractive proposition.
One major sawmiller said they had found the domestic market to be very strong in 2023 and continuing into 2024 and noted that Ireland’s timber construction market had “fewer inputs” than the equivalent UK market.
“There is a lot less of an effect from imported C24,” he said. “The UK has all sorts coming into it but the Irish market is dominated by C16 and while it hasn’t been flying off the shelf we’re still fully accounted with our weekly targets. Activity in Ireland has been strong and it’s been a fruitful outlet for us over the last 12-18 months.”
However, despite acknowledging a good outlet for Irish timber domestically, another contact was less positive about prospects for construction timber in the UK. “It’s just dead,” he said. “We’re doing a fraction of what we would hope to be doing – but it will continue to rise as the year goes on. And then, hopefully, other factors will come into play such as lower interest rates and more mortgages being issued and that will spur things on.”
As mentioned earlier, fencing demand has stuttered into life although, again, it’s a mixed picture depending on who you speak to and no-one is hanging out the bunting just yet.
One fencing specialist said a couple of his customers in the UK had been heading for a record January and February but four days of rain “killed it”.
“I think the underlying demand has picked up but we’re being constrained by the poor weather, particularly in some fencing lines, such as round posts,” said another contact. “I can’t say that prices have moved very substantially but the direction is upwards.”
“Fencing took a bit of a lift in Q1, probably helped by the exceptionally low stocks,” said another contact. “Any bit of a blow and everyone wants [fencing] at the same time,” he said. “Demand is reasonably ok.”
Another mentioned that this sudden scramble for fencing material had “artificially pushed the price back up again”.
“The price had fallen before Christmas but has started to come back up again,” he said. “It’s not back to where it was last June but it’s probably not far off it.”
He, for one, is not counting his chickens, though. “Everybody has restocked but if we don’t get a good traditional British fencing season following Easter then the bottom will fall out of it because if they don’t sell it, they won’t be buying it again in June, July and August. It’s very much day-to-day – we can’t predict three months ahead.”
The pallet wood market was “a funny one” last year, with a good start and then a tapering off in certain sizes towards the end of 2023, according to one contact.
“We had to get really creative with our cutting patterns and cut what we could sell rather than what suited yields,” he said. “It’s had an effect on productivity and yield percentage, but we did what was necessary. We came back in January with extremely low stocks and we’ve been playing catch up since.”
Another contact complained that the pallet market in Ireland is “slow and dragging its heels”, suggesting that the poor weather was impacting one major pallet using sector – farming/food production and that a post-Covid adjustment period was affecting another – the pharmaceutical sector.
He went onto say that pallet demand in the UK was equally dire and “down at least by 20-25%”. Speaking in April, he said the previous two weeks had been a bit busier but “a long way off where we would expect it to be”.
This time last year, pallet wood producers were wrapping their heads around BSW Group’s acquisition of Scott Pallets, with many of them suddenly having to find new buyers for their production. The “settling in” period for Irish mills lasted most of last year but contacts report that they are seeing business “bouncing back in”.
One producer said pallet wood demand had been steady and that there had been “a big kick” in demand in late March/early April, to the point where “orders-wise we don’t want to see too much more at the moment”.
Another said that pallet prices were slowly starting to move up again and that he had absolutely no pallet wood in stock.
On the subject of log availability, contacts said as a whole it was good in terms of Irish material but for any mills sourcing additional logs from Scotland, a clamp down on material brought in from some areas of the country for phytosanitary reasons has “narrowed the opportunities for Irish purchasers”.
While the felling licence issue that hampered Ireland’s forestry operations in recent years has been dealt with to some degree, it is far from perfect, with restrictions proving to be “unpredictable and troublesome”.
Coillte reports that it is being granted the felling licences it applies for but that they are coming with more conditions attached, making it more difficult to manage on the ground. It says it is working with the Department of Agriculture, Food and the Marine and the industry towards standardising the felling licence conditions, replacing the current system where an individual licence might have multiple pages of conditions and another might have a raft of completely different ones, making it difficult for the teams on the ground to interpret them.
The backlog of road permits is still a significant issue, holding up access to harvesting in areas where felling licences have already been granted. Again, Coillte says it is engaging with the Department of Agriculture and industry representative bodies to try to resolve the problem.
“We’re still managing to get all our volume to market,” said a Coillte spokesperson. “The biggest impact is the consistency of that volume to market. With some of the [felling licence] conditions imposed it makes it difficult to bring material to market in as streamlined a fashion as we would ordinarily do because there may be certain periods where we can’t harvest, whether that’s because of a felling licence condition or the lack of a road permit. So, we might have an auction with a lot of material and the following one we might not have as much because of the timing of the restrictions. But our auctions are proceeding as normal and we’ve had four already this year and have another four left [speaking in April].”
Coillte’s volume target last year was 1.65 million m3 and it will offer the same this year. “We probably sold 90% of it last year but I think we will sell it all this year,” said the spokesperson, adding that all the material it brought to the four auctions thus far this year had sold.
Coillte’s logs may be in more demand because there is less private material on the market at the moment. This is attributed to the “horrendous” weather creating tough harvesting conditions and to low prices. Private growers are likely to come back on the scene when prices start to rise and the weather is drier.
“It’s pretty much a trend that Q1 and Q2 are quite strong for us and then it levels off as the private supply comes to market,” said Coillte’s spokesperson.
In the meantime, log prices continue to divide opinion.
“The last two auctions have been well above the index,” said one major producer. “It’s putting pressure on us because the sawn prices, which decreased in the last 12-18 months, are now starting to come back but they’re being quashed by the log prices.”
“The log prices aren’t in line with the market,” agreed another contact. “Unfortunately, prices rarely stay in line with the market, so whether people buy [the logs] or not depends on how their stocks are at that particular time.”
Coillte pointed out that log auctions only represent 35% of its supply and that prices at auction are not representative of the market, which, it said, has seen log prices rise by a matter of cents in Q1.
“We have an annual contract with customers, which is 50% of what they get from us and those prices do follow the market – they don’t reflect the auctions at all. At the auctions customers are competing for volume and there are a variety of reasons why the prices might be up or down. One auction does not reflect the market – it reflects the availability of the raw material.”
Coillte itself isn’t immune, with financial results released in April revealing its operating profit almost halved last year against the backdrop of weak demand. The company’s operating profit in 2023 was €61m, compared with €119 the previous year. Revenue declined almost 16% to €414m.
There will be trouble on the horizon if Ireland – and the UK – don’t starting planting commercial tree species in the near future.
“I’m very concerned about log availability in the longer term,” said a contact. “Planting is constantly under threat in the Republic of Ireland, it’s getting worse in Scotland and in England and Wales it hardly exists at all. Northern Ireland is probably the best of a bad lot but there’s not enough going on.
“As an industry – the construction industry in particular as it moves towards timber – we are not planting the commercial resource that is going to be needed in the UK and Ireland in the next 20-30 years. We have the World Bank telling us there is going to be a fourfold increase in timber demand and all the UK is doing is offshoring it. You can’t accuse Ireland of offshoring it yet but it’s heading very much in the same direction.
“In 2050 we won’t have enough trees and we will be looking to import from other countries and that’s going to be a big issue. We need to make growing and harvesting commercial trees easier.”
Ireland’s new Forestry Programme, which launched last year and runs until 2027, is looking to address the shortfall. New afforestation schemes are lodged or are scheduled to be lodged within the programme, although uptake thus far hasn’t been as high as anticipated. This is perhaps due to lack of available land and the red tape and recent issues with felling licences knocking confidence in forestry. A forest strategy consultation committee comprising representatives from across the industry has recently been formed to support the implementation of the programme and to work through some of the issues that individuals and small co-ops are facing.
The national target is 18% forest cover, which equates to an additional 450,000ha.
“It’s certainly a big part of our strategy as a company and we are looking to enable 100,000ha of that [450,00ha total] by 2050,” said Coillte’s spokesperson.
Key to restoring confidence in forestry is establishing strong markets for timber and the industry-wide “Build with wood” initiative is playing its part.
Its aim is to promote the use of timber in construction in Ireland and to unlock the barriers that prevent it. As part of the initiative, an Interdepartmental and Industry Timber in Construction Steering Group was set up towards the end of last year to examine the regulatory challenges and changes to building standards needed to increase the use of timber in modern methods of construction.
