The last year has certainly seen the UK industry living through ‘interesting times’, as the Chinese proverb has it, with the establishment of the Confederation of Forest Industries (ConFor), restrictions coming into force on the use of CCA preservatives and new common standards to prevent the spread of pests being implemented for wood packaging materials.
The reference to China isn’t gratuitous. The country has the fastest-growing of the world’s major economies and has successfully transformed into a global manufacturing base.
Worldwide markets for Chinese goods mean increasing demand for shipping space, which is causing problems for timber exporters from the Baltics to Scandinavia both in terms of capacity and firming freight rates. Timber is sitting on quays, resulting in delayed shipments for UK importers, and the situation is exacerbated in the Baltics because of severe weather.
However, this potential opportunity for UK suppliers is dampened by the fact that demand for carcassing, which was going well until around three weeks ago, has eased off. Trade is expected to quieten towards the end of the year, but it’s happened earlier than expected and nobody seems quite sure why – although the prime suspect is a sudden slowdown in construction in the light of falling house sales.
A good year
Despite this last-minute hiccup, 2004 has been a good year for UK carcassing and, with signs that architects and specifiers are looking at UK timber and assessing it against the criteria for the government’s sustainable housing requirements, there is reason for optimism.
Private growers have benefited from steady demand – more so for sawlogs than for small roundwood – and are likely to end the year with a 5-7% increase in prices overall. The recent announcement by Egger of planned expansion at Hexham is also good news for growers.
The rains during the autumn have affected supplies from the forests, not through harvesting problems but because of extracting the wood on poor roads.
To that end, the announcement that the Scottish Executive has recognised the transport issues faced by the timber industry has been welcomed.
A £13m fund has been allocated to pay for projects that reduce the impact of transporting timber by road. Starting next year and running over three years, the fund will be administered by Forestry Commission Scotland. Details of how it will operate will be finalised over the next few months. Better rail or sea services would be welcome – but many of the roads thus freed from lorries will be motorways and major trunk roads, which are not really the problem as far as growers are concerned. The key difficulty is hauling logs out of the forests on minor roads, and it is hoped the fund will generate ideas to improve this stage of the transport cycle.
Palletwood prices
Palletwood prices have increased this year, reflecting the improved performance of the pallet and packaging industry.
A key development in 2004 was ISPM 15, the common standard aimed at preventing the spread of pests that may be contained in wood packaging and ending the confusion of the widely-varying existing controls in different countries and trading regions.
ISPM 15 requires either heat treatment, with the timber heated to a minimum core temperature of 56OC for a minimum of 30min; or fumigation, using methyl bromide to the relevant specification. To prove compliance, an international mark has to be applied to two faces.
Heat treatment is the favoured method, firstly because end users such as the food industry do not want chemically treated pallets or packaging, and secondly because fumigation would be a short term option due to expected restrictions on the production and supply of methyl bromide (a toxic and ozone-depleting substance).
The biggest problem with ISPM 15 has been its variable implementation; some countries have already introduced the standard, others have yet to do so but have confirmed that they will. The EU has announced that it will implement it on March 1, 2005. Although it will not apply to movement of goods within the EU, compliance is advisable to ensure that the pallets and packaging will also be acceptable for transporting goods outside the EU.
Since holding different types of packaging for export to different countries would raise significant issues in terms of logistics, stocks and control, many users decided early on to specify that all their pallets and packaging should meet ISPM 15 requirements.
UK pallet producers have invested in heat treatment facilities to meet this need, and the boost in demand resulting from ISPM 15, together with increases in raw material costs, has allowed welcome and long overdue price increases for pallets this year.
Heat-treated problems
There have been reports of blue staining and mould growth on packaging that is just heat treated, and the latest development is that users are now seeking materials that are kiln dried using a schedule that will achieve the required core temperature for the specified time – thus meeting the ISPM 15 standard while at the same time resulting in better quality pallets and packaging.
Markets for fencing and garden products have been good this year, after a delayed start caused by poor weather in the spring. For manufacturers of fencing – and other products requiring treatment – a major change in 2004 was the new regulation restricting the marketing and use of traditional CCA preservatives, which came into force on June 30.
Although this EU-inspired legislation moved relatively rapidly from conception to implementation, the market was well prepared and treatment plants have converted to acceptable alternatives. Although most moved directly to “new generation” preservatives, some smaller operators adopted the “halfway” measure of switching to copper-chrome products (the new regulations were more focused on the arsenate content of CCA).
Even at that time, it was known that regulators were looking at chromium so this was, and remains, a short-term solution. The shorter the better, in one way, since using up existing stocks of copper-chrome preservatives and treated timber ahead of any restriction will avoid the cost and difficulty of disposing of the materials.
For the UK timber industry as a whole, another major development of 2004 was the launch of the new industry umbrella organisation ConFor. A huge amount of work has gone into this, most recently with the news that the organisation is about to appoint a permanent chief executive which will allow it to develop its various projects further.
Recent announcement of the proposal to build a £1bn integrated sawmill, pulp and paper mill and renewable energy generation plant in Invergordon by a consortium of Scottish businessmen led by Ed Gillespie has received a rather more muted response from the UK timber industry than might be expected.
Feasibility study
The Scottish Forest Industries Cluster undertook a feasibility study into the establishment of a pulp and paper mill in 2001, and it is reported that a number of sawmills, overseas pulp mills and others have visited the Invergordon area. Ed Gillespie was project director for that study. At the time he was chief executive of Scottish Enterprise Grampian, and prior to that appointment in 1998 had a long career in the paper manufacturing industry, including director of manufacturing worldwide for Arjo Wiggins (Group). From 1976-1995 he was general manager of Arjo Wiggins Fine Papers in Aberdeen.
Now the consortium behind the proposed integrated mill plans another feasibility study – at a cost of £500,000, according to a report in Scottish daily The Press & Journal, to which a grant of £200,000 has already been approved by Ross and Cromarty Enterprise. Obviously a forest industries plant of this size would offer a significant market for growers, and the cautious welcome it has received may be a matter of ‘reserving judgement’ until the new feasibility study is completed.
Although the forecast 2020 peak in wood supply from Scottish forests could justify investment of a few million in a sawmill, whether the supply will be enough to warrant an outlay of £1bn will be a key finding of the study.
