Writing a market report during the moveable feast that was Brexit was challenging enough but compared to trying to gauge the impact of COVID-19 on the timber industry – or any business, for that matter – it was a walk in the park.

It is important to note that the Irish forestry and forest product producers contacted for this report made their comments in mid- March and immediately prior to the UK government’s lockdown directive. The Irish government also imposed restrictions on the movement of people and non-essential work on March 24 and a lockdown on March 27.

While at the time of writing no Irish mills had closed, curtailed or modified production (as with BSW switching production solely to pallet wood, for example), it is possible, or even likely, that by the time TTJ went to press the situation will have changed.

“From our industry perspective, thankfully it has been business as usual,” said a Coillte spokesperson. “But who knows what is around the corner. It is changing on an hourly basis.”

Obviously sawmills and manufacturing plants can’t operate remotely, so they are trying to work within the stringent procedures and safety protocols that have become necessary. “This is unprecedented for all of us,” said one major sawmiller. “We really are all in unknown territory and we’re probably looking to Italy, which is a few weeks ahead of us to see what potentially will happen.

“If we have to stop for a number of weeks then so be it for the greater good,” he continued. “Everyone I have spoken to wants to do the responsible thing. All we can hope for is that the measures are taken for a number of weeks – even if it’s eight to 12 weeks – and then things get back to normal. “Everyone is going to take a hit but if it costs a few quid, it costs a few quid. Normally in our game it isn’t a matter of life and death, but this is.”

“We can’t work from home in our industry,” commented a fencing and pallet sawmiller. “If it comes into a sawmill or any manufacturing facility in the morning then that’s it, it’s closed.”

He added that while the measures implemented in China had seemed draconian, he felt that Ireland and the UK had dragged their heels in restricting public gatherings.

“How in the world did the Cheltenham Festival [March 10-13] happen?”, he said.

There were no health issues within the sector to report on the date of interview, he said but “it’s only a matter of time”.

“I’ve been telling my customers they should be buying up at the moment because if they don’t and they are relying on suppliers week to week and we get closed down, what are they going to do? This is not like Brexit where we’re not going to stop production – if we’re not producing because of coronavirus then we could be down for a couple of weeks, or a month – who knows?”

Some impact had already been felt by mid-March, of course, and not just in terms of the added hygiene facilities and protocols.

“We’ve pulled our sales team and our forestry team in off the road and we’ve stopped people visiting the factory,” said a major sawmiller. “March 11 was the first day we had an order cancelled specifically because of coronavirus. A customer had done a stock take in his yard and realised that, actually, as they were going to be quiet, they didn’t need it. There is going to be a lot more of that.”

Halting the Momentum

Aside from the human tragedy, the pandemic has pulled the rug from under what was shaping up to be a good second quarter.

“It’s a shame because I really thought the UK economy and market had turned a corner,” said a contact. “We survived the last six months of last year, which was extremely difficult, we got through Christmas and we started off in January with our heads up. People definitely had the attitude of ‘onwards and upwards’.

“I was over in the UK in January and nowhere did I hear the word ‘Brexit’ – people had moved on.

“We moved into February and definitely felt a bit of momentum building. Fencing had been moving quite well and the attitude on the ground and the outlook for the year was genuinely quite positive.”

He added that his reading of the construction market was that Scandinavian imports still had a stranglehold on UK market share and he didn’t see that changing soon.

“There has been talk about the [Scandinavian] imports being more bullish about price increases going in to the second quarter but it remains to be seen. It may still happen but if coronavirus curtails demand then that plan may go out the window.”

Irish mills had started to talk at the end of last year about raising their sawn timber prices from April, revising that in January to the start of the third quarter, but hadn’t had the chance to implement them.

Some marginal price increases had been achieved for fencing, while prices for pallets and packaging were “more or less status quo”, albeit there was very good demand. Prices for construction timber were where they were in the last six months of 2019 – ie low.

Production levels at the time of interview were steady, with stocks coming out of the mill and going onto the lorries for delivery, rather than sitting in the yard.

“We had an okayish January, and February was very good – one of the best February’s we’ve ever had,” said a fencing and pallet specialist. “The storms have been the catalyst for that, no question about it.

“Our stocks are low and for the first week of March it shouldn’t be like that. Technically I could go home now as everything is sold.”

He added that three customers had approached the mill in late February/early March and said “we’ll take everything you’ve got”. Although unconfirmed, it seems very unlikely that those calls are coming in now, which makes the prospect of significant sawn timber price rises less likely.

“The price dropped so dramatically coming up to the Christmas period – it was an average of £20-25/m3 for fencing – and we could comfortably have got £5-10/m3 of that back. We might still get that back but whether we get £10-20/m3 depends on the coronavirus.”

There was some speculation that if, in the middle of the fencing season, a mill or two were forced to close due to the virus, the remaining producers could name their price but it was acknowledged that they would have to be “real so and sos” and that it would come back to bite them later on.

Another mid-sized sawmiller said he had found it really hard to push sawn prices up. “And if I can’t get sawn prices up I can’t get the logs, so it really is a quandary,” he said.

He complained of a “huge tightness” in log supply and the prospect of being in “the unenviable position of log prices increasing as market prices remain low”.

As a fencing mill he said his market is the UK and that there is potential for more business there but with all the uncertainties he is placing whatever he can in Ireland.

“I prefer dealing with the UK but my exchange exposure is very high,” he said.

Acknowledging the tsunami of global problems, including coronavirus, Brexit (he thinks both the EU and UK are spoiling for a no deal), the US/China tariff spat and the Russia/Saudi Arabia oil price war, he said “with so many unknowns I only worry about things I can do something about. We have invested in a state-of-the-art sawmill to try to make us as competitive as our peers and that is all I can do to overcome the above.”

The “huge tightness” in log supply he referred to didn’t come up in other conversations but roundwood availability was referred to in other circles as “mixed”.

There is currently a backlog of the issuing of felling licenses, which is causing delays.

“The Forest Service, which is responsible for issuing the licenses started implementing new processes and procedures last summer on the back of the new forestry bill which had actually been in place for two years,” said a sawmiller. “It has left it open for ‘serial objectors’ to come in and frustrate the system.

This has meant that going into 2020 there hasn’t been as much licensed material as the industry would like, both from private and public suppliers.”

The ‘serial objectors’ he refers to are environmentalists who protest against plantation forests and the use of non-native species, such as Sitka spruce.

Different Environment

“The whole timber industry is operating in a different environment these days, just from a public perception of what timber is,” said a Coillte spokesperson. “Our regulatory environment, EU regulations and how we choose to interpret those has changed somewhat and has led to a delay in felling licenses being issued to us.”

That said, this year Coillte will still supply a similar volume to 2019 – 1.7 million m3.

“It is definitely a real issue for us and I’m not saying it’s not a risk, but it’s a managed risk,” said the spokesperson.

“We are responding by giving our regulatory bodies enough volume to deal with so that even if some of it is appealed we are ok and our customers shouldn’t be seeing any interruption in supplies. Most of them are well contracted and we have good roadside stocks.

Certainly, that is borne out by one contact, in the short to medium term at least.

“Our own company is in a good position, with decent forward contracts of licensed material,” he said. “I think that most of the mills will start with plenty and as the year goes on that comfort zone will get smaller.

“It could take up until Christmas for the Forest Service to get fully up to speed with the system and get the resource behind it, but I don’t think anyone will run out.”

As mentioned, Brexit has been knocked off the headlines but for the most part the Irish timber sector is “getting on with it”.

“Other than fluctuating exchange rates from time to time around key decisions it hasn’t really had a major impact and we don’t anticipate that it will,” said a contact. “It almost isn’t discussed any more.”

As noted in previous market reports on the Irish timber sector – and setting aside the coronavirus context for a moment – Ireland’s economy is “not fabulous, but it’s ok”.

The housing shortage should lead to an increase in demand for construction timber but that just hasn’t happened yet. It does, perhaps, bode well for the future, however.

The UK market is viewed in a similar vein. “There is demand for housing and the targets are much larger than what is being achieved,” said a contact. “So sawmillers feel they have a good pipeline, although they don’t expect to see any major increase this year. Even before coronavirus they expected the construction market to be somewhat flat this year but the forecast over time is for it to improve.

“The UK will remain a key export market and the strategy is to grow our export volumes and maintain supply chains during the COVID-19 challenge.”