British timber producers are still enjoying strong demand and the well-documented tightness in log supply has become less critical over recent months, although log prices are still uncomfortably high.
“Demand is very strong for domestic timber and there is a gradual increase in demand – and tighter availability the further south you go,” said Andrew Heald, technical director at Confor.
“However, a lot more timber has come to the market than 12 months ago,” he added.
He attributes this to more private growers tuning in to the high demand and the resulting financial benefits. Private supply is estimated to be around 65% of the overall UK total now, although there are variations – in Wales, for example, it is closer to 40% private.
“I don’t think growers were deliberately holding back timber, they just weren’t bringing it to market and then prices moved up more quickly than anyone expected,” said Mr Heald. “The major growers, such as the Forestry Commission and the private investment holding estates produce timber year after year and have production forecasts to get through so they tie up contractors well in advance. I think the smaller growers and the more traditional estates may not have been quite as tuned in to the market.”
There is also, of course, a finite number of harvesters and operators and as demand increases and supply tightens, these resources are pulled in by the bigger producers, which has a knock-on effect on the smaller private growers’ ability to get logs into the system.
As mentioned, log prices have risen inexorably and are now around 65% higher than two years ago.
“And the Forestry Commission’s index is 30% up on 12 months ago,” said Mr Heald.
“So there is strong demand but squeezed margins – the mills have full order books but the prices of the finished goods haven’t gone up as much as the prices for roundwood.”
The good news is that sawmills no longer seem to be reducing production because of a lack of log supply – a huge frustration in a strong market. James Jones, for example, admits to “significant production challenges in Q1” caused by poor weather and log supply but all its mills are back up to full capacity.
Restoring capacity, say sawmillers, is by dint of managing their forward buying as much as it is of more raw material coming from the forests.
“The stress on the regions varies depending on the activity levels of competitors in those regions and also what the private growers are doing,” said Tony Hackney, managing director at BSW Timber. “We’ve been through a difficult period in the north of Scotland but that has got better and central Scotland seems to have steadied up, so there is more supply although I wouldn’t say it was healthy. We have what we need but it comes down to affordability – you can’t just pay through the nose for everything.”
“Sourcing of smaller diameter pallet wood material continues to be challenging both in terms of price and availability,” said Graham Blyth, sales director at James Jones & Sons. “Log supplies are currently good and the bought forward volumes are well balanced and in line with production forecasts.”
It’s a similar story at A&J Scott, where managing director Robert Scott says log supply has been comfortable, but pricey, all year.
“We are normally four to five months bought ahead, which is the case now. At its worst we were down to two to three months.
Whilst being comfortable we have seen significant cost increases and the average cost at mill is increasing week-on-week as the expensive timber filters its way into the supply chain.”
And at Gordon Timber the harvesting team has “done a great job and kept us fully supplied”, said joint managing director Scott Gordon, adding, though, that purchasing sufficient tonnages at a commercial rate had been a real headache.
He reiterated Andrew Heald’s point that a lack of hauliers and harvesting contractors was a problem and added that while supplies were adequate and that more roundwood had come onto the market in the summer months, not all of it was FSC.
“One of the hoops we are all having to jump through is keeping that minimum 70% FSC content. That definitely makes the whole operation more difficult.”
As mentioned, demand for sawn timber is extremely strong across all product types. The post-Brexit vote fall in the value of sterling has had a massive impact and has made British-grown timber much more competitive.
Another factor is that global demand for timber is increasing, sucking in huge volumes of timber from producing countries that have previously regarded the UK as their top export destination.
“Northern European timber is going into China and North America,” said Mr Heald “Things that happen in the rest of the world have a big impact all the way back to the price of UK timber.”
“The Brexit vote was not the single catalyst for UK price increases,” agreed Graham Blyth. “Both imported and domestic sawn timber prices have increased as a result of global demand, housebuilding activity, increasing log prices and competition for fibre from, principally, the biomass sector.”
Obtaining reliable statistics around the volume of fibre destined for biomass plants is challenging, according to Mr Heald, but the belief is that “significant volumes going into RHI boilers are coming from the private sector”.
It’s not all about price competitiveness, however, and as British sawmillers would testify, investments in their processing facilities and in value added products has driven demand for timber grown on home soil.
“The fencing and pallet and packaging markets are generally more reliant on British supply in any event and UK producers continue to promote graded construction products as fit-for-purpose and relevant to the UK construction sector,” said Mr Blyth.
“The quality of British timber is starting to be taken seriously,” agreed Mr Scott. “And the quick turnaround mills can offer is starting to give us the edge.”
That said, mills are witnessing “non-stop” demand and are in a situation where they are managing customers’ expectations and “rationing” out supplies.
“We have had record production for the year – up 10% – but even that has not managed to meet the demand that is out there,” said Scott Gordon. “Lead times have pushed out a bit and we’re not taking on any new customers at the moment, nor are we really looking at any major extras for existing customers. For certain products we’ve had to stop taking orders.”
He added that stocks of sawn timber were at record lows and that the mill’s annual summer shutdown had been reduced from a fortnight to a week in order to keep up with orders. Lead times are currently running at six to 10 weeks, with some items stretching to three months.
A&J Scott is operating at 100% capacity and has a similar stock situation. Lead times are now out to four weeks on most products, while sleepers have pushed out to five.
“Orders are being taken months in advance, however, these are subject to price changes,” said Mr Scott.
At BSW stocks are low – “almost handto- mouth” – with products being produced to order, although critical stocks for certain customers are still kept. Lead times at around three weeks for standard products are not severe but orders for special products have to wait their turn. Customers have accepted this regime and are more organised about placing their orders in good time, said Mr Hackney.
As mentioned, demand is strong across product types – even fencing material, despite fencing manufacturers having had a poor year, thanks in part to hot and cold weather extremes (see pp22-24).
A Confor market report quoted one of its members as saying they could sell every load of fencing stakes two or three time over, while Robert Scott said that fencing outperformed last year and demand for sleepers in particular is very strong.
James Jones attributes its domestic fencing sales performance to improvements in the construction sector and welcomes the actions the Timber Trade Federation and Wood Protection Association are taking to discourage the use of products that are not fit-for-purpose.
“Our message in Use Class 4 treated products continues – only products treated to UC4 should be used in ground contact applications,” said Mr Blyth.
He added that James Jones’s £17.5m 17-acre site at Hangingshaw near Lockerbie is now fully operational. The full benefit of this new 22,000m2 secondary processing and covered storage facility is expected to hit during the peak fencing season and the company is looking to optimise this in 2019.
The fencing, pallets and packaging operators are widely acknowledged as being “the squeezed middle” with the biomass and wood-based panels operators “coming for the small roundwood” and those in search of carcassing material buying smaller diameter material.
The pull through from construction activity is definitely there but for some it’s not as convincing as they would like.
“We’re ok on the KD construction side because the customers we deal with are supplying the major housebuilders, but I do believe there could be more activity in construction,” said Tony Hackney at BSW.
“Consumer confidence still isn’t there and whatever we say about the markets and the economy, the Brexit issue is having a massive impact.”
“There is always the issue of the strength grade of British-grown timber and where it fits into the market but I think the overall demand for carcassing pulls everything up along with it,” said Mr Heald.
“There is an increase in timber frame construction in the UK and there is a slow and steady move towards offsite and to cross-laminated timber construction – all this demand is going in one direction.”
James Jones would agree, having seen a 15% increase in sales of its JJI-Joists this year over 2017.
The company has invested £8.5m in a new I-joist assembly line at its Forres site and says work is on schedule. The line will have an annual production capacity of 20 million linear metres, or the equivalent of approximately 200,000 new build homes per year.
“The civil works are now complete on our new assembly line building and we expect to commission the new JJI-Joist assembly line in Q4,” said Mr Blyth.
Other on-going investments for James Jones include a major upgrade of its Aboyne sawmill. Phase one of the £5m programme has gone very well and phase two is scheduled for later in 2019.
Gordon Timber invested in its fencing line last year, adding a cross-cut which enables it to process double-length posts. It has followed up with a number of smaller investments this year, including in LEV and vehicles and plans a further £1m of spending over the next 12 months as part of a three-year investment programme.
“We’re looking to push the onsite primary production capacity and also augment what we are doing on the added value side as well,” said Mr Gordon.
A&J Scott is looking in the same direction and is installing a new value added line in October, which is due to be commissioned in January.
“This will significantly increase our capacity of fencing and garden products,” said Mr Scott, adding that other investments are being planned to improve sawmill yield by installing new scanners/optimisers.
BSW’s biggest investment news – to the tune of €40m – has been the announcement of its new sawmill, CHP and pellet manufacturing facility in Slovenia. Such is the global demand for timber that the company is already fielding enquiries regarding supply of Slovenian timber.
BSW is also bringing new products to market. In March this year it announced an addition to its fencing and landscaping portfolio in the shape of a new range of wood plastic composite (WPC) decking. This has seen significant sales growth and has “pretty much sold out this year”, according to Mr Hackney, who said investments in new extrusion lines and production equipment were on the agenda.
In fact the company has cemented its interest in WPC by acquiring Alvic Plastics Ltd, following its long-standing relationship with the organisation. Alvic’s chief executive Al Ghattaura remains in post and becomes a shareholder following the transition to the BSW Group.
“Alvic joining the BSW Group is a fantastic opportunity for us to revolutionise WPC products in the UK,” said Mr Hackney.
BSW has also launched IRO, which it describes as “a heat enhanced architectural timber” and suitable for indoor and outdoor applications. It is finished with a pigmented UV-resistant wax and its defined figuring makes it aesthetically pleasing. It is available in a range of colours, from teak and light grey to ‘lagoon’ (blue) and ‘veggie’ (green). Meanwhile, James Jones & Sons Pallets & Packaging launched a new innovative product called UPALL earlier this year.
UPALL is a pallet protection system, which uses robust protective guards at the point of entry, meaning wooden pallets last a lot longer and need fewer repairs – in fact James Jones’s research suggests the system can treble lifetime use.
The UPALL system, which can be manufactured in corporate colours and include company brands and logos, is currently on trial with a number of customers and early indications are very encouraging.
