At the time TTJ went to press in late November the Brexit deal was on the brink, recommended for approval to the EU by Donald Tusk, president of the European Council and to the UK parliament by Theresa May. The jury was most definitely still out.

The UK population was left wondering what on earth was going to happen. And, of course, it’s a sentiment that is shared by the UK’s trading partners, none more so than in Ireland’s timber sector.

Among Ireland’s sawmilling fraternity there is a mixture of pragmatism – contingency planning for a variety of scenarios – and denial. There is still disbelief in some quarters that Brexit will actually happen.

“I do believe it will come to the crunch and the UK government will be given two or three months extra time to sort things out and in that time the government will fall, or Theresa May will be booted out and whoever comes in will do so on the strength of a new referendum,” said one TTJ contact. “I think we’re wasting a whole lot of time and money talking about it.”

Another contact agreed that there was bafflement that the UK population wasn’t being given a chance to “tweak”. “We [Ireland] had three votes on the Nice referendum [expansion of the EU east in 2001/2002]. We’ve rejected a referendum as a bit of a protest and when it is clarified what it all means we’ve agreed to it, so we wonder why they don’t do that in the UK. It’s ok to change your mind.”

The over-riding feeling, both within the timber industry and elsewhere is uncertainty.

“There has been so much talk of the ‘backstop’ and how this will affect crossborder arrangements, particularly in transport,” said a contact. “Politically the attitude is hope for the best, prepare for the worst but it’s hard to make contingency plans when the outlook is so unclear.”

While some in the industry are still hoping it will all go away, others are making definite plans. For example, Coillte is setting up a UK warehouse for MEDITE SMARTPLY products to cater for border and custom controls and at least one major sawmiller is doing the same.

The rationale, commentators say, is not so much the fear of tariffs, but the impact of border controls on delivery times.

And time is money. “Someone said to us the other day that the very first thing that will happen if no deal is done is that there will be a £1-4/m3 charge on all timber leaving the country,” said a sawmiller. “That is going to come from the hauliers sitting on the border with all the extra paperwork and administration. The average lorry going across the border will have somewhere between 35-60m3 depending on whether it’s KD or wet. The mills aren’t going to absorb that [extra cost], they are going to pass it straight on.”

Stockpiling materials

In another potential twist, he said that someone in the finance sector had said Brexit could actually help business in Ireland for the first three to six months as British importers/ distributors stockpiled materials.

Another sawmiller added that his company is working very closely with its haulage contractors to ensure they have the relevant customs clearance documents and so on.

“To be fair to them they are very proactive and a lot of them are a long way down the road on having the correct resources in place,” he said.

One area where there is certainty is demand, which all agree is extremely strong – so much so that sawmills haven’t been able to build stocks going into Christmas.

One fencing and pallet specialist said mill efficiencies had enabled him to boost production by 20% without increasing hours while another similar sized and marketfocused contact said his mill always worked a double shift 49 weeks a year and always will.

“We are currently constructing a new mill that will give us double the capacity,” he said. “We will see how the market goes before we commit to more volume but we will definitely have the capacity.”

He added that he could have grown his exports to the UK but that because of Brexit he had “held it back as a precaution as I feel I am exposed enough”.

“We’re running on overtime and we have 40 hours of extra time planned between now [early November] and the end of this year over last year,” said one major sawmiller. “That will indicate the kind of demand that has followed through from the summer.”

Building stocks would be very difficult, he said, admitting that they had already turned away a number of allocations because they knew they didn’t have the capacity for it.

“It’s a relief, really, that the fencing demand has fallen back in just the last week as it will give us the scope to build some stock, but it still won’t be to the level that we would hope to have going into the spring fencing season.”

It’s been a good year for fencing, agreed another sawmiller. “Putting it bluntly there is no stock in any of the mills. There is very strong – though not insatiable – demand and we are going into Christmas and the end of the year with no stock on the ground.”

He added that the part of the trade hit the hardest at the moment is the pallet market. “We’re saying we’ll hold off [on price rises] until Christmas and you can hear the relief on the phone but then we tell them we’ll probably hit them in January.”

Price rises for the new year

Consensus is that sawn timber price rises will occur across the product types in the first quarter. And they don’t appear to be pegged to log prices (which remain high) to the same degree as in recent months/years – although one mid-sized sawmill contact did cite 29% sawn increases set against a backdrop of 30% log price increases over the year.

“It’s not about log prices any more – it’s simply supply and demand,” said a sawmiller, adding that global trade was having an impact. He said that if Swedish and Baltic timber was diverted away from the UK and towards China, then price rises, scarcities and gaps in specifications could be on the cards.

“The imported price rose over the summer and that has allowed the home-grown [including Irish] to follow,” said a major sawmiller. The gap between the two has narrowed to about £25/m3 at the moment.

“Demand followed right through October and that has given home-grown suppliers the confidence to raise prices in Q1. The increases won’t be of the scale they were throughout the year but we’ll certainly see £3-5 going onto home-grown construction timber in Q1.”

Exports to the UK have been maintained and, in some instances, increased.

“We are 80% dependent on UK timber sales and have a wider customer base with slightly increased volumes,” said a spokesperson for a mid-sized mill.

Log availability

The aforementioned log availability/log price seems to have stabilised. Coillte, which supplies around 60% of Ireland’s timber reported that the mills have actually taken less timber from them this year, despite most of them upping production.

“We sold about 1.64 million m3 last year and this year we are probably at 1.54 million m3, which is back a good bit,” said a spokesperson. He added that private supply had strengthened and that there had been “relatively strong” imports from the UK as well, but said that the event that had had a “dynamic change” was the fire at GP Wood in July, which had taken some capacity out of the market.

Coillte’s allocation of over 50% of its timber for next year took place at the beginning of October. This timber will be accessed from January 1.

“We have contracted 858,000m3 of timber, so it’s a large amount,” said the spokesperson. “Next year we are looking to go to a total of 1.72 million m3.”

Competition for material is as keen as ever and Scottish processors and the biomass sector are included in the equation.

“We have enough at the moment but it is never right for long in this game,” said one contact.

“At the moment supply is good,” agreed another. “However, from time to time we need a supply of lengths to meet customer requirements and this must be sourced privately or from more expensive standing sales. Scottish mills would have to be mad to buy at our auctions!”

Inextricably linked as they are to the UK market, the strength of the UK economy is being keenly monitored.

“If Brexit happens there will be serious consequences,” said a contact. “Our growth and viability in the timber industry is completely tied to the British economy so it is a huge worry. Hopefully common sense will prevail and egos will diminish.”

“It’s a definite worry, both industrially (sawn lumber for construction) and domestically (fencing and garden products),” said another, while a third said that at some point Brexit uncertainty and the resultant lack of investment must affect demand.

Enterprise Ireland has been encouraging Irish exporters to look beyond the UK for some time.

“Shipping costs versus value of product make it particularly difficult for basic timber products,” said a TTJ contact. “They are trying to push added value products and some in the joinery and construction sector have moved in that direction.”

He added that one specialist in acoustic wood panelling had found markets in the Middle East.

The market provided by Ireland’s strengthening economy is a drop in the ocean compared to trade with the UK, agreed all TTJ’s contacts.

Housebuilding is ramping up rapidly and, anecdotally, timber supplied by some of Ireland’s main construction-oriented mills is increasingly being spotted on developments, particularly in the Dublin area. However, as one contact advised: “demand is strong in Ireland but at the end of the day the market size is limited and exports are very necessary.”

It would take a massive leap forward in regulations and an increase in the labour force for Ireland to get from the current approximately 15,000 units a year to the much needed 25,000 units, said a major sawmiller.

“That 10,000 units is equivalent to 80,000m3 of timber. The volumes are so small it’s not something that we are willing to change our model for.”