The Irish housing market, a significant driving factor for the timber products industry, continues to confound expectations with its amazing growth rate.

Just when you thought it might level out and possibly return to a more “sustainable” output, it goes up again. Volumes increased for the 13th year in succession during 2005, with the Irish Homebuilders Association reporting around 80,000 houses completed, up from 77,000 in 2004.

AIB Global Treasury’s latest economic forecast predicts this year’s figure to reach 85,000 and described the market as a “hot house”.

This, of course, fuels continual speculation about when and how dramatically the market will level out. AIB says a protracted period of stability could follow beyond 2007 but risks to the sector – higher interest rates and strongly rising house prices – require “careful monitoring”.

Residential construction output was worth €19.5bn in 2005, 65% of total construction output. Continued high immigration rates, especially from eastern Europe, look likely to buoy demand for new housing.

Harvesting forecasts

Irish sawmillers gained an important window into future log availability recently when Coillte consulted them about its new harvesting forecasts, which have caused rumbles of discontent.

Coillte has put forward future log harvesting projections for 2006-2016, which will not be made public until the end of May. It has presented several options to mills – either to have a slightly higher harvesting rate during the next five years and then a dip for 2010-2016, or to have the same annual rate throughout the period. The average annual figure is likely to be in the region of of 3.2 million m3.

A Coillte spokesperson said: “What we are seeing is the supply for the next 10 years has basically plateaued. There will not be any significant growth in volume.”

Coillte expects to increase the amount of wood harvested through thinnings, rather than clearfell. But it expects the level of large diameter construction logs to hold up. A large volume of lower quality logs from the private sector is expected to come onto the market in the next 10 years.

One mill said of Coillte’s log forecasts: “We will not be able to process the volumes that we hoped we would.”

Another mill said Coillte’s figures were “disappointing” but predicted price increases for imported timber during the second and third quarters of 2006, due to the buoyant worldwide demand for timber.

The contact said markets such as the Middle East were sourcing an increasing amount of wood for construction, so Ireland would have to pay the price to secure its imported timber.

The mill is hoping for a pick up in the fencing market, which he said was currently slow due to wet weather during March, and has high hopes for the decking season.

Another sawmill agreed that a decrease in imported timber volumes, especially cheaper Baltic product, would probably give the home-grown market a better price and demand.

A further contact described the market for Irish home-grown timber as very busy and “buoyant” since the start of the year, with prices “not doing too bad”.

Meanwhile Murray Timber Products has already replaced its Ballygar mill which was destroyed by fire last August. Machinery is currently being manufactured and the mill is expected to be operational by year end.

On the merchanting side, one trader said of 2006: “It’s been very buoyant, but margins are very tight.”

He was sceptical about timber shortage rumours, saying a lot of Russian wood was being offered on the market. But he reported that 2×4 studs have been hard to source from six months ago and thought this was due to Baltic producers not making enough profit.

Decking demand

The contact said 2005 had been a bumper year for decking, buoyed by the ban on smoking in public enclosed spaces. “Every pub in Ireland has a deck outside now.”

Another merchant said imported softwood prices were increasing but the growth in timber frame construction was not helping many of the traditional suppliers.

With specialists such as Crown and VIDA supplying timber frame manufacturers direct, the extra wood coming into Ireland is bypassing many of the traditional companies and driving competition.

“Business is still very buoyant in Ireland. But margins are tight,” he said.

The imminent release of the first batch of SSIA funds (a five-year government savings scheme) is expected to boost consumer spending. Over the next few years billions of euros are expected to be spent by SSIA savers – widely regarded as good news for the construction and home improvement sectors.