The result of June’s EU referendum has certainly focused minds within the British grown timber sector.
The consensus is that while it is still early days, efforts must be made to ensure the sector maintains, or increases its foothold within the wider timber trade. The good news is that – for the moment at least – British sawmills are all busy, running close to capacity and managing fast turnover of stock.
Demand for fencing material has been strong and construction grades have also been selling well, reflecting housebuilding activity – although whether that will continue at the same pace is up for debate.
Whatever happens, the British timber sectors’ collective foot will remain on the gas. “We must ensure we promote the sector as things change,” said Stuart Goodall, Confor chief executive. “This is particularly important at the forestry level because the lack of new planting has been an issue for some time and it is very much infl uenced by the Common Agricultural Policy [CAP].
“The indications are that whatever route we go down we will be leaving the CAP, which means a whole new policy and funding arrangement for rural areas.” In a nutshell, forestry will have to fi ght its corner very hard against bids for funding from the agricultural sector.
“My feeling is we are going to have to step up our game in all four countries of the UK to promote the sector’s interests,” said Mr Goodall.
The apparent lack of a plan at Westminster in the immediate aftermath of the Brexit vote has rattled confidence. “The big concern for industry now is the prospect of a prolonged period of confusion and deliberation, which will erode confidence,” said David Sulman, executive director at the UK Forest Products Association (UKFPA).
Ian Pirie, joint managing director at James Jones & Sons agrees: “Housebuilders are still fairly optimistic about short/mid-term prospects despite the immediate postreferendum share price falls. We need political uncertainty to ease and to see a clear economic and political strategy to improve business confidence.”
Some players are looking forward to the opportunity provided by Brexit to look afresh at standards and regulations.
“From a forestry point of view there may be scope for simplifying and reducing the burden of some regulations but that will be some way down the line and it’s worth noting that the EU Timber Regulation is enshrined in UK law,” said Mr Sulman.
“Product and performance standards play a valuable role and UK manufacturers who want to trade with Europe will still have to engage in the European standards programme.”
One perceived short-term benefit to UK manufacturers is the dramatic fall in the value of sterling, reversing the position the home-grown sector faced last year.
“There was a real challenge competing with imported softwood through 2015 as the strong pound made Scandinavian, Baltic and German timber relatively cheaper,” said Mr Pirie.
“British timber did lose a small amount of market share but held on to the bulk through aggressive pricing. The EU referendum has weakened currency, which is helping homegrown timber in the short term.”
BSW Timber chief executive officer Tony Hackney said he took action to reassure the group’s customer base immediately after of the Brexit vote.
“I personally wrote to all our customers to let them know that we have invested significant amounts of money into homegrown capacity and we are here to support them through what might be very uncertain times,” he said.
He said that “de-risking” the supply chain by specifying home-grown timber was a real opportunity for buyers but added that they should be realistic in their expectations on sawn timber prices.
“I think it is strategically important for the key players throughout the timber supply chain that we stand together as UK companies for the benefit of the UK.
There will be some [buyers] who will see the sterling collapse as an opportunity [to buy cheap timber] but we have to be far more balanced in the approach we take with customers and with our log supplies.”
As mentioned, the availability of raw material remains front and centre of lobbying activities by Confor, the UKFPA and others and while Brexit has undoubtedly thrown some uncertainty into the mix, there have been some more encouraging signs regarding new planting.
“We need more commercial woodland production but to make that happen we need to streamline and accelerate the planning process,” said Mr Sulman. He added that meetings were called immediately after the referendum by both Rory Stewart, former Defra minister (now minister of state at the Department for International Development, following the Cabinet reshuffle) and Fergus Ewing, cabinet secretary for rural economy and connectivity in the Scottish Parliament.
“The meeting with Fergus Ewing was one of the most heartening ministerial meetings I think I’ve ever been to,” said Mr Sulman.
“The Scottish government has got ambitious planting targets and he wants them met. No doubt Mr Ewing’s enthusiasm is fuelled by the fact that there are a number of forestry and sawmilling interests in his Inverness and Nairn constituency, not to mention the Norbord plant.
In England the £1m Forestry Innovation Fund launched at a Confor event by Rory Stewart last November has been a huge success, with applications being received to plant more than 1,000ha of new woodland.
“The UK government has been very supportive in saying they want to see larger scale planting taking place in England and they want to see the approval process sped up,” said Mr Goodall. “This fund has demonstrated that there is land that will come forward if the process is de-risked. It’s shown that we could see an expansion of productive forestry in England.
“It’s a real turnaround and it’s vital that Forestry Commission England and Defra follows through and ensures the applications are approved easily because that will set the tone.”
Ian Pirie agrees that firm initiatives to recover planting areas are required.
“The fact is that we are losing commercial forest and this must be reversed if we are to have a viable UK timber industry in 30 years.”
At present, though, roundwood timber supplies are said to be pretty much in balance, although with some regional shortages emerging as harvesting increases to meet mills’ demands.
BSW Timber’s acquisition of Tilhill Forestry earlier this year is seen as positive proof that wood supply is a major issue for processors and that similar vertical integration might even be on the cards for others.
“The acquisition has run very smoothly and we’re offering a good service to the client base,” said Mr Hackney. “This is very strategic in terms of security of supply for BSW but also ensures we have a toehold in forest management and harvesting and we will grow other areas and initiatives within that business, such as biomass supply and soft landscaping products.”
He added that BSW was very supportive of new planting initiatives both through Tilhill and in the wider context: “We have rejoined Confor and I have become a board member and we are supporting the organisation’s efforts to increase planting in the UK.” Other mills have opted for acquisitions and strategic relationships further downstream.
For example, James Jones has bolstered its presence in the pallets and packaging sector with the acquisition of TWP Packaging.
“The acquisition was designed primarily to strengthen our existing pallet offer through Unit and Larch,” said Mr Pirie. “The addition of TWP has improved our geographical reach but also the mix of pallets and packaging offered, which includes recovery and repair of pallets and skids and many other enhanced service options.”
He added that, in order to give a clearer identity across the industry, the businesses are to be merged under the name James Jones Pallets and Packaging.
Quite apart from acquisitions, investment within the UK sawmilling sector has been ongoing and far-reaching.
BSW’s Fort William mill has seen around £3.5m invested in a K3 line for processing large logs. Meanwhile a £2.5m combined heat and power plant has just been commissioned at the Carlisle mill. The 3.2MW CHP boiler marks out the company as the first UK sawmiller to generate electricity from biomass fuel and is part of an £11m investment programme in biomass energy across its mills in the UK and Latvia.
The Carlisle plant, which was supplied by Dallol Energy, will provide heat for the kilns, treatment plant and offices, while also producing electricity for the sawmilling process.
New handling equipment has also been installed at all the multi-head lines, enabling the production of more featheredge and bespoke fencing products. This kit is already in place at Carlisle, Dalbeattie and Fort William and has been purchased for Newbridge.
In fact multi-million pound investment at Newbridge has just been announced by the group as the next phase of a £4m programme that started in 2013. This includes a high-speed edging line, a small log profiling line, cross-cut, stacking and handling equipment and multi-head systems.
“This is in addition to the existing mill and by integrating the two lines – the profile line and the bandsaw line – we will almost double capacity at Newbridge,” said Mr Hackney, adding that he expected this to happen by April/May next year.
“It will give us a really flexible mill in Wales and will give us more efficiencies and more ability to process home-grown products. This is a great opportunity to strengthen the economics of the forest sector in Wales plc.”
The company has also invested in product development. An initial £2m investment saw the launch of BSW Energy in April.
“We built a flat bed dryer and processing equipment to feed four heat log extrusion processes at the Fort William mill,” said Mr Hackney, adding that capacity at the mill will be about 20,000 tonnes of heat logs per year.
BSW Energy products currently include “Hotties” heat logs, “Pizazz” logs for wood-fired pizza ovens, “Barbies” barbecue fuel and chiminea and firewood packs and are distributed from the Fort William mill and from Bridgebrooke Energy in Bury St Edmunds in Suffolk, a company which BSW acquired in 2014.
Other product development has seen the introduction of the Warrier brand of BM TRADA-accredited acoustic Highways Agency Environmental Barriers.
“We make the panels and supply specialist contractors,” said Mr Hackney. “It’s a niche market but one where we can add value and support applications for home-grown timber.”
Meanwhile, James Jones has bought 18 acres of land three miles to the north of its Lockerbie mill and has secured planning permission to build a fencing and secondary processing centre. This will free up capacity at the main mill and allow the company to put more wood through the existing sawlines.
The next round of investment at the Lockerbie mill is heavily geared towards increasing fencing capacity, including an additional treatment tank (green and brown), resawing and bundling for smaller sections, and high speed production of featheredge, including bundling.
“These investments, together with a large, dry storage facility will allow us to meet the anticipated growth in demand for fencing product and, at the same time, have the stock available for our customers at times of peak demand,” said Mr Pirie.
He said that incised timber has seen huge growth in the three years the company has produced it and almost all of James Jones’s merchant customers are now selling the benefits of the material for ground contact use. The company’s third incising machine is on order and will be installed at Lockerbie in early 2017.
“Demand for fencing has been very strong in 2016, with year-to-date sales up 19% [at July],” said Mr Pirie. “Agricultural fencing sales are still strong but the real growth has been in domestic fencing.
“Demand for landscape sleepers has also been very strong and we are seeing an increasing preference for Use Class 4 incised sleepers. We have a very real concern about the amount of UC3 treated sleepers being sold and are trying very hard to market incised UC4 as the product fit for purpose. We would like to get to a point very soon where we refuse to sell UC3 treated posts or landscape sleepers and we think the market is almost ready for this now.”
