With growth anticipated to reach possibly 7% this year, the Irish economy is clinging on to its mantle of ‘tiger’ in the face of widespread fears among other European countries of a looming world slowdown.
However, there are now real signs of a deceleration in Ireland’s new housing market and this is beginning to have an effect on almost every area of the timber industry, in the opinion of one contact. With the construction market on course to complete just over 40,000 units by the end of 2001, an overall drop of about 16% is anticipated in new-build projects for this year, with a further fall of almost 20% expected in 2002.
‘Things are slowing down and all timber is affected,’ said one contact. ‘We’re all under pressure because of the cutback in housing – it is all related to building.’
The consequent reduction in the volume of work related to building, most noticeable in cities but evident all around the country, has adversely affected both costs and prices for timber firms. One merchant pointed out that Ireland’s previously fast-growing timber frame housing sector has also been hit. ‘There are more timber frame houses being built in Ireland now than there have been in previous years,’ said the merchant, whose firm has developed a significant ‘sideline’ in timber frame supply as the market has grown. ‘The sector now has a good percentage of the overall housing market and so the slowdown has impacted on us.’
Aside from standard market fluctuations, it is widely believed that government intervention is a key reason for the speed with which the housing market is falling away. For instance. stipulations on planning permission include a two-year time limit in which construction must be completed, which is deterring larger building firms from applying.
One contact said: ‘If a builder wants to build 200 houses and he can’t get them built in two years, there is no point in applying for permission, because he’ll have to apply again.’ He added: ‘It takes about a year to get all the permission in place anyway, so a builder is only going to apply for those that he is able to build in one or one-and-a-half years at most.’
Another key factor is the new requirement for builders to produce ‘affordable’ housing alongside high-yield, prestige developments in a 20/80 ratio. However, appreciating that many builders are hesitant about embarking on new developments under such conditions, local authorities are apparently applying these requirements in a ‘flexible’ way.
The government, mindful of a predicted fall in economic growth to around 5% next year, is cutting interest rates too, which is helping to allay any real fears of trouble on the immediate horizon. Even if there is global downturn, impetus for industry is assured by the interest rate cuts and other budgetary measures aimed at keeping the economy on an even pace. ‘Most economists would say that the budgeting by the Irish government has been good, because it has proven that the growth rate can be sustained at a better level [than critics predicted],’ said one contact. Irish inflation may be hovering about the 4% level, compared with an EU average of a little over 2%, but this comparison is made in the context of much higher growth in Ireland than elsewhere, he added.
Log supply
Coillte has come under fire from some quarters, including importers, for ‘pumping out more wood’ than the market can take and will be able to absorb in future. The state forestry service has got its strategy wrong in ‘opening the floodgates’ at a time when the market is clearly contracting, some say. ‘It is bad planning and it is putting us under pressure on prices,’ claimed an importer and merchant. ‘There is no shortage of timber in the Irish market, that is for sure, and the worry is that there could be a glut of timber in the new year.’
In line with market conditions, log prices in Ireland are already back on last year and some contacts believe they may yet have further to fall. Coillte, which says it is concerned by the drop in timber consumption, manages 438,000ha of forests and hopes to sell around 1.8 million m³ of sawlogs into the domestic market this year, with a slight increase next year.
Although Coillte admits the sudden fall in housing starts has ‘surprised’ the market and that the increasing supply capabilities of Irish mills means they are fighting for a larger share of a decreasing market, there are no plans yet to scale-down harvesting plans. ‘By international standards the market is still quite good and demand is still very strong,’ said a spokesperson. ‘Also, the price of sawn timber has stabilised in the past few months and hopefully it will stay at that level and start to increase.’
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“Within the Irish market there is scope for mills to gain an increasing share of the market and we would hope that they would be in a position to do that and be competitive” |
‘Within the Irish market there is scope for mills to gain an increasing share of the market and we would hope that they would be in a position to do that and be competitive in the market,’ he added. ‘All of us would hope that demand improves because there has been a lot of investment in the sawmill industry in new lines either on stream or coming on stream.’
Export markets
Irish mills have steadily increased their exports of timber over recent years and the spokesperson said he expects this trend to continue – particularly with regard to exports to the UK.
However, other sources believe the mills may have to fight closer to home merely to maintain their current markets, let alone develop new ones. The principal suppliers to Ireland, after domestic mills, are the Swedes, with lesser volumes coming from Finland. The volume of Baltic timber coming into Ireland is said to be fairly substantial though ‘static’, compared with previous months, while a number of contacts mentioned a recent increase in the amount of competitively-priced wood imported from Russia. ‘There is a lot of wood being offered on the market at the moment,’ confirmed one contributor. ‘More than there has been for some years. A lot of it is from Archangel – you can’t beat it for quality.’
However, another contact said he was unaware of reports of ‘major supplies’ of Russian timber imports to Ireland. ‘There has been talk of it and it has been happening in the UK, but so far it hasn’t actually happened in Ireland, to the best of my knowledge,’ he said. ‘If there was a move by exporting countries to put more volume into Ireland, it would presumably be done by way of special offers.’
A lot depends on whether Ireland’s principal timber suppliers continue to produce at current rates or make cutbacks. While reduced production is widely predicted, particularly in Sweden, demand for pulpwood is falling, which may eventually make competition even stiffer on the sawn timber front.
The Irish Timber Trade Association (ITTA) is well down the road with its biggest single project for this year, the annual Irish Joinery Awards. ITTA assessors are putting together a shortlist of entrants in various categories, from which winners will be chosen.
Skills boost
The initiative has been a great success, achieving its aim of improving skills in the industry and raising the level of awareness of timber among key specifiers, an ITTA spokesperson said. ‘We have had good support this year from architects, as a result of doing a lot more work to make them aware of the scheme,’ he said. ‘It was felt that timber industry skills were being lost, particularly with more automation in the joinery and manufacturing sectors, and also that we needed to make architects more interested in doing the necessary detailing of joinery. The award is made to both the architect and the joinery company and is designed to foster skills in the industry both in terms of design and workmanship.’
To further assist architects and other timber specifiers, the ITTA has also become involved in a four-year project called Woodspec, which was completed in June. Available on CD-Rom with an accompanying manual, Woodspec is designed to break down barriers to timber specification by pre-empting the sorts of questions asked by specifiers. Free copies of the publications, which will be updated ‘on an ongoing basis’, have been sent to all architects in Ireland.
