The latest figures from the Timber Trade Federation reveal that Irish imports to the UK have strengthened again.
Although year-on-year they slipped slightly in March – down to 5% of market share from 6% in March 2011 – in April the movement was upwards, with 40% growth from 5% of share in April 2011 to 7% this year. In the period from January to April market share rose from 6% last year to 7% this year.
With these figures, Irish producers are reasonably happy with business in the UK. "It’s steady," said one sawmiller. "It’s not a bonanza but it’s not stopped. It’s business as usual."
Others thought the UK market was slightly subdued – not helped by the persistently wet summer – but nevertheless, producers are managing to secure some price increases. Over the past few months Irish mills have also benefited from movement in the euro/sterling exchange rate from the earlier €1/85p to €1/78p at the start of this week.
"The sterling rate has certainly helped," said one producer. "It was a badly needed turn and we’d like to hope that the Irish mills would have the good sense to maintain their prices and not just give it back to the market to get market share. That’s a big worry."
Another agreed that the exchange rate made Irish mills more competitive but it really only offset producers’ higher log and transport costs.
"All it’s doing is papering over the cracks. It’s still a very fragile industry; if sterling was to change in the morning we’d have some fun here," he said.
The change in the exchange rate has also slowed imports of logs from Scotland, benefiting Ireland’s main raw material supplier, Coillte. In the first half of the year the stateowned company’s sales were up 100,000m3, or 13%, on the same time last year.
A spokesperson said there had been a slight increase in small sawlog prices but prices for standing sales and large logs were roughly the same as last year.
The mills say log prices are still too high but producers recognise the influencing factors. "Log prices are ridiculously high. Log supply is difficult but not because of a shortage but because there’s overcapacity in the Irish industry and as long as that exists, despite the best efforts of both sides of industry, it’s hard to see how it will be remedied," TTJ was told.
Despite the less favourable exchange rate that’s persisted over the past few years, Irish mills have strengthened their foothold in the UK, as evidenced by the TTF’s statistics, and, with little activity in Ireland, the UK will continue to be a focus.
"We’re not basing our production or sales targets on the Irish market. We very much have to keep our focus on the UK," said a sawmiller. "We’re effectively a British mill. It’s our primary market with 80-90% of our output going there."
The mills have worked hard to raise the quality of their product and all are encouraged by the growing acceptance of home-grown timber in the UK.
"Every mill has risen to new standards because everyone has invested in new grading machinery and technology," said a contact. "We’re seeing growth in displacing imports; there are a lot of customers changing from C24 to C16. There’s confidence in home-grown PAR carcassing from Scotland, Ireland, wherever it’s from. The old, poor impressions are finally being corrected and people are impressed with what they get."
Coillte also has praise for the mills’ work. "The excellent work done by the Irish sawmills investing to upgrade technology and packaging has proved fruitful; they’ve done a great job," said a Coillte spokesperson.
For customers, home-grown timber also has cost and delivery advantages. "They don’t have the hassle of forward contracts, or buying dated stock from the docks. They get it direct from the sawmill, freshly sawn, freshly dried and wrapped and that has a big part to play in the market continuing to change over," one contact said.
He knew of one national company in the UK considering "a wholesale change" to home-grown.
"Inside the next 12 months there’s a good chance that home-grown demand will far exceed supply. There’s a good day coming for home-grown timber," he said.
However, one contact believed that, while Irish timber has made ground in the UK, the mills are not filling the just-in-time demand, which has increased as customers are reluctant to hold large stocks. "The Irish are probably losing a percentage of business in the UK because they won’t deliver half loads, so the British mills will be picking that up," he said.
The Irish mills’ focus on the UK has filled the gap left by the dire state of the Irish market, which shows no signs of improving. Housing starts are a fraction of what they were five years ago and the merchants sector has contracted. Some larger merchants chains are thought to have reduced their branch network by two-thirds, while some smaller independents have gone out of business.
A lot of merchants opened in smaller towns during the Celtic Tiger boom years when housing was going up at unprecedented speed and numbers. Now that many of these houses are "ghost estates", sitting empty, the merchants have closed.
However, as in other industries, those that can hold on may emerge stronger.
"When the recession is over, whether it’s one year or five years down the road, there are going to be fewer people selling timber so whoever has managed to survive will be in a much stronger position," said one contact.
Another was also heartened by the level of business in difficult times. "We’re in the worst possible situation in terms of the global economy and we’re still managing to bob along, so things can only get better," he said.
Although Ireland has a long way to climb out of its economic problems several contacts pointed to some small signs of hope in the housing market. While housing stands empty in many parts of the country, in Dublin a shortage of houses, as opposed to apartments, is nudging prices upwards.
"There have been indications that house prices are starting to rise again in Dublin. We certainly hope that would put the skids on and stop the downward spiral, things will bottom out and we will see some stability," said a contact.
Back in the UK market, the Irish mills expect little change in the second half of the year, although the effects of months of wet weather create some uncertainty. The impact is being felt most by fencing suppliers and it could become more acute if farmers who have lost crops or spent their winter feed budget in the summer have no finance for repair work. However, if they do, then there could be a spurt in demand for timber in the autumn.
Decades of housing oversupply, says report
It will take 43 years to fill all the vacant houses in the Republic of Ireland, according to a report by Deutsche Bank.
The report says there are 289,451 empty houses in Ireland, including nearly 60,000 vacant holiday homes – a vacancy rate of 15%.
If current population trends continue, the oversupply will take 43 years to clear, although if holiday houses are included in the calculations, it rises to 57 years.
"Barring a sudden and sizeable recovery in Irish net migration (people coming into the country as opposed to leaving it), or a politically controversial policy of demolishing large volumes of excess housing stock, housing oversupply will remain a feature for many years, possibly decades, to come," the report says.
"This has ramifications for any bank with development loan exposure, and also for the mortgage market, where prices have continued to fall and oversupply makes any reverse of this trend unlikely in the near term. Over 200,000 houses would need to be demolished in order for the housing supply to fall to three years of current population growth."
