There’s good news and bad news in the British timber industry. The good news is of underlying trends that support potential growth and success; the bad news is of current trading patterns and is therefore likely to be of more pressing concern to the industry.

Other good news is that Britain’s forest area and the volume of timber harvested continue to grow. Statistics just published by the Forestry Commission show the total area of woodland in Great Britain is now an estimated 2.7 million ha – an increase of more than 370,000ha in the past 10 years.

Woodland now covers nearly 12% of Great Britain, 8% of England, 14% of Wales and 17% of Scotland. The Forestry Commission (FC) manages some 30% of the total area.

The volume of timber harvested from Britain’s forests also continues to increase, exceeding 10 million m³ (standing volume) for the first time. More than half of this comprises logs that go to British sawmills and the rest is small roundwood, most of which goes to panel mills and integrated pulp and paper mills.

According to the FC Sawmill Survey 2000 there are around 300 British sawmills – although about half of all softwood sawn is produced by the 13 largest mills.

Significantly, British timber provides only about 15% of the total volume of wood products used in the UK – offering plenty of scope for increasing market share. If all things were equal, that is. Given the current competition from lower priced imports, such expansion is no easy task.

According to members of the UK Forest Products Association (UKFPA), conditions in the UK softwood sector have deteriorated since August. In its latest report to the Supply & Demand sub-committee of the FC Advisory Panel, the UKFPA says demand for sawn softwood has slowed in recent weeks. Conditions are now described as ‘steady’ whereas they were considered ‘buoyant’ in the summer. Continued fierce competition from lower priced imported softwood, especially from Sweden and the Baltic states, is having a serious impact on the profitability of the UK sawmilling sector.

Sawmill co-products

There is also increasing concern about sawmill co-products, with further price reductions imposed by panel manufacturers and some production cutbacks. In the panel products sector, strong competition from lower priced imported material continues unabated and all UK manufacturers are maximising operational efficiency and tightly controlling costs. This demonstrates yet again the interdependence of the various sectors of the UK forest products industry.

Another concern is the increased use of recycled fibre displacing significant volumes of virgin fibre – especially small roundwood. UKFPA says there are fears that demand for sawmill co-products may also be affected, which would have ‘very serious and damaging implications’ for the industry.

Although UK sawmills appreciate the difficulties faced by the wood based panel sector, it is a fact that price reductions and lower demand for small roundwood and sawmill co-products are having a serious impact on the sawmilling sector.

Likewise, mills say that log prices in the UK are ‘unsustainably high’ and that all growers must appreciate this fact if there is to be any prospect of an efficient and profitable forest products industry.

That is not news the growers will want to hear. According to the Timber Growers Association, the private sector in England and Wales says markets for most species and sizes of softwood continue to be difficult; while for chipwood, prices are so low that there is no hope of recouping harvesting and transport costs and owners face significant losses on many thinning operations.

In addition, although the problems of foot and mouth have receded in south and central England and Wales, the flare up in the North meant restrictions were re-imposed. Some owners are understandably reluctant to allow contractors and hauliers who have travelled long distances through previously infected areas to come onto their land.

Scottish growers say the third quarter of the year provided little encouragement to make progress with felling programmes.

Although demand and prices for sawlogs remained firm over the period, the difficulties facing the sawmilling sector are well known and there are fears that the recent reductions in prices for co-products may bring log prices under further pressure.

Access restrictions in Scotland as a result of foot and mouth eased considerably over the period and many growers looked to reinstate harvesting programmes that had been postponed. However, restricted demand for small roundwood limited this opportunity to those parcels that would yield only small volumes of this material.

Private growers in Scotland have also noted the continued decline in the market for chipwood, as UK panel manufacturers battle for market share against imports. Prices for roundwood reduced further – but the displacement of significant volumes of virgin fibre by recycled fibre is seen as a more critical factor.

Price increase

Forest Enterprise‘s three-monthly figures for September show an increase in average log prices (combining a rise for Green grade logs and a slight fall for Red grade logs) for the second month in a row, although they remain below the levels of the same time last year. Continued downward pressure on sawmill co-product prices and unseasonably slow demand for sawnwood are likely factors.

Prices for Green logs were £31.60 for September compared with £30.80 the previous month and £33.66 a year ago; while for Red logs they were £24.71, £24.78 and £25.23, respectively.

Standing timber prices also showed an increase in all categories over last month, but again they are generally lower than at the same time last year.

For hardwood companies, trading conditions are said to be reasonably good – although imported stock continues to take some share from UK grown material as customers seek to maintain their competitiveness. Some traditional markets such as upholstery and mining are still in decline, which further limits opportunities for UK grown hardwood.

However, interest in oak remains high for a wide range of uses, including joinery, flooring, decking and construction – with a preference for English oak among some buyers.

Private growers in England and Wales report a good start to the hardwood sales season, with interest in most species and prices little changed from a year ago. Quality trees are easier to sell, but there is a market for smaller diameter mining timber logs, and pulpwood and firewood prices are firm.

Volumes being offered by growers match demand – but are only a small percentage of the potential cut. However, hardwood markets are still contracting and any increase in volume risks a collapse in the price.

External factors continue to exert considerable pressure on the industry as a whole. With no indications that the situation will ease, the negative impact on the profitability of the industry is of increasing concern. There is considerable uncertainty about prospects for the remainder of the year and the early part of 2002.