There is only a narrow expanse of water between the UK mainland and Ireland but there is increasingly a world of difference between the two countries’ economic performance.
While Gordon Brown has slashed his growth forecasts by half to 1.75%, his opposite number in Ireland, Brian Cowen, is predicting a rate of 4.5-5% in 2006.
Mr Cowen unveiled his 2006 budget this month, forecasting the number of jobs would rise by 60,000 next year, while government spending would grow 9.9% to €50.6bn, including an additional €469m in capital expenditure.
And the slowdown in the UK housing sector is certainly not being repeated in the republic – yet. There have been rumblings over the past couple of years that the bubble will burst for the rampant Irish housing market but the latest predictions are anything but sombre. AIB Global Treasury expects house completions to average 77,000 in 2005, the same as 2004. And it believes completions will remain at this level during the next two years.
When you consider this figure is half that of the UK completion rate, and Ireland’s population is 15 times smaller, the significance is apparent.
Housing concerns
The word used by one Irish timber merchant to describe the situation was “phenomenal”. Everyone in the industry is amazed, though there are concerns about when the high output will drop, and how dramatically.
Factors which may provide a boost to construction are the release of the first batch of SSIA funds – a five-year government savings scheme which gives account holders €1.27 for every €5.08 saved – a guaranteed return of 25%. The first batch of accounts will mature in mid-2006 and could lead to a spending spree.
Continued growth in immigration, especially from eastern Europe, is also a factor, with Ireland’s population – just over 4 million – at its highest level since 1861.
The positive economic atmosphere has translated into good sales volumes for most Irish timber companies but, as reported in the summer, margins have been tight.
A panels and softwood agent told TTJ: “The Irish market is still buoyant. The year has been very good in terms of volumes but mixed in terms of yield.
“Margins are still quite tight and several players are trying to seize opportunities in the market place by increasing market share.”
He said the last couple of months had been reasonably busy, especially November.
The good autumn was also flagged up by another trader. “November was extremely buoyant, one of the best Novembers we’ve ever had here. It was dry and a lot of builders were getting their work in,” he said.
Decking sales
The merchant also reported a “fantastic” summer for decking sales, with the highest volumes ever recorded by the company – a contrast with the UK where there is some evidence that decking sales have dropped.
Sales generally for the trader were up on 2004 and he thought most timber companies were planning for a further 5% growth in 2006. But he admitted margins were not as good as 2004.
He reported a trend of small amounts of timber being sold direct from the quay which, if it increases, could cut business for mechants.
The redwood trade is considered to be steady but with prices remaining flat, with Scandinavian wood being imported for specific end uses.
Baltic supplies are reported to be irregular and certain specifications difficult to obtain.
Several companies are trying to come up with strategies to counter the threat of specialists such as Crown and Vida, who are supplying direct to the growing timber frame industry. The growth of timber frame is a continuing concern for many traders as the home manufacturers favour a one-stop shop operation for their timber requirements, cutting out the traditional timber merchant/importer.
Incidentally, timber frame has been used for the government’s first Affordable Housing Initiative development in Dublin, while tenders are currently being invited for the development of a national code of practice for timber frame dwellings.
Planed CLS and TR26 are selling in great volumes.
One trader said: “The average sawn piece of timber – that’s the stuff that’s going to become the dinosaur. Not today or tomorrow, but it’s going in that direction.”
The MDF industry has been hit by energy cost increases, while UK mills are continuing to export products to Ireland at the same price as Irish mills, despite the increased transport costs.
One board producer said: “It’s been a good year in terms of sales volumes and a difficult year in terms of the cost base.”
He said chipboard and MDF product price increases were achieved early in 2005 but high fuel costs since March wiped out the positive benefits.
The company said it had recently been hit with electricity price increases of 15-20%. Raw material costs for timber have also risen.
On the sawmilling front, Murray Timber Products recently became the second sawmiller in two years to suffer a major fire when its Ballygar mill was destroyed. The company will spend about €16m rebuilding the facility, which should be operational by the end of next year.
Imported timber
Sawmillers have reported quite good business in 2005, with November a particularly buoyant period, though currency fluctuations had made imported timber cheaper.
State forester Coillte said the fire at Murrays had some impact on its sales volumes but it was still on course to meet its target.
Coillte’s invoiced sales by the end of November had reached 1.76 million m3 for prime sawlogs in the 14cm-plus category. It expects to reach 1.9 million m3 by the end of 2005, an increase from 2004.
It said good summer weather ensured a lively market for fencing and lifestyle products, such as decking and garden furniture. Demand for pallet material has also been strong but prices generally have been a bit down.
A Coillte spokesperson said: “We have delivered on our sales commitment for the year and we are going to achieve our sales target. It reflects a good demand from the sawmill sector.”
