TTJ’s scheduled April report on Ireland’s timber market was postponed due to the fact that the March 31 deadline for Brexit would have fallen between interviewing contacts and publication date, rendering some comments obsolete. However, in a Groundhog Day scenario, we find ourselves at the end of 2019 with a new deadline looming at the end of January and in a very similar position.
Opinions on Brexit over the Irish Sea are divided, with some contacts still convinced it will never happen and others predicting “it could rumble on for some time yet”. The fact that the UK is – and will remain – a net importer of timber, with Irish supply accounting for around 6% of it, gives some comfort to sawmills, certainly when they compare their prospects to other trade sectors in the Republic.
“The UK still very much needs our timber,” said a major sawmiller. “”And they still need the service they get from Ireland.
“Any timber user in the UK can afford to have overseas suppliers where delivery can take four to six weeks, but they also need the just-in-time service and that’s where Irish sawmills come in. We see that continuing.”
The probable additional bureaucracy is a worry to some, less so to others.
“Brexit will mean a return to customs clearance and paperwork, which had been consigned to the past,” said one contact from a mid-size mill. “Instead of removing bureaucracy, Brexit will increase it – something that I think has been lost on some of the Brexit-minded politicians.”
However, a major sawmill contact thought this could be short-term pain.
“There are questions about customs and logistics in the short-term but even on that there are temporary measures put in place by the UK government in the case of a hard Brexit that would streamline that,” he said.
“There is a fair amount of scaremongering going on regarding, customs and movement of goods at port, but we don’t really see that worst case scenario happening.”
The biggest impact so far has been on confidence and whether this has caused the slowdown in demand and sharp fall in sawn prices, or whether that is part of a cycle and an unfortunate coincidence is hard to judge.
“I would say that Brexit is now beginning to have an effect,” said one fencing and pallet sawmill contact. “It probably didn’t before last March because people stockpiled and put a lot of wood on the ground and that gave a false impression of the market.
“We haven’t had any significant storms, Brexit has been delayed, there’s no investor confidence in the UK and some of the big boys aren’t spending money.”
He added that the knock-on effect is that mills are having to chase sales – something they may have got out of the habit of doing.
“This is the first October/November in four years where people have actually had to go out and sell timber,” he said. “I would say most mills are probably doing 80% of their sales on spot selling.
“November 2018 was the best ever November and most mills would have gone into the Christmas recess with very low stocks. They may be going in with higher stocks this year.”
One primary processor cited a customer who had an empty timber yard, having dropped the value of his stock by €100,000. The customer knew he didn’t need to carry the stock himself because there was plenty at the sawmills and when he needed it he could ring around for the cheapest price.
“Short term that’s good for him but long term it isn’t because when it’s busy again the mills will have other contracts.”
One sawmiller said he wasn’t visiting customers at the moment for fear of being forced into further price reductions. “I’m better off doing the deal on the phone because if I visit I’m going to be pressurised into giving the customer another tenner off.”
At the time of writing, sawmills were maintaining their production levels but were monitoring the situation closely.
“We haven’t changed our working hours but we continue to review this,” said one.
“At the moment we have no plans for production cuts but we monitor it every day,” said another. “We’re flexible and can move from pallet to fencing production and back again. I’m sure the carcassing boys will be having some difficulty.”
One such mill reported that production was being maintained but that it was “a struggle” and being monitored weekly. “We can sense from the order book – and three weeks in particular where there is a sharp shock to the system – it’s very likely we’re going to be on short time for the next period.”
Uk exports
Exports to the UK have remained stable but much less profitable, with price drops for sawn timber cited as between 20-25% since the start of 2019 – and most of that decline experienced in the last couple of months.
“The percentage of our total production exported to the UK has stayed the same, or slightly increased,” said one mid-sized sawmill contact, adding that he was looking at 20% price reductions across all products.
“The spruce bark beetle and increased availability of whitewood [from Scandinavia and Europe] are negatives but this won’t last and after the diseased trees have been removed there will be a shortage of whitewood and increased prices. When that will happen is anyone’s guess.”
Another contact put the price drop for fencing and pallet material at £30/m3, adding that the price for 22mm pallet board had “fallen off the shelf” recently. “It was building up [to a drop] up to September and then came in hard that month.”
A major sawmill contact put the sawn price drop at 25% on where they were 12 months ago. Up until the start of October this had been more acute in the carcassing market but similar reductions for fencing and pallets had been witnessed since then.
He said his exports to the UK, as a percentage of production, were stable, although it had become a challenge to maintain volumes to the UK in the last six weeks (speaking in November). Processors are appealing to log suppliers to support the Irish sawmilling industry by pegging back roundwood prices.
“We are well stocked with logs but they are too dear at the moment compared to the reduced end market prices,” said a contact.
“We continue to negotiate with the log sellers on price.” “We are in unprecedented territory in terms of the aggressiveness of European and Scandinavian exporters taking market share from British and Irish mills,” said another.
“I think it is crucially important – probably for the first time since 2009 – that our raw material prices reflect the market changes in the UK and enable us to compete and maintain our long term market share there,” said another major primary processor. “Our log suppliers are going to have to play a bigger role in that going into the next 12-18 month period.”
Forest Industries Ireland
Logs will become more abundant in future, with predictions that the supply of wood from Irish forests will double by 2035. Stemming from this, the forest products industry estimates a doubling of its combined turnover from €800m today to €1.6bn in 2035.
A new trade association, Forest Industries Ireland (FII) was set up to promote Irish timber and help create a market for the additional volume and to position it as “the preferred sustainable material”. Along with forestry sector members it counts Balcas, Glennon Brothers, ECC, GP Wood, Woodfab Timber, Murray Timber Group, Coolrain Sawmills, Laois Sawmills, Masonite Ireland and Coillte among its number.
Coillte’s Des O’Toole is on secondment to FII as marketing and communications director and is tasked with delivering the group’s strategy, which is based on four pillars.
“The first is driving demand through the specifier and is all about providing support and technical guidance,” said Mr O’Toole. Along with design guides and such like, FII is developing CPD modules for the Institute of Architects while, on the merchant front, it is creating a half-day training workshop for sales and counter staff.
The second pillar is ‘Building a future for home-grown’ and revolves around creating a preference for timber and supporting education skills development.
There are currently no degree programmes for wood science and timber technology in Ireland so FII has developed a four-year level eight degree programme, which went for approval at the end of November. “It will ultimately create the future leaders of the industry and we’re hoping to get that over the line very soon,” said Mr O’Toole.
The FII is also working on a part-time evening course level six certificate. “The half-day merchant training workshop will be rolled out across Ireland and will help upskill staff but it won’t result in a formal accreditation or certificate,” said Mr O’Toole. “So the level six course we are developing is 100 hours of learning, probably about 40 hours of which will be classroom time, 20 hours equivalent project time and some self-learning, and then an exam. It will give individuals a formal, transferable qualification.”
The third pillar is to collaborate on research and development. “There is a lot of really good research going on in the universities and third level institutes but they were working in silos,” said Mr O’Toole. He added that meetings have already been held between FII and universities involved in timber research and that collaboration is now on the agenda.
The next step is to create a formal working group including the universities and to bring that in front of industry. “We want future research to be industry led and this working group can be the conduit for engaging with industry. The ultimate wish would be to create a centre of excellence that coordinated all the R&D for the forest products sector.”
He added that this would be of enormous benefit if the processing sector, which is currently focused on commodity products, were to start exploring added value opportunities.
The fourth pillar of the strategy is to drive volume and value growth and revolves around using effective sales channels to support the industry, attending trade shows and speaking at conferences. “It’s about raising the profile of the sector and building networks,” said Mr O’Toole.
