After a tough 2002, the UK forest products industry entered 2003 with a some trepidation. In general terms, 2002 saw further pressure on the profitability of all in the wood supply chain. In addition, concerns intensified over markets for small roundwood and sawmill co-products. Prospects for 2003 will again, to a large extent, be dictated by matters outside the industry’s control.
There are growing concerns in the UK sawmilling sector about markets for sawmill co-products as the UK panel products industry and parts of the paper industry use increasingly large volumes of recycled wood fibre, aided by various government initiatives.
Although sawmill co-products are finding a market, the significant reduction in prices for co-products over the past few years has had a serious impact on the profitability of the sawmilling sector, thereby adversely affecting its investment decisions. Although modest price increases have been seen in some parts of the sawn wood market, most notably in carcassing, these increases have been more than offset by reductions in co-product prices. For the first time in living memory, the development of the UK sawmilling sector is being constrained by prospects for the markets for sawmill co-products.
Heat and power
There is a high level of interest in wood as a fuel for the generation of heat and/or power. However, progress is frustratingly slow and is not aided by government policies which have an emphasis on energy crops, such as short rotation coppice, and overlook the ready availability of wood from UK forests and woodlands. As a result, there have been few positive developments in terms of new wood fired power stations coming on stream, or existing coal fired plants co-firing with wood.
Apart from market issues, the availability of wood for UK sawmills and other processing plants is to some extent taken for granted. However, practical constraints are beginning to have an impact. There are concerns, especially in parts of Scotland and northern England, about the possibility of local authorities imposing weight restrictions on weak rural roads, resulting in areas of forest becoming ‘landlocked’.
The palletwood sector remains extremely difficult, with fierce price competition from Baltic softwood and hardwood. Many softwood suppliers to the pallet and packaging sector responded promptly to the decision by the Chinese authorities to impose new plant health/landing requirements on solid wood packaging, based on the requirements of ISPM 15, which will require either heat treatment or fumigation of solid wood. Many UK suppliers of timber for packaging, and packaging manufacturers, are already licensed under the UK Wood Packaging Material Marking Programme but there is still a lack of awareness of the issue.
Hardwood sawmilling
As has become the pattern in recent years, good quality UK hardwoods continue to sell well, although there is increasing pressure from imported temperate hardwoods, especially from the Continent. There has been further reduction in hardwood sawmilling capacity in the UK and it is expected to continue. Many long-established hardwood sawmillers have ceased primary conversion, or curtailed it in favour of processing imported material and merchanting.
However, it is encouraging that some hardwood sawmillers are investing in value-added processing. The availability of competitively priced, consistent quality hardwoods from the Continent, aided by the strength of sterling, has been the principal driver of this change.
Another factor which has brought about change in the hardwood sector is the changing face of the timber harvesting sector, where increasingly stringent and costly demands for managing health and safety, combined with an ageing workforce, mean that the specialist harvesting sector is becoming increasingly fragile, especially in the southern half of the country.
Markets for second quality material, of which there are plentiful supplies in the UK, remain particularly difficult and there is only one major industrial user of hardwood roundwood; a paper products manufac-turer in South Wales.
One of the hallmarks of the UK forest products industry is its resilience. There can be no doubt that this characteristic has been tested to the full over the past few years; however, the industry is also an optimistic one and despite recent difficulties and current uncertainties, it is well placed to take advantage of any improvements in trading conditions and the general business environment.
