Innovation is key to prosperity

Recession has been tough for everyone in the timber industry but, as there are signs, however fragile, that the UK economy is on the road to recovery, the outlook for British timber is extremely positive.

The trading climate for British processors has never been more favourable. The pound’s position against both the euro and the Swedish krona is rendering British materials more competitive; reductions in output implemented throughout Scandinavia during the last 18 months have reduced their UK presence; and restrictions on the availability of credit and finance have contributed to a decline in supplies originating from the Baltic states, the mainstay of supply for many British customers throughout the past decade. These factors present real market opportunities for British timber.

A competitive market

Some of our overseas counterparts have been criticised for abandoning the UK in favour of more lucrative markets: the truth is the UK market is an extremely competitive arena where price remains the dominant feature. Until recently, availability of supply has exceeded demand and this, combined with poor market conditions, has driven prices to levels which are unsustainable. Given the losses experienced by many over the last few years it is understandable that the common focus is on markets which offer the best return.

As we approach the quietest period of the year, UK stock inventories are a finance director’s dream, with little or no surplus stocks and a general equilibrium achieved with production and demand volumes. A lack of confidence in what is generally a fragile market has been a key trading feature of late. But attitudes are changing, opportunities for British processors are clear and I’m absolutely certain prices will firm beyond the end of the year.

A recovery in UK pricing will not, however, be straightforward. Scandinavian supplies are unlikely to enter the British market at anything like the same volume, while demand from the Middle Eastern, Far Eastern and North African markets continues. However, looking west, the US market is yet to show any real sign of sustainable improvement. North American output has also contracted significantly and supply to the UK has not featured yet. But for as long as the US market remains subdued, an improving UK market represents an obvious attraction to our North American counterparts.

The contraction of the Irish economy and the severity of their recession has also led to Irish producers offering more volume to customers in the UK.

At the same time, shortage of raw materials supply throughout Scandinavia and Continental Europe remains an important factor, with prices increasing as a result. In the UK, the emergence of biomass as a major consumer of timber fibre is therefore a double-edged sword for domestic sawmills. Demand for wood fibre, be it in chip volumes or virgin forest, is increasing as sawmills, panel and biomass sectors compete for supply. As a result, [raw material] price inflation is a distinct possibility and must be carefully managed.

Environmental credentials

But in British timber we have a product range to meet a diversity of customer needs. Processed and machined and manufactured to a high standard, it is ideal for a consumer who is increasingly environmentally conscious, aware and demanding, in both public and private sectors. British processors have excellent environmental credentials and are ideally positioned to respond to the sustainable agenda that is vital to our success.

Few manufacturing processes can compete with the timber industry’s ability to maintain 100% product utilisation and we as an industry need to do more to advise, inform and educate.

We also need to look at other issues jointly. The timber trade is genuinely a people business and boasts a wealth of experience and knowledge, accrued over years in organisations throughout the country. But this strength is also a weakness. Are we effectively and successfully attracting younger people into the trade? We can’t compete with the banking or IT sectors and, while not an obvious choice, those seeking a challenging and rewarding career, where people and relationships are fundamental, need look no further than the timber trade.

With youth often comes innovation – new ways of doing, new ways of thinking. Innovation must be encouraged and embraced if we are to survive and prosper. We need to constantly look at ways to introduce new product ranges and at different ways in which to bring them to market. Timber is one of the planet’s most flexible natural products – let’s make sure we develop all its potentialities and grow our market share.

With one cautious eye on housing statistics, market forecasts and exchange rates, I am certain 2010 will provide challenges and opportunities for all involved in British timber.