Despite the fact that the market fundamentals are "horrendous", UK mills are still able to offer competitively priced, fit-for-purpose timber. Add to that the focus the home-grown sector has put on marketing and improving customer service and the result is that the sector is surviving the double whammy of the stuttering economy and the atrocious weather better than even some closest to it would have expected.

"The underlying market was already fragile, then with Easter not really happening for us and the subsequent bad weather, it’s been lacklustre since the start of May," said a major UK sawmiller. "Having said that, we’ve sold more volume every month this year than we did last year – and by quite a chunk. We’re continuing to take a bigger slice from a static cake."

There is consensus now, however, that things are coming off the boil and one indicator of that is log availability.

"It’s improved quite significantly, which would suggest that some mills aren’t taking what they thought they would."

This has benefited some of the smaller mills, particularly those focused on fencing, pallets and packaging. "A number of mills allied to the construction sector have reduced their log intake and we’ve been offered various parcels of timber as a consequence," said one fencing specialist. "We probably have the healthiest stock of raw material than for many years. We may even be over-stocked but we’ve done it because 12 months ago we were all fighting for timber and we didn’t want to be in that position again."

Unfortunately for the primary processors, the abundance of raw material has not pushed log prices down, with some speculation that demand for biomass is underwriting this, particularly for small roundwood and "creating high expectations for the rest of the market".

"The prices are still uncomfortably high pro rata to the [sawn timber] selling price," said one processor, adding that margins were now under "tremendous pressure".

The Forestry Commission’s recent forecast on timber availability has fuelled the frustration. "The forecast says there’s about 42 million tonnes of timber that is overdue for cutting," said one sawmiller. "Why hasn’t it been cut? It’s all on the back of market prices and private growers sitting on it because they don’t want to bring it to market at a cheaper price."

"They’ll roll over parcels of timber hoping that in a few months’ time they’ll get the price they want," agreed another. "It’s really not helping UK sawmillers at the moment."

There is some hope – rather than expectation – that the market’s resistance to any increase in sawn timber prices will eventually feed back into the growing sector and lead to a reduction in log prices, but when and by how much is impossible to predict.

Demand for sawn timber has also proved difficult to predict, with customers continuing to buy smaller amounts at short notice for fear of being caught with too much stock. Opportunistic buying, coupled with the poor weather, has made it a challenge for producers to turn over regular volumes.

Carcassing is still the weakest element of the product mix and, unsurprisingly, fencing demand nose-dived as a result of the poor weather, with virtually no fresh orders coming from the DIY sheds at the time of writing.

Here again it’s been a roller-coaster market. "We’ve already delivered more wood to them [DIY sheds] than for the whole of last year but the prognosis is there’ll be no orders for August and September," said a sawmiller. "Annualised it’s looking quite good but it doesn’t help me right now."

While there is hope that some latent demand may come through, there is also anxiety that the window of opportunity may have past.

"There will be pent-up demand but unless the fence has fallen down and the dog’s run away, people may say ‘let’s go on holiday and put the fence up next year’," said a sawmiller.

Either way, processors accept the fact that it will be October/November before there is any uplift in fencing demand. "Our customers will look to stock build for the next season – I think they’re confident there will be business there," said one.

Pallet wood demand
Meanwhile, demand for pallet wood is exceeding supply, according to one sawmiller. "It’s not a bad picture and Europallets are particularly strong just now."

However, the pallets and packaging sector continues to be a source of worry for the home-grown processing sector as it’s a vital market.

"If they aren’t profitable I can’t get insurance on them and I can’t sell to them," said one. "And I can’t run this site without pallet makers."

"It’s a pretty ferocious situation for them," agreed an industry expert. "Raw material pricing is difficult for them and there’s no movement in terms of an increased market or a willingness to pay more [for the finished product], so there is a real squeeze."

But despite these bumps, the home-grown producers are still on track in terms of production. One fencing contact has just cut back from the double shift instigated at the start of the year but is still operating at one-and-a-half shifts and expects to return to a double shift in September in preparation or the next fencing season. "Our order books are still healthy and we’re ticking along nicely," he said.

Other mills are sticking with "designed capacity" – ie extended operating hours or double shifts. "We’ve got a sustainable market for that at the moment," said one major sawmiller. "Whether we can sustain that into the depths of the winter we don’t know – we’ll have to review that in November/December."

Mills are keeping a watchful eye on stock levels of finished product. They’ve kept them topped up to compensate for the summer shutdowns and fencing specialists are thinking about the next season, but building too much stock could be unhealthy. "The business is about keeping the cash coming in, so if we have to take capacity out, we will," said one.

British-grown timber still has a price advantage over imported material, with the differential being in the region of £20-25/m3 "at the top end". This is £5-10 less than previously, but still a big enough margin for mills to be winning business from overseas shippers.

"We’re in discussions with a number of people looking to replace some of their imported timber with British-grown," said a contact.

However, he added that Irish imports were still undercutting British timber prices. "I don’t like it but when you see the grim state the Irish mills are operating in, it’s understandable," he said. "We don’t think their numbers stack up but they’re not going to be selling it anywhere else."

Other contacts were more forthright. "The biggest interference in our making progress capturing market share is Irish timber," said one. He added that the recent weakening of the euro had made Irish mills 6-7% more competitive and therefore "less suicidal".

He admitted that as a consequence of the Irish mills’ "very predatory" pricing, his business had suffered a little in terms of overall volume "but we’re not prepared to sell at loss-making prices".

"It’s affecting our unseasoned carcassing and boarding [sales]," said another contact. "[The price differential] is not something you can always absorb, so you have to walk away and say ‘good luck to you’."

The softening of the euro has caused some hearts to beat a little faster. "With the shift in the euro UK timber has lost 10-12% of its competitiveness," said a contact. "Having said that, other countries are having to deal with their own high timber prices, so they have their own pressures."

"We’ve noticed more competitively priced Baltic timber in the country," said one pallet timber producer. "We haven’t lost any business because of it but that may be more down to the customer base we’ve built up and the reliability of our supply [than price]."

British appeal
"When buying is still very much hand-to-mouth, people feel they can do that a lot more easily with domestic producers than buying from overseas and the UK producers are banking on that carrying them through when the currency situation works against them," said a contact.

And, said one producer, there’s more than just convenience in UK timber’s favour. "The improvement in quality and the service offering has had a massive impact," he said. "UK-produced timber is far better than it was. That’s helped us gain market share and I think we’ll hang on to that."

Looking ahead no-one is confident enough to stake their house on an upturn in the market but UK producers are pleased they’ve survived relatively unscathed thus far and most would accept similar levels of business until the real recovery begins.