Although it must be hedged with a few ‘ifs’ and ‘buts’, 2003 has been a fairly good year for the UK forest products industry.
The performance of the construction market – even better than last year and aided by good spring weather – meant that demand for softwood started well and was maintained throughout the year. UK sawmills have even been able to lift prices a bit, although not by as much as the increase in imported prices.
It’s a similar story for the fencing sector, which has also benefited from favourable weather. Non-standard products including trellis have fared especially well and good sales are also reported for round fencing and slats. Decking continues to thrive. The seasonal slowdown is now here but there are no major concerns.
Even the beleaguered pallet and packaging industry seems to have had a better year and some small price increases have been achieved – albeit from very low levels. Competition remains fierce, of course, and concerns are being expressed about the credit-worthiness of some companies in the sector, with customers urged to check the credentials of suppliers.
CCA regulations
Legislation has had an impact on much of the industry. It’s now just six months before the deadline when the use of traditional CCA preservatives and CCA-treated timber will be severely restricted. During the summer there was considerable activity to change treatment plant over to new-generation preservatives for both fencing and carcassing. A lot of work is also being done to educate end users about the change – since there is still confusion about the regulations and timescale.
For pallet manufacturers there is ISPM 15 – requiring wood packaging material to be either heat treated or fumigated. China has already implemented the programme and other key export markets are expected to do so next year. For most end users it would be a logistical nightmare to separate pallets for different markets so most are expected to require all pallets to meet ISPM 15.
Particleboard demand has been good, especially from the construction sector (including flooring grades) but also from the furniture industry, although competition is fiercer in the latter. The picture for MDF is not quite so rosy since supply continues to outstrip demand, but the sector has made some strides this year.
The market for UK manufactured OSB is buoyant and prices are firm. There have even been exports of board to the US.
In the hardwood industry there is little change, with good quality material selling well and imported temperate species still a large factor in the market.
Timber supply from UK forests is not a problem. Good weather has helped logging activities and there are no reported shortages of wood being offered either from the public or private sector. Overseas it’s a different story. Winter has yet to arrive in the Baltic states and Russia, and soft ground is hampering forest operations to the extent that it’s becoming increasingly difficult for mills to find logs and prices are rising as a result.
Conference claims
It will be interesting to see whether comments by Francis Sullivan of WWF about illegal logging in Russia will have any impact. At a conference on responsible timber purchasing, organised by UK Forest Partnership for Action for a wide range of delegates including central and local government procurement officers, architects, housebuilders and the timber industry, Mr Sullivan said Finland was buying logs from Russia and that some Finnish forest products (including pulp and paper as well as sawn timber) may come from illegal Russian raw material.
Although UK growers are unhappy about prices, at least log volumes into sawmills have held up. Very few parcels have been refused this year.
The growers have seen sawmills lift their prices and hope that they, too, can obtain an increase. It’s not quite that simple, since the gains made by mills on sawn wood must be seen against the continued problems in the market for co-products, which means overall margins are not much improved.
However, some tension is appearing in the supply chain. Mills are not thought to be over-stocked and there is not much oversupply of raw material. Log prices are slowly reaching the point where they are insufficient to restock.
The Forestry Commission is reported to be looking at reducing the volume offered – and some concerns are being expressed that volumes from both private and public forests may be lower next year.
The need for a general lift in timber prices is not helped by advertisements from DIY multiples that highlight price cuts.
At the moment sawmills are able to sell all their co-products but there have been further price reductions for these and for small roundwood, and there are rumours that the particleboard sector is looking for still more cuts. Exports of small roundwood are growing, with a volume of up to 250,000 tonnes expected for the full year, but Shotton stopped using virgin fibre last month and although increased chip use by another mill has helped to some extent, sawmills and growers alike are likely to be affected.
Some erosion of traditional markets for bark is also reported, as a result of the availability of green waste from local authorities.
Wood for fuel
There continues to be a lot of talk about wood for fuel – and the joke within the UK forest products industry is that this is the only hot air being generated by this subject, as there is very little action.
Trials of co-firing with wood are still under way but there are no results yet. The recent failure of Torren Energy, set up to generate power by burning wood chippings, is the latest in a long line of disappointments since the collapse of the Arbre programme.
The industry is still waiting to hear about Powergen’s biomass-fuelled plant in Lockerbie. An announcement could be imminent, but there have been recent sudden objections from a local village.
Following the recommendation by Alastair Macdonald that the UK forest industries sector should create a new single association to represent its interests, members of the Forest Industries Development Council, Forestry & Timber Association, Forestry Contracting Association, UK Forest Products Association and Wood Panel Industries Federation (WPIF) were asked to meet in October to discuss the way forward.
Before the first of these meetings, WPIF decided this was not something it wanted to participate in, but the other groups have met three or four times. Although the meetings have agreed that there is an undeniable need for better representation of the UK forest products industry, the question of how to achieve this and within what timescale has proved more difficult.
Evolution not revolution
There is widespread agreement among the associations – including the WPIF – of the need to work more closely together, but most seem to feel that Mr Macdonald’s vision of a single association is too much, too soon and that what is needed is evolution rather than revolution.
One interesting idea that seems to be gaining support is that of a confederation, although some associations are still worried about the pace of change. Serious issues that need to be addressed include the question of funding – some associations are better funded than others and their members obviously want to ensure that their fees are used wisely to their benefit.