Cautious optimism has been the prevailing mood in the domestic wood chain for more than a year (albeit less so among hardwood growers). We’ve seen a wide range of processing investment, more is planned and ConFor and its partners are working on many market opportunities.

Demand for UK-produced sawn softwood products continues to be good in all product sectors, with the usual slight dip in demand over the summer holiday, and steady prices are being reported for UK-grown timber. There are some notable individual cases of mills reporting difficulty securing sufficient supplies (for example, in Wales as a result of reduced felling by the Forestry Commission) and growers securing significantly increased prices.

Suppliers of carcassing report a sound market, with market share being maintained.

In pallets and packaging, quality problems (notably discolouration and sizing) with some Baltic material have been reported, resulting in additional business for UK producers. Demand for ISPM 15 compliant (heat treated) solid wood packing is steadily increasing, as more countries implement the new plant health requirements, which are designed to limit the spread of forest pests via wood packaging in international trade. There is renewed pressure from plastic pallet manufacturers.

The domestic fencing sector has been quieter than usual in some parts of the country, particularly during the summer, attributed to reduced consumer spending, however, demand for agricultural fencing remains good.

Decking demand is reported to be buoyant, with further growth in the market predicted.

Certified wood demand

Demand for certified wood and wood products is reported to be steadily increasing, principally driven by public sector customers. Therefore it is welcome that the government has accepted the advice of its Central Point of Expertise on Timber that the PEFC and North American SFI Program certification schemes meet government criteria for delivering legal and sustainable timber.

In the UK hardwood sector, many traditional hardwood sawmillers now include imported stock and although some jobs specify, for example, English oak, it is likely that the majority of oak sold in the UK is of Continental European origin. However, the concepts of cutting “timber miles” (ie the distance the material travels) and improving sustainability, brought more sharply into focus by rising fuel costs, are gaining ground. The number of hardwood sawmills in the UK continues to decline, but at least one in Scotland is expanding and the Buccleuch Group is planning a new, £10m hardwood sawmill in south Scotland.

In other sawmill products (such as chips, sawdust, bark) the various markets remain buoyant and many are watching with keen anticipation for further developments in the wood fuel sector.

The sector is concerned about increasing fuel/energy costs, which are impacting on profitability and competitiveness.

The reported slowdown in housing start-ups is another concern, although the DTI reports increasing orders and John Prescott’s expansionist plans and the 2012 Olympics construction are opportunities.

The sawmilling sector is hopeful demand will hold up to the end of the year. As ever, much depends on developments in the international timber market and with exchange rates.

Timber growers

After 2004 ended on a positive note, the January storms across northern Europe caused anxiety about gluts. However, there does not appear to have been a significant impact on prices, partly because only about 60% of the Swedish blown timber has been recovered, while demand for redwood has been good. Domestic harvesting capacity was reduced, causing local problems, but most contractors have now returned. Fortunately, the export of pulpwood to Finland has continued.

Some good softwood sales were reported early this year, but prices have slipped a little, apart from the influence of supply reductions in Wales, possibly due to the impact of the Working Time Directive and increased fuel prices on haulage costs.

Forestry Commission figures to March 2005 showed increases of 3.7% in real terms for coniferous standing sales and 4.3% for softwood sawlog sales, compared with the previous year.

Widespread processing investment continues to build confidence among growers. In Northern Ireland, where Balcas has made substantial investment in sawmilling and wood pelletising, and processor demand appears to exceed supply, growers are disappointed not to see price improvements. Timber continues to be exported from south-west Scotland to Balcas.

Woodfuel heating

There is frustration in Scotland and elsewhere at government reluctance to commit to small-scale, woodfuel heating, which is suffering a lack of critical mass.

Meanwhile, the massive Forscot supermill plans at Invergordon are reported to be progressing to schedule. More immediate is the E.ON biomass energy plant at Lockerbie, which is going ahead and should be on stream in December 2007. This could improve returns per hectare for growers, benefit forest management, enhance profitability of harvesting contractors both sides of the border and facilitate production in the cluster of wood-processing plants. Other mills continue to invest, for example James Jones & Sons has begun its £18m transformation at Lockerbie.

In parts of England, the mood among growers is quite buoyant. Much of north and east England has benefited from Drax’s testing of wood in co-firing, and equine bedding is now a useful market. Prices for hardwoods, especially quality oak and larger ash, are holding up well. In many parts, traditional firewood supply, as well as modern woodfuel, is significant. Longer term, Egger at Hexham is pursuing £100m renewal/expansion plans.

Developments in Wales include BSW’s £3.5m improvement plans and UPM‘s use of small roundwood to burn sludge from recycled newsprint. At the time of writing, Kronospan (Wales) had closed its gates due to oversupply and has just reopened, inevitably causing some consternation.

The future

Against the backdrop of a projected economic slowdown, it is difficult to predict how markets will develop in the short to medium term. However, given the focus of government-driven initiatives such as sustainability and carbon emissions reduction, increasing oil prices and the strong economic performance of China, there are reasons to be optimistic.

The renewable energy market is the major bright spot for much of the sector. The government has commissioned reports into incentivising the heat market and biomass in particular, which are likely to drive many smaller, often local/community projects.

In Scotland and in parts of England there are

significant supplies of wood ready to come to market and renewable energy provides an outlet for lower quality material and sawmill products such as chips and sawdust. ConFor is conscious of the need for new, long-term sustainable markets, as well as retention of existing ones.

Climate change mitigation and sustainable development are promising openings to promote the use of wood instead of concrete, steel and fossil fuels. ConFor, with various partners, is educating decision-makers about how trees and wood can help to sequester carbon and reduce emissions.

The sustainability agenda underpins the timber promotion activities and wood. for good‘s CPD work with architects and specifiers is particularly welcome. Domestic industry is providing an increasing share of the funding and with that comes an increasing role in the development and delivery of wood. for good’s programme of work.

The economic performance of many UK growers, and future supplies of timber, will be influenced by the new EU funding policy for rural development, reviews of the England and Scotland forestry strategies and the new policy on ancient and native woodlands in England and Wales.