Summary
• Demand for timber remains flat in Ireland.
• Irish housing starts are expected to total 10,000 this year.
• Demand is pushing up log prices.
• Irish mills are looking to export markets, including Europe.
Irish timber traders are steeling themselves for another tough year – one that could be even harder than 2009.
The Irish economy is expected to contract further over the next 12 months and, with only 10,000 housing units to be built this year, compared with 90,000 in 2006/07, no-one is predicting an increase in demand for timber on the home market in the foreseeable future.
“The Irish market is in a pretty grim state. We’ve seen business reduced by about 50% from the 2007 high,” said an agent.
For some merchants, business is down by 60%, he added. “If you ask merchants how they see things, they look blank and say ‘we don’t really know’. It’s grim. You won’t find anyone saying things look good unless they’re in the liquidation business.”
RMI work is generating some business but merchants are generally buying on a hand-to-mouth basis. “People are not buying the volumes they used to and that presents logistical issues; they no longer want to take full loads and it all adds costs,” TTJ was told.
Difficult start
Irish mills had a difficult start to the year, with floods and then freezing conditions interrupting log supplies, production and deliveries.
They are now back to full production but are finding little interest from the domestic market where demand could remain depressed well into next year.
“We don’t have anything really to give us much confidence; there’s not a lot happening on the Irish market,” said one contact.
There are reports of some mills offering cut-throat prices, a move that’s not welcomed by the majority. “Some think you can buy market share but no matter how much you drop your sawn timber price, if houses aren’t being built it won’t stimulate demand,” one sawmiller said.
Another said the price cuts occurred only before Christmas and he hoped it would “not be a feature of 2010”.
Faced with flat demand on the home market, Irish mills are increasingly relying on export markets, and their recent emphasis on the UK has paid off. “Our push into the UK has been successful,” said one sawmiller. “Our products are accepted and we’re selling more volume.”
This success has come despite the added burden of the exchange rate.
“Sawmillers are caught in a jam where they need to export more but log prices are rising and the cost of supplying the UK or other markets is greater than supplying the home market, which is contracting,” said another sawmiller.
UK imports
According to the UK?Timber Trade Association, from January to September last year Irish softwood exports to the UK rose by 20,000m³ and one mill contact said the lack of supply from Scandinavia was a key factor helping Irish product in the UK. “There’s a hole at the moment that the Irish are filling. Also, UK buyers are only buying on a short-term basis so they can get goods from Ireland within 24-48 hours, whereas from Sweden they have to wait longer. Ireland is nicely positioned for just-in-time supply,” he said.
The euro/sterling exchange rate continues to be an added difficulty for Irish exporters, although the recent slight strengthening of the pound has brought a small benefit. “Any improvement in the exchange rate helps,” TTJ was told. “Small movements give percentage changes.”
The UK remains the main export focus but mills are also looking to European markets and there are reports of at least one shipping to France.
The export success has increased demand for logs, and prices are rising. A spokesperson for Coillte confirmed that all material was being sold first time at auction – not the case a year ago – and there had been a “small lift in price”.
“We had an improved year end in terms of volume, but there’s still a long way to go on price,” he said, adding that Coillte expects volumes to stay up during the first quarter.
Private timber supply
Overall, Coillte will supply similar volumes to the market as last year when mills had reduced their output. Now, with the mills back to full-time working, producers are concerned over what could be a tightening of supply. However, the Coillte spokesperson said the increased demand would be met by private forest owners who have held off harvesting over the past year or so. One private owner would have 200,000-300,000m³ for sale this year, he said.
“With price rises I’d be very surprised if more didn’t come from private sources,” he said.
At present the mills are feeling the higher raw material prices as they are not reflected in sawn timber prices on the Irish market. “And last year we had to swallow a reduction in woodchip prices so we’re not getting a win anywhere,” said a sawmiller.
There is talk that the continued pressures could lead to mill casualties this year, or at least a return to curtailed production. For the moment, said one contact, the mills are happy that they’re still in business.
“They’re happy they are able to move product and keep the show on the road. People think if they can get through another year then the worst is behind them.”
