The British timber industry has been battered by wet weather – which continued from last autumn into the spring and affected everything from harvesting to construction – higher diesel costs; continued pressure from cheaper imports; and the advent of the climate change levy. It really did not need foot and mouth.
The outbreak of the disease dominated pre-election headlines for some time, with foremost topics being the plight of livestock farmers and the damage to the tourist industry. Though not achieving the same widespread coverage, the impact on the British timber industry has also been severe.
Distress stories
Experiences will differ depending on geographical location, but the Association of Professional Foresters‘ (APF) website says that a variety of ‘distress stories’ have been received. Planting contractors – many of whom look to make money during the spring to cover leaner summer months – have had work cancelled or postponed indefinitely. In some cases trees have been delivered and need to be lined out again in a nursery for the summer, at significant cost. Contractors feel unable to pass this cost to customers – especially if they are farmers – but ‘somebody down the line is going to lose out’.
Some harvesting contractors are in a still worse situation because they have to continue payments on machines despite being unable to work. While much harvesting seems to be continuing, it depends on individual owners and there have been several reports of long-term contracts being suspended and new contracts being delayed.
Many APF members live on livestock farms, some in infected areas, and in their case restrictions may have been imposed by landlords and neighbours rather than customers.
Contractors who are able to work with precautionary measures in place have faced increases in time and costs because of those measures.
There have been cases of severe damage to new plantings by deer in areas where no control is allowed to be carried out.
For private growers in England and Wales, the wet spring that followed the wet autumn and wet winter seriously curtailed harvesting operations. Then, as the latest report presented to the Forestry Commission Advisory Panel Supply & Demand sub-committee points out, the outbreak of foot and mouth closed off large tracts of private woodlands – from northern England to Devon and Cornwall.
Sales already agreed were suspended and new offerings delayed pending the lifting of movement restrictions – which makes it difficult to identify any particular trend in sales.
Prior to the outbreak of foot and mouth the market had been ‘reasonably firm’ for most products, particularly chipwood and large logs (especially for fencing applications) – although the latter weakened considerably when Jeffrey Walker announced closure of one of its sawmills (TTJ January 20).
Pallet and small diameter fencing sizes have been more difficult – and the closure of Somerlap Forest Product’s sawmill will hit growers in central and western England particularly hard. Changes in purchasing policy at Sonae have had a serious impact on the viability of softwood thinning operations; and low demand for agricultural fencing stakes in the wake of foot and mouth has halted many potential sales. Growers will proceed with caution once restrictions are lifted but prospects do not look good.
Scottish success
Private growers in Scotland saw some improvement in demand for small roundwood during the first quarter of 2001 as a result of the decline in supply from both private and state sectors over the winter. Modest price increases allowed growers to re-evaluate thinning projects and premature clearfells and move forward with a number of operations that had been considered uneconomic.
However, just as production started to increase, foot and mouth appeared in southern Scotland and northern England and many contracts were stopped or postponed. The impact was also felt further north, with many landowners reluctant to move ahead with projects for fear of infection – particularly as a result of hauliers moving between affected and unaffected areas.
Sawlog demand
Demand for sawlogs and palletwood has remained strong throughout the period and modest price increases have been achieved, but this is mainly because of lack of supply rather than improvements in prices for square-edged material, and as a result the situation may not be sustainable.
The UK Forest Products Association (UKFPA) acknow-ledges that hardship has been experienced in the contracting sector and that there has been a severe reduction in private sector production. However, the softwood sawmilling industry has been working closely with Forest Enterprise and this has enabled timber supply from the state sector to be maintained at near normal levels – although additional costs have been incurred.
Forest Enterprise says the situation is gradually improving as the progress of the disease has slowed – although there are still some ‘very difficult’ areas. The latest update shows that in north Scotland supply remains unaffected; in south Scotland there are some restrictions on haulage that are likely to remain for some time; in Wales the number of reported cases of foot and mouth has reduced – and most of these are on the Welsh/English border where Forest Enterprise has limited activity. In England there are significant restrictions in Peninsula and Dean Forest Districts.
Forest Enterprise reports that average three-monthly timber prices for February 2001 were £31.65 for green logs and £26.30 for red logs compared with £33.53 and £26.63 respectively a year ago. In addition, the annual south of England auction at Westonbirt (held on April 24 after being postponed by one month because of foot and mouth restrictions) saw strong competition for most parcels on offer – primarily because of reduced supply from the private sector.
However, sawmills say log prices are still too high and are not sustainable. Faced with intensifying and worsening competition from Sweden and the Baltic states – aided by the weakness of the euro, the strength of sterling and the weakness of the Swedish krona – together with increased costs including diesel fuel, energy and the climate change levy, there is ‘universal agreement’ among mills that log prices must reduce if there is to be any chance of the sawmilling sector restoring its competitiveness and profitability.
UKFPA reports that ‘almost unbelievably’ the downward trend for palletwood has continued – with prices of imported timber still falling.
In addition, the heavy rain early in the year has adversely affected demand for fencing, decking and other timber garden products, including bark. It is hoped that the recent spell of warm, dry weather will stimulate sales to this important market sector – but the ‘season’ has already been reduced by a month.
Hardwood demand
Demand for good quality hardwood – especially oak and sycamore – remains strong although imported hardwood from Europe, America and to some extent the Baltics continues to take significant market share. UKFPA reports a marked increase in the volume of low priced hardwood from the Baltic states being used by pallet manufacturers.
The market for second quality UK hardwoods remains problematic.
Hardwood harvesting operations have been hampered by heavy rainfall early in the year and, in addition, access to many areas has been halted by foot and mouth – either confirmed outbreaks or because landowners have denied access to their land for fear of the spread of the disease.
The market for sawmill co-products (chips and sawdust) is variable. Demand for chips from UK panel products manufacturers has been reasonable but with further price reductions that have hit the profitability of the sawmilling sector; while some demand for sawdust has been displaced by recycled fibre.
Global demand for pulp and paper was brisk during 2000, with year-end figures showing increases for European and US markets. Output from UK mills was steady and there was a good balance between supply and demand for wood until the first quarter of 2001.
Supply levels
Since then a combination of logistic problems – bad weather, greatly reduced supply from the private sector and foot and mouth – have had an adverse impact on wood supply. Despite this, stocks at most wood processing factories have returned to more normal levels following the winter period and there are fears among growers that if this pattern continues and supply outstrips demand over the summer, prices will come under pressure once again.
With the impact of the US economic slowdown starting to manifest itself in the UK and Europe, the pulp and paper sector says there may be some downtime during the second half. The weakness of the euro and the climate change levy are putting pressure on UK manufacturing industry and the rest of 2001 is likely to see continued efforts to improve competitiveness in a global market.
Conditions within the UK wood based panel products sector remain difficult. There is still fierce competition from imported products and all costs are under scrutiny. However, there is a limit to how much costs can be cut and some, such as energy and fuel, are outside the control of the industry.
In line with other sectors of the UK forest products industry, panel products producers are concerned about prospects for the rest of 2001. In general, forecasts are bleak, with no signs that an upturn will be seen before the end of the year – at best.
