With 2002 nearly over, the consensus across the Irish industry is that it’s not been a bad year.
Business in the past couple of months has been buoyant, with the housing market remaining strong and prices increasing.
The issue of log supply to the sawmills is one that won’t go away. The mills, now moving into full capacity following big capital investment, are hungry for large logs going into construction but are concerned about a shortage from Coillte.
A meeting of both camps in July resulted in Coillte agreeing to provide an additional 100,000m3 this year. It maintains that supply and demand are mainly in balance though it says there has been a shortage of large logs because of the new sawmilling capacity running ahead of supply.
One sawmilling contact said: “There is significant capacity in this country to process whatever Coillte may throw at the mills in the future. But there is a lot of concern about the supply of logs in the short and long term.”
On the merchanting side, a source said the market was not as busy as last year “due to the economic situation”, with growth slowing down to about 5%. But timber prices have increased across the board.
Supply problems
Supply of 44x225mm timber from the Baltics and Scandinavia, commonly used in floor joists, has been interrupted in the past two months and, as a result, the source says, timber has lost some market share to concrete.
The supply blip was created by high temperatures in these regions, with a myriad of forest fires affecting harvesting. This has pushed prices up, with cheaper domestic wood said to be getting a larger slice of business.
House prices are expected to be up 9% this year, with economists predicting a slowdown rather than a crash.
“There seems to be no end for it going up. It’s crazy. It’s a worry, particularly for young people trying to buy houses,” said one contact.
Another merchant said: “October was a fantastic month for the whole trade, it was superb. Traditionally, the last four months, leaving out December, are the months that you make all your money.”
He was also affected by a shortage of 44x255mm imported timber, which pushed up prices. “They [Baltics and Scandinavia] had a 1-in-200 years’ summer and were not able to get into the forests. If we had more lumber in August and September then we would have had no problems shifting it.”
He said concrete was increasing its market share but engineered timber sales were doubling every year.
“This year has been good for the trade. “Over the past couple of years housing has just rocketed. But there is too much space in the office market, it has reached saturation.”
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“There is significant capacity in this country to process whatever Coillte may throw at the mills in the future but there is a lot of concern about the supply of logs” |
Coillte log auctions
Coillte has held 21 of its 24 scheduled log auctions this year, with 2.125 million m3 standing/harvested offered. A total of 1.852 million m3 has been contracted.
It says sales have been “very strong”, with prices rising following the increases in end markets.
The most recent auction had a poor take up, which Coillte says was mainly down to the big volume offered and increasing prices.
A spokesperson said: “This is the first time for some while that we have had stability in terms of pricing in the market.”
Demand for large log spruce has been high and Coillte is still attempting to get some smaller independent customers to use alternative species and shorter lengths, which traditionally go into lower value products.
It is encouraging mills to take smaller logs, usually used in the pallet sector, which is causing some shortages of pallet material.
But the spokesperson thought pricing had replaced supply as the main issue for mills.
Coillte has also entered the timber frame house building business in a €5m joint venture with Austria’s GriffnerHaus. The Griffner Coillte business has recently produced its first home, imported from Austria, for a well-known architect.
Reduced government spending
Prospects for 2003 are difficult to foresee, though revision of government spending estimates this month, reducing capital expenditure in key areas such as education, housing and transport, is likely to have some effect on the trade.
Finance minister Charlie McCreevy announced on November 14 that 2003 public spending would rise by less than 2%, compared with this years’ spending increase of about 14.5%.
The picture will become clearer on December 4 when the budget is announced. But the drastic cut in spending may mean rumoured tax cuts on the middle classes, which could dampen consumer spending, may not been needed now.
The government has moved from surplus to deficit and faces benchmarking pay awards to public sector workers next year. Inflation is hovering at 4.6% and unemployment is creeping up.
The revisions to Part L building regulations, which require reduced U values for dwellings, will come into force on January 1, and will also apply to replacement of external doors, windows and rooflights from July 1 next year. This is expected to have a beneficial impact on timber frame.
