The hoped-for kick-start to the season that Easter usually provides failed to happen this year, with demand flatlining and at least one sawmiller referring to it as "a non-event" and the worst he’d ever experienced in terms of business activity.

Spring did arrive, however, albeit six to eight weeks late, and the market has reflected that with demand now steady across all product ranges and mills working either at full capacity or at budgeted levels.

Log prices continue to be a common gripe and, as mills edge up the price of sawn timber, the cost of roundwood is unlikely to fall. "All the background chatter about sawn wood prices rising is picked up by the roundwood guys and their expectation is that they can ask for more for it," said one sawmiller. Another suggested that there was also some "manoeuvring" in the private sector and that roundwood volumes were being restricted in order to keep prices high.

For the smaller mills, whose focus is on fencing and pallet wood rather than graded and KD carcassing, the prices are even more uncomfortable. "The carcassing mills are paying the reserve prices without too much quibbling because they are getting the returns on their sawn prices," said one fencing specialist. "We’ve pushed our prices up as the market has picked up, but nowhere near in line with the larger carcassing mills. We’re having to bite the bullet and pay the prices because you can’t run a sawmill without logs."

There has been some strain on log availability in the south, caused by significant extra demand, although the situation is more in balance in the north. However, the alarm bells are starting to ring because of the massive scale of the outbreaks of Phytophthora ramorum in south Wales and in Galloway.

The Galloway outbreak is of particular concern because the virulent EU2 strain of P ramorum has been confirmed, but in both regions it is possible that a million tonnes of larch is infected and will have to be felled.

Crisis talks between the forest product associations, the Forestry Commission, Forest Research and the private sector – including growers and processors – are ongoing.

"The spread of the disease has been much greater than expected and the volumes we’re looking at are far in excess of what we anticipated," said Confor. The problem has to be addressed from a regulatory perspective – ie the sanitation felling of the infected larch – but also from a practical perspective, said Confor’s spokesperson.

"We need a containment strategy that is achievable in practice. We need to look at whether we have the resources to harvest the infected timber and what we do with it, because larch has a limited market. "We also need to consider the private growers who are facing significant loss of income. They are being issued with plant health notices instructing them to fell their trees but there isn’t anything about restocking. There is the danger that growers will have the cost of felling often immature trees without much timber value and that they won’t be able to afford to restock. There is a threat of deforestation."

There is also a real possibility that the huge volumes of larch hitting the sawmills will "gum up" the system.

"There are significant licensing and control measures around the movement and processing of this material and sawmills wanting to take the infected larch will have to segregate it," said a UK Forest Products Association (UKFPA) spokesperson. "Some mills don’t physically have enough space to do that."

Disposal of the bark is also likely to be a costly business for sawmills, he added. "At the moment burning it is the only option but there is a limit to how much can be included in a woody biomass mix – probably 10-15% maximum. Mills may well have to pay for someone to remove the bark to a licensed site [for disposal]."

Larch processing capability The major processors in Scotland are confident they are "kitted out" to at least process the larch.

"Four years ago we did around two batches of larch a year and we’re now doing one batch of one or two thousand tonnes every six weeks," said one sawmiller.

Thus far the market has soaked up the material but whether it will be able to absorb the onslaught heading its way remains to be seen and sawmillers – and both Confor and the UKFPA – are concerned that the focus should not be taken off the bread and butter species, Sitka spruce.

"They can’t turn the harvesting resource entirely onto larch and away from spruce because our customers want spruce," said a sawmiller.

"We’ll do everything we can to assist the Forestry Commission but it depends on what effect it will have on the spruce supply," agreed another.

All are conscious that care must be taken not to undermine the achievements of the British timber sector over recent years – achievements that have seen its market share rise to just over 40%. "We have to remember that there is still a very large resource out there that is not affected by any of this," said Confor.

Plant health issues aside it is business as usual for the mills and demand across all products has picked up such that they have been able to push modest sawn price rises through. The price differential between imported and British timber remains significant and there is a school of thought that domestic prices could – and should – rise further to narrow the gap, but producers aren’t pushing their luck with their customers.

"Q2 has seen steady improvement and we’re downright busy," said one contact. "We’ve managed to move all our construction prices forward – although not as much as initially hoped."

"We’ve tried to be reasonable with our customers and the price increases have been moderate," said another. "The whole market may have moved forward a bit but it’s not significant and I think the problem is that activity levels are still deflated. We’re just in the position where we have to move things forward to keep pace with the log prices because we haven’t really recovered from the big hike [in log prices] 18 months to two years ago."

"We had strong resistance to price increases at the end of Q2 but they’ve risen now and are at a reasonable level," said a fencing and pallet wood processor. "I’d say they’ve risen 7-8% across fencing products."

He added that, for fencing at least, demand was finally good and that, unexpectedly, the traditionally quiet month of August was shaping up to be pretty busy.

"Normally it is a tough month because of the holiday period but it seems to be replacing our usual April/May as we already have orders on for August."

His mill has been running double shifts since the beginning of June and will continue to do so after its summer shutdown. The major carcassing mills, with their huge potential outputs, are also either running at capacity or at "budgeted levels".

Mills’ own stock levels are being carefully managed and are turning over rapidly with some localised and very product specific shortages possible due to the summer shutdowns. One producer, for example, said he already had "zero stocks" of pallet wood and that he could see the possibility of price rises during the downtime period.

Although buying isn’t quite as hand to mouth as it has been over the last year, there is some frustration that customers still aren’t able – or confident enough – to build stocks, with the nationals said to be managing their overall stock levels much more carefully.

"This month nearly all the nationals are restricting how much branches can buy," said a contact. "Independents tend to be more nimble on their feet and if they need it they buy it, so I suspect in many instances they are gaining advantage over the nationals."

Looking ahead the view most commonly expressed is one of "cautious optimism".

"We’ve got good commitment from our customers and feel quietly confident that we’ll have a good third quarter," said a processor.

"We’ve still got great ambition to grow and we’ll continue to invest in both capacity and quality improvements," said another.