The soaring demand for timber during the Covid lockdowns has been well documented over the last two years and one of the recurring questions was ‘how long is it going to last?’. The answer seems to have been ‘until this spring and summer’ when consumers opted for holidays rather than DIY and the war in Ukraine sent shock waves through communities and markets.
The British-grown timber sector certainly enjoyed its share of the buoyant market from mid-2020 to around May this year and while demand has by no means fallen off a cliff “the shine has gone off it a bit”, according to Scott Gordon, joint managing director of Gordon Timber.
“Demand is still pretty healthy but just not what it was before.
“About the middle of May demand didn’t really push forward as it normally does for that time of year and then it fell back,” he said, adding that the mill had been in the unusual position of building some stock in May and June.
“I guess it’s the legacy of the cost of living and the energy and fuel crises and I think people just don’t have as much disposable income on the back of all the work that was done during lockdown. There are only so many decks and fences and raised beds that you can replace, so the fierce demand has gone for a while.”
It’s not just landscaping timber products that have dipped in demand – the market for construction timbers is “incredibly volatile”, according to Tony Hackney, chief executive officer of BSW Timber, which is now part of the Binderholz group.
“There continues to be pressure on volumes purely because of the residual amount of imported timber in the UK delivered during and since the pandemic period,” added Mr Hackney.
He noted that construction continued be the strongest market, with national and regional housebuilders continuing to build at record levels but that the RMI market has slowed as people have chosen to delay or cancel projects because of the increased building material costs.
It may be the strongest market but Tom Bruce-Jones, chairman of James Jones & Sons, said that there had been a weakening in demand for carcassing as a result of the holiday period, the continuing uncertainty created by the war in Ukraine and the global energy crisis.
Demand for pallet wood had held up pretty well, with some interruptions to imported supply as a result of the war in Ukraine resulting in an uptick for British producers – although as Scott Gordon pointed out “since then the general economy has taken a step down and the demand for pallet wood has reduced”.
There is consensus that British-grown timber is still very competitively priced against imported material.
“The British mills were able to enjoy some very strong price improvements [over the last two years] but I don’t think we kicked the ball quite as far as some of the imported timber producers – the Swedes, perhaps,” said Mr Gordon. “They had further to fall and their prices have come back quite considerably so I think the gap has got narrower, but British timber is still highly competitive.”
The war in Ukraine is having a wide-ranging impact on global market dynamics but the jury is still out on how deeply the British timber sector will be affected.
“The war in Ukraine and the decision of the government to stop Russian material coming into the UK has affected certain markets such as joinery timber more than it has affected construction markets,” said Tony Hackney. “We are yet to see the full impact of this as most importers had significant stocks in place prior to the import embargo. Our disappointment, though, is that we still see a lot of Russian timber being traded.”
“The knock-on impacts from the Russian and Belarussian sanctions are really only just beginning to come into force and the replacement of an estimated nine million m3 will start to bite in the autumn, which should precipitate increased demand for European sawn goods,” said Tom Bruce-Jones.
One product that has “dropped out of the equation” since the sanctions is Siberian larch. “We have had good healthy demand for larch for cladding, so we’re continuing to source good quality British larch,” said Mr Gordon.
Overall, he added, raw material availability has been fine.
“It’s pretty good and probably improving as the level of demand is dropping back and mills are throttling back on what they are producing,” he said.
“Log availability is well balanced and we have good roadside stocks,” said Mr Bruce-Jones. “The biggest issue within harvesting operations are the increased fuel and haulage costs.”
Another challenge is the price of the logs themselves.
“In terms of the spot market the prices have definitely come down but never as quickly as you want and when you are buying three to six months ahead you have to work through your previous commitments,” said Mr Gordon.
“There are a lot of expensive logs in the system and I’m sure a lot of the mills are now looking to get those through the system and out the other side,” he said.
“The falling sales prices are not being reflected in the log market, leaving the full impact of the market volatility with the sawmillers,” said Tony Hackney.
And, he added, with soaring energy prices resulting in an increase in demand for wood for biomass, competition for material – and creating a “false” price for it – is a concern.
“As biomass becomes an increasingly larger player in the log markets it will undoubtedly have an impact on pricing from an inflationary perspective,” said Mr Hackney. “And, as it stands, there is also an overall shortage of chips and sawdust due to sawmillers taking out time.”
Energy costs were becoming a serious issue long before the war in Ukraine but the conflict has made a bad situation much worse.
“We fixed a two-year deal last year and ended up paying 25% more,” said Mr Gordon. “We came out of those negotiations licking our wounds and thinking we hadn’t done very well but, unfortunately, that deal is looking better and better and we’re quite fearful of the numbers we are looking at when we renegotiate next year.”
Mills do have strategies in place to help combat the impact of rising fuel and energy costs.
“We have a proactive risk management strategy and we have hedged all of our input costs and we are fortunate to have biomass boilers operational at all of our principal manufacturing sites,” said Tom Bruce-Jones. “We also benefit from a very symbiotic relationship with Eon’s biomass plant over the fence at our Lockerbie sawmill complex.
“We recently purchased the UK’s first subsidy-free windfarm to the west of Glasgow, which has an output of 24MW, further reducing our carbon emissions across the group.”
BSW has also tried to remove itself from the volatility of the energy market as much as it possibly can by introducing biomass boilers to fire the kilns at the majority of its sites.
“We cannot, however, remove ourselves completely and we have suffered like the rest of industry not only in the energy markets but also in the increasingly difficult transport markets that are hugely affected by the fuel price issues,” said Tony Hackney. It is time that government gets a grip on escalating energy costs and supports manufacturing before irreparable damage is done.
“Transport is a major challenge both in terms of availability and costs,” continued Mr Hackney. “Everyone is aware of the shortage of drivers and the corresponding issues this caused during the pandemic period, and this has not corrected itself since we have returned to normal activity levels. In fact, the only reason that drivers are currently available is because activity is down. Fuel surcharges are similarly a huge challenge for any business that operates across the whole of the UK.”
Gordon Timber has fuel escalators in place for hauliers that are driving logs into the mills and that are taking product out to customers and says it feels this is “a fair way of doing things”, but concern is growing.
“Last year, when prices were what they were, it was easier to absorb them but part of the concern going forward is that these energy and fuel costs are going up and up and the sawn timber price has started to go down, so it’s much more difficult to do that. Who is going to take the hit?” said Mr Gordon.
“It’s difficult to square that circle but being as transparent as we can be, having the fuel escalators and having an agreement on how it’s going to be shared is, we believe, the best way forward.”
James Jones & Sons points to the ban on the use of red diesel as a problem the industry could do without.
“Transport and logistics costs throughout our supply chain have been under significant pressure and the most acute area has been the removal of duty free red diesel for wood processing operations,” said Mr Bruce- Jones. “We have lobbied hard to retain this exemption to no avail and this increased cost is in excess of £1m. We have taken measures to move across to as many electric fuelled mobile plant options as we can.
“Our Pallets and Packaging division has benefitted from the geographical spread of its sites which have enabled us to offer smaller delivery distances, which is good for the customers in terms of cost but also for the environment in terms of emissions,” he added.
As for transporting products further afield, James Jones is now exporting “significant volumes” of JJI-Joists to Australia.
“Sourcing containers and shipping has been challenging,” said Mr Bruce-Jones. “However we have now established good routings and expect to establish this market.”
Sawmills are, understandably, tempering their production in line with demand, so, for example, Gordon Timber has taken out some overtime and is operating on “much more standard shifts”. Stock levels there are comfortable and lead times, which had been out to 10-12 weeks, are now back to one to two weeks for most products and three to four for others.
At the time of writing, James Jones’s sawmills were just returning from the annual summer holiday and the company was evaluating production plans for the remainder of the year.
“Our vertical integration with our pallet division provides optionality on cutting patterns, and we are able to do a considerable amount of resawing and value adding as a result of the investments we have made over the past five years,” said Mr Bruce-Jones. He added that stocks were well balanced following the summer shutdowns and that the company was “able to respond very quickly to all orders and enquiries”.
It’s a similar story at BSW where production levels are being matched to the demands of the market.
“We will continue to monitor the situation very closely to ensure that we are in a strong position when the market corrects itself and activity levels return to more normal levels,” said Mr Hackney.
Stock levels are “healthy” he said. “It is incredibly difficult to manage the massive demand we have seen during the pandemic period and then the quite dramatic slowdown of activity we have seen since the end of Q1 this year.
“We have very healthy stock levels and are matching production to maintain the service levels to our customers whilst reducing the overall stock to expected levels.”
If there’s a positive side to a slowdown in the market, it’s that it gives businesses time to re-evaluate and to invest in improving efficiencies.
“You keep investing and then when things get a bit tougher that helps you to be able to tighten your belt and run the business as efficiently as possible,” said Scott Gordon. He points to ongoing yard repairs and improvements and automating some of the storage processes by way of example.
“We’re also looking at automating our anti-stain dipping facility over the next 12 months,” he said, adding that Gordon Timber was also looking to increase its focus on lean manufacturing in order to process timber more efficiently.
James Jones was very proactive during the Covid pandemic and completed a number of acquisitions and grew organically through investment and capital expenditure.
“The purchase of GT Timber (the holding company of Taylormade and Kerr Timber) in March 2021 has been very successful and the integration process has delivered all of the synergies that we identified, and the teams have gelled brilliantly,” said Mr Bruce-Jones.
“We acquired a majority stake in Mayflower Enterprises Pty Ltd in Australia (the holding company of Hyne Timber and XLam) at the beginning of 2022, which increases our group sawn output by a further 800,000m3 per year and it has also provided an invaluable insight into CLT production with the XLam business,” he continued.
“We have expanded our Pallets & Packaging Division by opening a new site in Coventry and through some major investments in new manufacturing lines and site upgrades. A brand new Storti line is currently being commissioned in Gateshead, and our Hetton and Wrexham sites are being enlarged significantly. We have also consolidated our market leading position in pallet collars through further acquisition.
“Our Timber Systems Division has benefitted from further capital expenditure which has increased production capacity and allowed us to build market share,” said Mr Bruce-Jones.
He added that James Jones is evaluating many acquisition opportunities in both the UK and Australia and some of these transactions will conclude before the year end. And, it has submitted planning applications for two new sawlines in the UK, which will significantly increase sawn output and value adding capacities.
James Jones hasn’t held back on the product development front, either.
Incised decking joists were introduced for the 2022 season. These are kiln dried C16 graded joists that are incised and treated to Use Class 4 as recommended for all ground contact applications. As with the company’s full range of incised products, these decking joists come with a 15-year guarantee, providing the consumer with a high degree of confidence.
“Our Timber Systems Division launched a new release of its JJI Design Software last summer,” said Mr Bruce-Jones. “This software was the most advanced release to date with a number of significant improvements and enhanced design features.
“Our software department developed this new release to reflect customer and industry feedback. The new features included a number of design efficiencies in addition to a 3D model export.”
And, of course, BSW was also in the news during the Covid pandemic thanks to its acquisition by Binderholz, a deal that was completed in January this year (ttjonline January 10 2022). And in more recent news, BSW acquired a stake in Power Sheds (ttjonline August 11, 2022).
“We are continually innovating and have just launched our new Horizon composite fencing range, which we are very excited about,” said Mr Hackney. “And, of course, we are looking forward to developing a whole range of new products with our new partners at Power Sheds.
“We are already integrating into the Bindherholz Group and are in a position to offer our customers the complete range of engineered timber products, which completes a very extensive range of sustainable materials.”
Predicting the fortunes of the timber industry over the next 12 months has probably never been as difficult – even during the pandemic – but sawmillers remain optimistic despite the obvious hurdles in their path.
“The three main concerns are the demand, which is a bit flatter than it was, the very punitive energy and fuel costs and labour,” said Scott Gordon.
“Covid and lockdown has caused people to look at what they are doing and there is certainly more fluidity in the job market. We are very fortunate to have a committed and motivated workforce and we have been recruiting over the last nine months – but it has become a bit more challenging.”
Despite this, he remains optimistic – and says the company is proud to produce locally-grown and processed softwood that competes with products from all over the world.
“I’m very positive about the future and think that, come spring time, we will be in a better demand situation,” he said. “British timber continues to have a very good story to tell – environmentally and in terms of availability, cost effectiveness and the quality that all the British mills are turning out. These opportunities will come back again and we are still very optimistic about that.”
“The year ahead will be a very difficult one for many reasons – energy prices, inflation, potential recessionary periods and reducing demand will all contribute to the overall challenges we will face,” said BSW’s Tony Hackney. “However we are in a strong position to take advantage of potential demand in many markets and have the infrastructure and capacity to do so.
“It is critical that the industry pulls together to promote the use of wood, in particular home-grown material,” he continued. “The use of C16 in construction is well proven and what can be better for sustainability than utilising wood that is grown and manufactured on your own doorstep?”
Tom Bruce-Jones agrees that British timber has an important role to play in contributing to a net zero carbon target and this presents many opportunities, particularly in satisfying the demands of customers who are keen to support the UK economy, employment and industry while mitigating the collective carbon footprint.
“One of the key challenges is in working with architects, designers and specifiers in challenging why C24 is being uniformly specified in construction projects,” he said. “One assumes many do not realise that this precludes the use and supply of British product. In partnership with the UK customer base and in response to customer demand, UK mills have committed significant investment in industry-leading, world-class processing facilities which has improved the quality and standing of British product throughout the marketplace.
“Timber is a fully sustainable product offering versatility across a wide range of applications but designers, specifiers and architects should be aware the impact their actions may have on the supply chain and the longer term consequences on UK industry. Timber is a tremendously versatile product that can assist in addressing global climate change. The role British timber can play in this and the contribution it can make should not be overlooked.”
Mr Bruce-Jones added that James Jones remains very committed to further growth in all of the market segments it operates in, both in the UK and Europe.
“Consumption of all products in the building sector is likely to falter, but it is important that we support all companies in the value chain,” he said.
“A domestic supply chain with lower carbon emissions has to be supported and further investments in new technologies will ensure that timber remains the product of choice for consumers, along with a credible and supported new planting regime.
“It is vital too that the industry promotes itself correctly as a low carbon economy and that we are able to attract new and emerging talent through apprenticeships, graduate training programmes and mentoring,” said Mr Bruce-Jones.
“The most important lessons that global economies have learned is that an over reliance on extended supply chains and imports can be damaging to company survival,” he added. “It is vital that merchants, specifiers and end users continue to support local processors and manufacturers who can offer a high intensity just-in-time service.”
