Following what proved to be a reasonable year in 2003, the always delicate balance of the various factors that affect the UK forest products industry seems still to be weighted towards the positive, and in general there is “cautious optimism” for the first half of this year.
The sawn wood market has remained fairly buoyant, with particularly good demand for carcassing. There is some nervousness about what the Swedish krona will do and what impact this will have, but overall there are no major worries.
Good winter weather – fairly dry in the south of England and no serious problems caused by the snow in northern and western areas – also meant access to the forests was unhindered so there was no interruption to log supply.
Private growers say demand held up as well as expected – but there are mutterings about prices. Aware that sawmills and merchants have been able to lift prices, growers are disappointed that they have not seen any movement – particularly since there have been indications of stronger prices at standing sales.
While recognising that sawmills’ higher sawn prices are to some extent offset by continued problems with prices paid for co-products, growers believe they should be seeing some lift by now. It’s likely there will be pressure for this in the next round of quarterly negotiations – although there’s a realism that any increase will not be large.
Double shifts
A further factor that gives growers confidence is the understanding that some mills are talking about introducing double shifts as a result of their good order books. Demand for logs to feed any increased production would underpin a firming of prices.
Small roundwood demand has been fairly steady, although at reduced levels due to erosion of the paper and panel products markets by increased use of co-products and recycled fibre (RCF), respectively. However, growers have been helped by exports, particularly to Norway, Sweden and Finland. Demand for Sitka spruce is especially good; this species has long fibres, which paper manufacturers need to mix with the short fibre of RCF.
Growers say there has been reasonable demand for palletwood, although with the usual problems over poor prices. Minor improvements are being reported in the pallets and packaging sector, but there is also significant nervousness about the financial stability of some companies in the sector.
There’s continued confusion about the ISPM15 regulation, which requires heat treatment or chemical treatment to prevent the risk of spreading pests in wood packaging. Heat treatment seems to be the favoured option, and concerns remain that although investment has been made in heat treatment kilns, there is still not enough capacity to meet potential demand.
The situation is not helped by variable implementation of ISPM 15 – in particular, the EU has postponed the original target date of July 1 this year to January 1, 2005, and the US, which initially aimed to adopt the standard in the first quarter of 2004, will now publish regulations on May 1 with the aim of full implementation between 6-12 months later.
Plant health issues
A couple of domestic plant health issues are causing some concern. The Forestry Commission is proposing to adjust the boundary to the protected zone in respect of the great spruce bark beetle in order to prevent spread into north-east England and Scotland, but has yet to announce where the northern boundary will be. The situation is worrying for woodland owners but the adjustment is not seen as a major problem for the trade as most of the timber flow is from north to south.
Sudden oak death syndrome – a misnomer because it has been found on a number of other species, including beech and chestnut – is also exercising minds. However, there is no major problem at the moment, and DEFRA and the Forestry Commission are continuing to monitor the situation.
“Demand for Sitka spruce is especially good; this species has long fibres which paper manufacturers need to mix with the short fibre of recycled fibre” |
In the fencing sector, some have commented that the market seems a bit sluggish – but this is traditionally a fairly quiet time and those concerns perhaps arise from comparison with last year’s unusually early start to the season. Demand is expected to pick up as Easter approaches.
Many treatment plants have been converted to new generation preservatives, ahead of the July deadline that will restrict the use of traditional CCA preservatives. The new rules do not require replacement of CCA-treated wood already in place but they do raise an interesting question about what happens to that treated material when it is replaced. For example, motorway fencing is the responsibility of the Highways Agency, which replaces existing fencing at its own discretion, perhaps every 20-30 years (or in the case of damage, of course). In many cases the replaced fencing will still be sound, and traditionally has been sold or given to the landowners for their own use, as ‘compensation’ for access to the land.
Second use markets
This is a cost-effective solution for recycling the material to a second use market – a story that also applies to telegraph poles and railway sleepers. However, under the new rules it will be illegal to place CCA-treated timber onto the market after July – and surely that must mean that existing material cannot be passed on.
While that motorway fencing is in the ground, it’s fine but as soon as it’s removed for replacement, it suddenly becomes hazardous waste. The Highways Agency will therefore need to find a certified hazardous waste carrier to take the material to a landfill site (at odds with current pressure to reduce landfill) or waste incinerator – and find the additional costs of disposal from its budget.
Another development in the treatment sector, according to one source, is that the Health & Safety Executive is now looking at chromium. The new rules on CCA (copper chromated arsenate) were more focused on the arsenate.
There has been no change in the UK hardwood sector, with imported temperate species still taking a strong share – even demand for oak is often for European varieties. Traditional hardwood sawmillers are increasingly becoming hardwood importers/merchants, and this trend is thought likely to continue.
Panel products for construction purposes, including flooring grades, are benefiting from the buoyancy in this market, and demand here is better than for furniture grades. The seeming paradox remains unexplained: new homes usually mean new requirements for furniture, yet the furniture industry still appears to be struggling.
Following the Macdonald report, which recommended that the UK forest industries sector should create a new single association to represent its interests, there has been considerable discussion within and between the various associations – especially the UK Forest Products Association and Forestry & Timber Association.
The Wood Panel Industries Federation is maintaining a “watching brief” on the discussions, while the Forestry Contracting Association is restructuring and the dust will have to settle on this, although it has been involved in the meetings.
Working parties
So far it seems that the idea of a confederation is gaining ground. Working parties have been set up to consider its structure, purpose, activities and how it would be funded.
Any proposals for a confederation – which would have to benefit and give value for money to the industry and not just be set up to meet the government’s desire to work with fewer industry bodies – will then have to be discussed and approved by the individual associations.
The UK forest products industry has seen a good start to the year – and with good weather, continued demand from the construction sector and favourable currency movements, there are hopes that this will continue. News that sawmills are dusting down previously shelved investment plans adds weight to the generally positive feel in the industry.