The cold, dark days of winter are not the ideal time to predict business for the next 12 months but, with a satisfactory year behind them and the spring season coming into view, Irish timber traders are generally upbeat about prospects for 2015.

"We’re looking forward to the beginning of March when the fencing and construction seasons kick in and we’re very optimistic about activity and volumes from there on," one Irish mill told TTJ.

After a flurry of activity and higher prices in the first half of 2014, partly as a result of last winter’s storms, which created a frenzy for fencing, the softwood market settled to a more realistic level in the second half. Prices fell slightly in the third quarter as Scandinavian mills made a concerted effort to regain market share in the UK, but demand remained good until the last week in November.

"There was good activity right up to the end of the year," one sawmiller said. "December was a traditional December but it was still up on 2013."

Order books were now "where you’d expect them to be" for this time of year and he hoped that the industry would hold its nerve for the next six weeks or so.

Time To hold nerve on price

"There’s a balancing act for the next six weeks and you would hope that people won’t panic by reducing prices of stock they have, or panic with production levels," he said. Some mills were reported to be reducing production slightly in January before resuming full shifts in February.

Merchants are reported not to be carrying high levels of stock, but they’re wary of letting them go much lower for fear of being caught in a replay of the shortages of this time last year.

"There was no stock on the ground going into the new year in 2014, then we were hit by the storm and that drove the price crazy," said another sawmiller. "This year most fencing businesses have stock, so if we have a bad week of weather all that’s going to happen is that this will be used and it will be replaced. I don’t see any major change in the price." While stormy weather could increase demand for timber, the industry is hoping that the weather will settle for the seasonal pick-up in demand in the spring and around Easter.

"I believe the big sheds are well stocked so it’s only going to be replacing products as they move out," said one sawmiller, adding that this stability would probably suit everyone in the supply chain.

"We’re not going to have the peaks and troughs; we’re going to have a nice flat line, and as long as that flat line is reasonably high, that’s good," he said.

The cost of raw material remains "challenging" as it lags the fall in product prices since the summer, one sawmiller said. "There is a need for a correction in the Coillte reserve price but, in fairness, it usually comes. They typically trail the market by three to four months so we’re waiting to see it kick in."

Coillte began selling timber for 2015 at the end of November and there was "strong contracting" at its first auction in January, according to a Coillte spokesperson.

About half of the timber felled in last winter’s storms was cleared during 2014 and extra volume would come from the remainder of the clearance this year.

"We offered an extra 150,000m3 last year and it will be a similar volume this year," he said.

UK is sTill The focus

The UK market remains the major focus for Irish producers and, although demand in Ireland has improved slightly, it will be many years before it has a noticeable impact. "In the last 12-18 months the Irish market has lifted out of the gloom but it’s still a very small player compared with the UK," one contact said. "Even if there are 15,000 units built this year it’s a very small timber number and we don’t see that changing for the next 10 years or more. Any increase will be welcome but it’s unlikely to have an impact on supply across the Irish Sea."

A merchant agreed that demand for timber had increased, but there were still no volume sales.

"The business we’re getting is nearly all RMI and that probably suits a lot of homegrown timber because it’s shorter lengths," he said.

Since 2011, when the market "bottomed out", demand had improved. Last year the merchant’s turnover was 16% higher than in 2013 and "timber sales would have been up accordingly", he said.

This trend is reflected in Grafton Group’s trading update last month which revealed a 9.5% rise in revenue for the year ended December 31, 2014. The UK accounted for 75% of turnover, but Grafton noted that the rate of revenue growth in the merchanting business in Ireland increased sharply as the impact of the market recovery spread and the economy strengthened.

"Revenue growth was initially concentrated on the residential RMI market, but extended into the new housing market where output increased from very depressed levels as the year progressed," the company said. However, housebuilding is largely confined to the main urban areas and remains well below the 93,000 units built at the height of Ireland’s boom in 2005/06.

The Midlands and the west of Ireland were still suffering what one contact described as "a serious hangover from the recession", and there were ghost estates – uncompleted or unoccupied – that have been idle for the past seven or eight years.

House sTarTs below 10,000

"Like the UK, we need more houses," said a contact. "We need three or four years at 19- 20,000 units to get us back above water; last year it was below 10,000."

One stumbling block, a merchant said, was that many building sites are still held by the National Asset Management Agency (NAMA).

The organisation, set up by government in 2009 in response to Ireland’s financial crisis, acquires property development loans from Irish banks in return for government bonds. Although the sites may be released this year, it will be some time before the supply chain feels the benefit.

"If a lot of these sites aren’t released early enough it will probably be next year when we see the benefit," the merchant said. Irish mills welcome the recent slide in the value of the euro against sterling but of course it benefits their competitors too.

"It’s a welcome reprieve," said one. "Two years ago it was in the mid-80s, now it’s 78 so it’s a help, but it doesn’t just open the door for the Irish mills, it opens the door for the Europeans as well, so it’s a double-edged sword."

The stronger pound would continue to attract competition from the Scandinavian mills this year, and Baltic shippers are also expected to have more timber available. Another sawmiller pointed out that the exchange rate was just a part of business for exporters.

"I don’t pay any attention to sterling," he said. "You can’t focus the business on the exchange rate. If you’re looking to make a few bob on the exchange rate then you’re not going to be around very long."

Gains made, he added, were also now being lost in rising haulage costs.

"You win a little bit on the one hand and then lose it on the other. You’d think the haulage companies night have reduced their charges in line with the lower oil price, but they haven’t," he said.

Two years ago his company could transport timber to one part of the UK for £600; today it cost £830, he said.

These concerns aside, mills are content with the stability in the market and are hoping that it, and good weather, will continue into the spring