Around the same time as the sun belatedly started to put a bit more effort into performing its expected summertime role, there was also a noticeable warming of markets for the UK forest products industry.

Up to four weeks ago trade was quiet – the sluggish start to the year making demand in the first quarter lower than the same period in 2005. Fencing and garden products were particularly slow to get going, with observers placing the blame on a combination of poor weather, a late Easter and reduced consumer spending.

However, a month ago demand for carcassing, packaging and fencing started to pick up – to the extent that softwood importers began talking about a possible £3-5/m3 firming in prices. Now, markets are reported to be good right across the product range and importers are saying that increases could be as much as £10-15/m3.

That could open more opportunities for UK forest products suppliers, adding to the hopes that demand will be sustained at a good level for the rest of the year and perhaps even make up for the shortfall seen in the first few months.

Consecutive falls

During the past decade the overall trend in sawn softwood consumption in the UK has been upwards, with the occasional blip. However, it is worrying that there have been consecutive falls in the last two years – the sharpest in 15 years. If that were repeated this year, as some believe possible, it would make three years in a row of falling consumption.

A reduction in demand for repair, maintenance and improvement (RMI) is thought to be the most likely culprit. The RMI sector accounts for just over 60% of total sawn softwood consumption in the UK, so any slackening has a significant impact.

However, volumes are also affected by the increasing use of engineered products in place of solid softwood. For newbuild homes, the timber industry continues to benefit from the government’s sustainable housing agenda. Timber frame is ideally suited to modern methods of construction, but uses relatively little solid wood. In fact, there is an increasing move to prefabricating elements with engineered wood products under factory conditions, resulting in effective quality control and more rapid on-site construction.

The high volume social housing market has major potential for timber frame. So, too, does the 2012 Olympics and the industry is actively working to promote the use of timber for the necessary construction projects.

However, the success of timber frame and engineered wood products such as I-joists has led to increased efforts by manufacturers of competitor materials, who are not averse to promoting their products by knocking wood.

&#8220During the past decade the overall trend in sawn softwood consumption in the UK has been upwards, with the occasional blip. However, it is worrying that there have been consecutive falls in the last two years – the sharpest in 15 years”

The case for robust promotion activity by the timber industry, to protect and further expand its markets against such criticism, has probably never been stronger – therefore it’s good news that Wood for Good is gaining wider financial support from the UK industry.

Wood fuel boom

Interest in the use of wood for fuel continues to grow, and panel products manufacturers remain concerned about the potential impact on their businesses.

The key word there is ‘potential’. Nobody knows what will happen in the future, but the worry of the panel products industry is that there is nothing in the government’s Renewables Obligation (RO) to prevent their wood fibre resources being diverted into co-fired power plants.

Introduced in 2002, the RO places an obligation on licensed electricity suppliers to produce evidence that they have sourced a specified proportion of their electricity supplies from renewable energy sources. Last year the Wood Panel Industries Federation (WPIF) encouraged the DTI to look at the impact of the RO on the wood panel sector.

Co-fired plants are the main source of concern, because relatively little investment is required to adapt existing plant so that it can use wood as well as traditional fossil fuels, compared with the capital cost of building a dedicated wood-fired plant. As a result, says the industry, co-fired plants have greater ability to pay more for the raw material. Indeed, there are reported cases where panel manufacturers have had to pay 20% more for their fibre in response to competitive bids from co-fired plants.

Long-term unsustainability

Until now co-fired plants have been predominantly burning imported biomass, so the impact on UK panel products manufacturers has been small so far. However, WPIF believes the use of imported biomass is not sustainable in the long term since the countries supplying the material will increasingly need it to meet their own energy-generation requirements.

The government has looked at the use of imported material, but from the point of view of its impact on ‘energy crops’ such as coppice willow, where regular and reliable demand is essential if growers are to invest in plantations. If the RO was revised with wording that specifically focused on encouraging the use of energy crops that would be one thing, but so far the terms aren’t that specific. In any case, it takes around six years for an energy crop to mature, and in the meantime co-fired plants will have to find alternative sources.

Predictions of the impact that all this might have on the panel products industry range from “mild” to “very serious”. However, the industry can already point to some experience – albeit regional – where the market for wood fuel has led to price rises for the wood fibre. It believes the situation will become worse over the next 12-18 months as the next batch of wood-fired heat and power plants come on stream.