Investment focuses on forest sector

They say that after a great party there will be a hangover. That’s defi nitely the case for wood products currently. After the two-year bonanza starting during the pandemic, we’re now facing a demand slowdown. 2023 will be a weak year for our industry and who knows how long the slowdown will last. There are so many moving parts in the equation, making short-term forecasts almost pointless.

Slow demand is partly due to infl ation, which is making consumers cautious and leading to project delays. We also saw abnormally high sales of decking, garden products and DIY consumables during the Covid years, inevitably leading to lower demand in coming years. The supply/demand balance will take some time to return to normal.

At the same time, we have great things happening in our industry. Wood products require less fossil fuel and produce fewer CO2 emissions in processing and manufacture than non-wood construction and manufacturing alternatives, such as concrete, metals, or plastics. They also emit lower volatile organic compounds and, because of its natural cellular structure, wood has a higher insulation rating than both steel and plastic. Finally this message is getting through and, as consumer demand for green building solutions grows, wood – provided of course that it’s derived from sustainably managed forests – is becoming increasingly attractive as an alternative to traditional construction materials.

As research continues into new technologies, innovative products are also being developed from wood for this and other markets and critically this work is also being backed by the fi nance sector.

Private equity investment in the forest industry is already on the increase and is set to grow further in the coming years. In the UK alone it is estimated that £2.5bn has been invested by PE investors in our sector in recent years. This source of fi nancing will be key for growth and innovation.

Specialised investment funds, such as the recently launched United Bankers Forest Industry Green Growth Fund from Finland (UB FIGG – covered in this issue on pp62-63), have also been set up specifi cally to focus on our industry.

This should be seen as a positive trend as they not only provide sources of fi nancing and expertise, but also attract young people in a new way to our industry. Sustainable and Environmental, Social and Governance (ESG) friendly investment is becoming increasingly popular amongst investors and our industry is in pole position to capitalise. Investors are showing a greater interest in companies that are actively reducing their environmental impact, supporting diversity, and driving positive change to tackle the climate change. This will also be driven by regulators as it’s an issue high on the political agenda worldwide.

This trend is benefi cial to both investors and companies, as it puts pressure on the latter to become more conscious of their social and environmental impacts. Additionally, it ensures that investments are directly linked to reducing climate change and driving positive social change.

Regardless of the headwinds we are currently facing with our traditional sawn and planed timber and sheet materials, I believe the future looks bright for wooden products and our industry.