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EXCEPTIONAL WINTER WEATHER SLOWS ACTIVITY IN THE TIMBER MARKET
The widespread winter weather that brought chaos to travel all across the UK during December and January brought activity in the UK’s forest to a shuddering halt. In some parts of Scotland the effects of the winter snow were still being felt in mid March. The disruption in haulage of timber from harvesting sites to timber processors has caused a great deal of angst amongst wood buyers as stocks of round wood have diminished significantly and in some cases disappeared altogether, resulting in reduced activity levels or occasionally a cessation of production.
The market for timber products of all descriptions was subdued at the beginning of the year due to the effects of the weather on construction activity. However as activity has picked up so has the demand for products from panel products to sawn timber. Activity in the sawmill sector is currently very brisk, with the continuing weakness in sterling continuing to help the home grown trade. Imported stocks are low and with most importers having to raise prices, this is providing the home grown industry with the opportunity to keep raising their market share and to gradually improve their selling price. The only significant competition on price coming from sawn imports from Ireland as the Irish sawmilling trade looks to sell into the UK to sell volume that traditionally went into their domestic market.
All grades of sawn timber are selling well, demand for pallet boards is beginning to outstrip supply as the economy picks up and pallet usage increases. The UK sawmills proportion of a rather quiet carcassing market is increasing as a weak pound makes the UK an unattractive market for Scandinavian imports, prices have risen in the early part of the year are expected to continue to do so in the second quarter. The fencing trade is also beginning to pick up as the traditional fencing season begins, in particular the agricultural sawn fencing is buoyant with again demand outstripping supply. With good sales and high production levels coupled with a restricted log supply earlier in the year, the usual supply and demand effect has seen log prices begin to move upwards fairly strongly. The standing sale market, particularly in South Scotland and Wales has been exceptionally strong with many competing mills trying to secure supply into their log yards.
The demand for small round wood has been even stronger than the demand for sawlog material, with the panel board industry really pushing hard to secure volume wherever possible. All of the big manufactures are reporting, good sales in chipboard, MDF and OSB, again all being aided by a weak pound. In particular sales in added value panel products such as flooring and furniture are selling very well as is OSB, with some of the traditional construction products not quite so strong. Levels of production are returning to somewhere near capacity for the first time in over 18 months, this high level of production coupled with a reduced availability in recycled fibre means that consumption of Small Round wood is very high. Put this high demand from the panel board industry together with the ever growing demands from the energy market and the inevitable result is strong competition for small round wood.
The energy wood market continues to develop, Balcas at Invergordon and Verdo renewables (formerly Energi Randers) at Grangemouth are now in production and Verdo renewables pellet plant at Andover is now nearing completion. These together with UPM and EON’s existing plants as well as the many other energy related outlets are gradually making a significant impact on timber fibre movement within the UK.
From a growers perspective the activity levels of the UK forest industry are providing a far better outlook than most would have predicted a year ago. The high level of competition for standing timber of all qualities is providing an ideal opportunity for the private sector grower to return to the market with a reasonable expectation of a good return on his standing sale. The only real note of caution is that if inflationary pressure in the UK means a gradual increase in interest rates and therefore a strengthening of sterling against the Euro, then the going may get a lot tougher for the UK based industries.
Ashley Williams
Deputy Managing Director
Euroforest Ltd
April 2010
