News
Seasonal slow down puts pressure on timber prices
I am writing this report in the midst of a maelstrom of a European debt crisis that is changing by the hour and seems increasingly intractable. The centre of this storm is the crisis in Greece and its potential knock on effect to some larger European economies. How does this affect us in the UK timber market? The answer is one well formed but crucial word ‘confidence’, this essential ingredient to encourage individuals, companies and governments to spend and invest is currently very fragile. This is having a widespread effect on most sectors of the trade; construction is at a low ebb with a reduced number of house starts combined with the effects of government spending cuts reducing significantly public sector construction projects. UK sawmills are struggling with carcassing sales, prices are falling as available sales volumes reduce and buyers are spot buying driving prices lower. UK mills are reacting by altering their product mix cutting more pallet and packaging products which is a less constrained market in terms of volume. The sawn fencing market is also very quiet with demand dropping off significantly in October; fencing mills also are cutting more into pallet wood. However cutting lower value products is having an inevitable knock on effect on profitability. Most mills are well supplied with logs and gradually slowing production to meet demand. The overall result of diminishing profitability, good log supply and slower activity is a dampening effect on log prices, the frothy log prices of earlier this year are now becoming a distant memory as sawmillers look to bring their raw material costs back in line with their selling price. This time of year is traditionally slow for the sawn market so a judgement has to be made on whether the current slowdown is the usual seasonal dip or something more structural in the economy at large, or as is probably the case, a mix of both. With Sterling still weak against the major currencies, the UK trade can still count its blessings that things could be a lot worse if we were within the Euro zone.
On a more positive note new investment continues within the UK sawmill trade, BSW have just announced a multi million pound new sawmill line for Fort William, Ransfords are currently installing a new line at Bishops Castle, James Jones are back to full capacity at Lockerbie, these together with many other investments across the UK show that the UK sawmill trade is in robust health and relishing the challenges that lie ahead despite current difficulties.
The small roundwood market is in a similar position to the log market, with a poor market and ample supplies of timber. The board manufacturers are struggling in some sectors, raw chipboard sales are poor whilst MDF and OSB sales helped by export outlets are relatively healthy. Some UK mills are beginning to take production down time to balance production with sales; this is causing an oversupply and quotas on roundwood deliveries. Log yards are generally full but most mills are looking to hold significant stocks following the previous two years experience of severe winter weather that resulted in perilously low stocks of fibre.
The overall picture in the medium term for growers is relatively healthy for industrial round wood, with new potential outlets on the horizon. In particular the new Biomass boiler at Workington due to come on stream later in 2012 will have an effect on wood fibre flow across a wide area. The other new large scale biomass operation under construction is the Tullis Russell/RWE power station at Glenrothes, although largely fuelled by RCF there will be some disturbance to the flow of fibre across the country as some end users who are consuming RCF at the moment will be forced to look at other sources of fibre. These projects combined with the arrival over the past few years of several pellet plants and biomass operated power plants across the UK has provided UK growers with a varied suite of potential outlets to chose from.
The small roundwood fencing market continues to be very healthy across the country with most end users very busy and struggling for supplies, this is one ray of sunshine for growers in the current climate. Prices for fencing stakes and rails continue to be very strong as a limited supply is struggling keep pace with demand. The other sector that provides comfort for growers, especially in the South of the UK is the ever buoyant firewood market where demand constantly outweighs supply and growers are achieving very healthy returns on their hardwood thinnings.
In conclusion, the trade is at a traditional seasonal low at this time of year but is looking forward with some uncertainty towards next spring. However with increasing outlets for forest products whether in export form for logs and roundwood or new sawn capacity or biomass projects within the UK, the forest grower should look forward with optimism in the medium term.
Ashley Williams, Deputy Managing Director
Euroforest Ltd, November 2011
19-09-2011
Standing market defies underlying concerns
The current market for standing timber remains buoyant despite some underlying concerns by end users. Demand for standing timber from merchants and direct harvesting organisations has kept standing prices in a very healthy state during 2011 with prices continuing to rise.
The sawmilling industry has enjoyed a very good year to date with plenty of demand especially in the pallet, packaging and fencing sectors; carcassing has been the weakest element of the sawn sales market. Demand for construction timber has remained weak all year with a slow housing and public sector construction sector keeping the market constrained. However the weakness of Stirling has allowed the home grown sawmilling trade to maintain a historically high percentage of the home grown market, currently approaching 40%, having achieved this level of market penetration there is a determination to maintain the home grown share of this market. There is some optimism that re construction in Japan will divert potential imports into the UK and help revive this market. In summary the sawn timber market has had a good 2011 to date but there are concerns that with the traditional slow down in the fencing market at this time of year and a weak construction sector that overall demand may slow in the second half.
The busy sawmill industry has translated into a buoyant log market especially in the hotbed of Northern England and South Scotland, where prices have been very healthy for timber growers. Elsewhere in the country the more balanced supply and demand ratio has kept log prices at reasonable but not excessive levels. Some export of sawlog material to Germany from ports distant from sawmills has provided growers with good roadside log prices in area which have traditionally suffered from high transport costs.
The panel board industry in common with the sawmills have had a good 2011 to date, most plants are at full capacity and selling all of their product. The recent fire at the Sonae plant near Liverpool has put a lot of additional recycled wood fibre onto the market and provided some additional sales opportunities for most UK producers. Most UK plants are very well bought for small roundwood with strong flows of sawmill residues and recycled fibre meaning that small roundwood usage is reduced. Most of the larger plants have suppliers on quotas, waiting to see how much the summer sawmill shutdown effects their overall fibre stocks. As with the sawlog market, the reduced demand for small roundwood has not had much affect on the standing price.
Other users of small roundwood continue to be buoyant with ongoing deliveries into pellet and wood shavings markets continuing, even though we are in a traditionally slow time of year for such producers. In addition the constant demand for roundwood fencing products keeps prices at a good level for growers as demand comfortably outstrips supply.
The advance of Phytophthora Ramorum in an Easterly and Northerly direction from its initial sites of infection continues albeit at a much reduced pace. The recent information from aerial and ground inspections is that the disease although spreading, is now moving in a more controlled manner. Whether this reduced rate of flow is due to climactic or disease control factors are difficult to quantify but is probably a combination of both factors. The reduced flow of infected Larch material into the market has made a gradual but sustained improvement in returns to owners as we move from an oversupply to a more controlled and normal supply situation. However should we experience a wet summer and autumn the spread of infection may well accelerate dramatically.
To date 2011 has provided good returns to growers from all sectors of the industry, there are some concerns about a slowing economy and issues with the Euro but timber prices appear to be set fair for some time to come.
15-03-2011
Markets look to fill the shortages left by winter weather
The earlier than expected snow late last year, caught many markets by surprise, resulting in low timber stocks for many end users. This shortage caused some markets in all categories of round wood to offer some prices on a project basis to recharge their inventories.
The home grown sawn sector has enjoyed a good opening quarter in 2011, with good market share in all categories of sawn wood. Pallet wood is in short supply with most sawmills sold well ahead, the shortage of supply of sawn pallet wood from the Baltic States, exacerbated by ice, has helped UK mills to gain market share and strengthen their hand in price negotiations. The fencing sector is also proving a strong market for the UK producers with strong orders and an upward movement in price; however the presence of an ever growing quantity of produce from Ireland is gaining market share by aggressive pricing. The construction market continues to be a success story for UK Sawmills, with a continuing increase in market share. Shortages of imported material aided by a weak pound sterling have helped market penetration; again the influence of Irish sawn sales have kept sawn prices at a lower level than many UK millers would like. One concern for the UK trade is the political instability in the so called ‘sand states’ of North Africa and the Middle East. If sawn sales to these markets from Scandinavia and the rest of Europe is disrupted significantly, this sawn product will be looking for a home, with the UK market an obvious destination.
The panel board sector is enjoying a reasonable start to 2011 with some hesitation on behalf of buyers as producers push through price rises. However sales to the furniture and the construction sectors are reasonably strong. Expectations are generally optimistic for the rest of the year with sales improving into March.
For the timber grower in the UK the picture looks fairly healthy for 2011; most sawmills are back to full capacity looking to fill their depleted sawn stocks going into the spring. Demand varies across the country with demand particularly strong in South Scotland, supply and demand further South and North are more in balance. Log prices are strong especially in Northern England and South Scotland. Prices for pallet wood are being driven by strong sawn orders and the underlying price of small roundwood, which is beginning to compete with pallet wood prices. Small round wood fencing is in very heavy demand all over the UK with a strong agricultural sector driving demand. Consequently many small round wood fencing manufacturers are chasing any available stakes, rails and strainers with vigour, providing a very healthy return for the woodland owner. Industrial small roundwood is being competed for by the traditional panel board sector, the bio energy sector, the horse bedding sector and the export market producing a very healthy market for any timber sellers.
All of the above combines to produce an optimistic outlook for the woodland owner for 2011. Everyone in the trade will be hoping that 2011 proves to be as good a year as 2010 has proven to be.
