Four months ago, we were staring helplessly past drifting snow and later watching the relentless falling rain. All this, restricting access to the forest. The market was poised to take off, but the weather was inhibiting much of the planned activity.
However, the show must go on. The curtain finally lifted. From that moment, the level of business, has barely given anyone in the forestry sector a moment to draw breathe. So centre stage the action was frenetic, driven by the high demand and high prices. Working hard to catch up, it was almost as if two scenes had been rolled into one.
However, the show must go on. The curtain finally lifted. From that moment, the level of business, has barely given anyone in the forestry sector a moment to draw breathe. So centre stage the action was frenetic, driven by the high demand and high prices. Working hard to catch up, it was almost as if two scenes had been rolled into one.
The two main areas of market activity, are sawlogs and small round wood. Turning our attention to sawlogs, the opportunity to sell all grades of sawn timber has continued undiminished. With no major change in the exchange rates, imported timber can be matched by comparable home-grown alternatives, with price advantages too. The demand for sawlogs remains strong. Log prices have continued to rise with a 65% increase on the prices of two years ago, and in some areas by 25% over the last quarter. Most mills are staying open for roundwood deliveries throughout the summer, even if production takes a break.
Regionally, the further south you go, the greater the price and the scarcer the logs. There is no appreciable material shortage in the north, but demand for the finished product is supporting the strong standing prices. The larger coups of 10-20,000 mᵌ are attracting strong competition and can be difficult to secure. With the double-act of a weaker pound and ongoing, rising global consumption of wood products, imports continue to hold their price. Asia and the Far East are drawing supplies of construction grade timber out of northern Europe and US production is being utilised in rebuilding after hurricane damage. Will the bubble burst? Will there be a twist in the tail?
There is a worldwide nervousness about the possible impact of escalating international trade disputes and oil price rises, whilst here in the UK, we are trading against a background of political and thus economic uncertainty. Recently, market observers report that manufacturing and construction industries are in a holding pattern, with the number of businesses expressing an intention to invest falling over the quarter. However, the major processors are reporting full order books, stretching comfortably beyond quarter three.
So, what of small roundwood? The scene is similar - demand constantly outstripping the supplies available. A biomass market with depleted stocks after the prolonged winter came to the market with a healthy bank balance and was keen to replace what wood it had consumed. What characterises this market is not just the larger players, August should see the CHP plant at Sandwich fully operational, taking 240,000 tonnes of fibre per annum, but the small and medium size players too. The numbers of processors in this sector has multiplied, from domestic heating schemes to medium size business units, (500-10,000 tonnes p.a.) and in some regions it is hard to see, irrespective of price, where the wood will come from. With RHI backing the biomass users are not shy about joining the chase for timber. Despite the inevitable availability of sawmill chips, due to production levels, the board processors are not sitting on their hands either, but are responding strongly to the situation, adding to the upward surge in roundwood standing and delivered in prices.
Out of the limelight, but very much part of the act, are the round fencing, bar and pallet users. With biomass regularly fetching in excess of £50 per tonne on the one hand and log processors prepared to take produce in at 14cm diameter on the other, they are being pushed from both directions. One trader reported that “We could sell every load of fencing stakes two or three times over…. the whole market is like trying to complete a jigsaw with only half the pieces!” The hike up in raw material price, due to its scarcity, is hard to justify given the market price for both sawn palletwood and peeled and treated fencing.
Can we confidently say, ‘It’s all good’? Certainly, the short-term prospect looks as if demand will continue unabated, and prices appear set. The curtain is yet to fall on this current drama, it may only be in March 2019 that all attention will be drawn away, as Brexit takes centre stage and we discover the part it has to play.
August 2018
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