UNITED KINGDOM FOREST PRODUCTS ASSOCIATION
UK SOFTWOOD AND HARDWOOD SAWMILLING SECTOR REPORT.
This report, which provides a commentary on the industry and its markets, is based on feedback from UKFPA Members operating in the UK grown softwood, hardwood, panel products and paper sectors.
British grown softwood sector
With regard to market conditions during 2016, after a relatively slow start to the year, many industry commentators were initially concerned about prospects for the year, however, as the year progressed it became apparent that demand was steadily improving and after an unexpectedly busy end to the year, almost everyone agreed that it had been a good year.
It has been very encouraging to see a very healthy level of investment continuing across the sector during the year, which bodes well for the future.
UK sawn softwood production is expected to be around 3.5 million cubic metres, an increase of some 3% on 2015.
For those engaged in the British softwood sector, the number one priority and certainly the most popular topic of discussion in many meetings is that of continuity of wood supply beyond peak wood production, which will be reached in the near future. The official UK statistics on new planting, especially of commercial conifer crops, make grim reading.
Looking forward to 2017, the fortunes of the sector will, once again, be subject to a range of external influences over which the sector has no control, including exchange rates, Brexit etc. The change in exchange rates which followed the vote to leave the EU has been to the benefit of British timber producers, with an increasingly large differential developing between domestic and imported softwood prices. Despite external uncertainties, there is cautious optimism for 2017.
With regard to the market for sawmill products, (sawmill chips, sawdust and bark), 2016 was probably the first year for a number of years that it was relatively safe to predict a likely imbalance in supply and demand for sawmill products, wood fibre and industrial roundwood based on a number of known circumstances and some unplanned events from which we are still feeling the consequences.
Major planned outages in the biomass energy sector in the Spring, combined with a strong levels of sawnwood production in UK sawmills resulted in all of the wood processors and energy plants being able to maintain full stock inventories throughout the year, avoiding the usual requirement to build winter stocks at the year end.
2017 looks set to be a year of plenty for industrial wood processors and with timber growers ALSO benefiting from sustained demand for sawlogs
British grown hardwood sector
2016 was seen as a positive year by many within the UK hardwood trade. Growers, merchants and sawmillers alike benefitted from a continuation of the buoyant market enjoyed during 2015 and saw trading conditions improve as the year progressed.
Oak is still by far the most sought-after and utilised of the home-grown hardwood species, with all grades continuing to sell well, fetching strong standing and roadside prices throughout the country. Throughout the year, demand for the lower grades of Oak increased, potentially a result of sawmills developing or increasing sales of products aimed at utilising fencing and sleeper grade logs. However, what is more likely to be the case, is that it is a symptom of the lack of supply to the market, a problem that has continued to affect the UK hardwood trade for many years.
There were positive changes in the demand for other species; Ash in particular, with high quality planking butts selling well and in demand for export and increasingly by UK mills. Although the volumes of exported Ash only remained steady, the volumes consumed by UK mills increased throughout the year. Sweet Chestnut was also in demand, with more timber being sought for use in joinery and other higher end applications. The developments seen through 2015 and more so in 2016 will be very welcome to growers in particular, as well as the industry in general, as it presents them with a reliable outlet for what has for many years been an under-utilised timber resource.
Unfortunately, the same cannot be said for other white woods, demand was at best poor for species such as Sycamore and Beech, which continued to be hard to market. The demand for firewood increased towards the end of 2016 and is offering a reliable outlet for the slower moving species and lower grades.
Sawn UK hardwood production in 2016 is expected to be around 46,000 cubic metres, an increase of some 4% on 2015.
Exchange rates once again played their part during 2016. Starting with a strong Pound, UK mills struggled against competitive imported products, but they were soon to be on the front foot after the drastic changes to currency markets throughout the World set in. Political upheaval pushed the Pound to near record lows during the second half of the year, allowing UK mills and processors to strengthen their foothold in the market and set them in good stead for 2017.
Report compiled June 2017.