UNITED KINGDOM FOREST PRODUCTS ASSOCIATION

UK SOFTWOOD AND HARDWOOD 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 and hardwood processing sectors.

UK GROWN SOFTWOOD SECTOR

2007 proved to be a year of considerable contrast for UK producers of sawn softwood; the year started with almost unprecedented demand for sawn softwood from all market sectors and strong demand continued throughout the Spring and Summer. However, by October, demand very quickly reduced, such that by November some producers were taking production shuts.

The increased demand for sawn UK softwood was very welcome, but it should be noted that overall wood consumption in the UK remains relatively static. The principal reason for strong demand for UK softwood was, once again, a consequence of several factors. Shortages of wood from traditional overseas suppliers, most notably Scandinavia and the Baltic States arose because of reduced harvesting levels as a consequence of adverse weather conditions in the Winter/Spring, which combined with particularly strong demand from China, resulted in shortages. The speed with which demand slumped at the end of the year has taken many seasoned commentators by surprise.

High levels of demand have not only seen UK sawmills working at full stretch, but also the timber harvesting and timber haulage sectors as well.

Despite the year-end downturn, it is pleasing to report that investment in the UK softwood sawmilling sector is continuing at very healthy levels, with additional capacity installed during the year, with more in the pipeline.

Long term wood supply and wood quality issues continue to be of concern for the UK wood processing sector, although increased supplies from private sector growers have been welcome this year.

It is difficult to predict what 2008 will have in store. It is hoped that the fencing season will get off to a good and early start, but again, much will depend on the weather and general economic conditions in the UK. Similar sentiments apply to the construction and pallets/packaging markets.

It is very encouraging to see that there is increasing recognition of the economic, social and environmental benefits that trees, woodlands and forests provide in the UK. The role that trees and wood products can play in climate change mitigation is expected to receive greater coverage during 2008 and beyond, which is welcomed. However, against this background there is an increasingly pressing need for increased commercial conifer planting in the UK. Such planting must be appropriate in terms of species and silvicultural practice, so as to provide a good quality crop. The old adage of "the right tree, in the right place" should perhaps be amended to "the right tree, in the right place, at the right time".

UK GROWN HARDWOOD SECTOR

There has once again been reduced activity in the domestic hardwood sawmilling sector this year, with less domestic timber on the market compared to previous years; this trend has continued for at least 10 years.

However, good quality UK grown hardwood continues to sell well and high quality logs are much sought after. Imported temperate hardwood continues to be a principal feature of the hardwood market and this is not expected to change. Supplies of good quality, competitively priced material are readily available.

Oak continues to be very popular and accounts for the majority of the UK sawn hardwood volume traded, but as ever, quality is a critical factor.

The hardwood auction at Westonbirt in November produced few surprises. As ever, good quality material sold well, especially Oak, Sycamore and Sweet Chestnut parcels also sold well. Other species did less well, with many small lots remaining unsold.

Markets for poorer quality hardwood continue to represent a challenge for the industry, although the development to the wood fuel market, quite apart from the traditional firewood market, has been of value and there is undoubtedly considerable scope for development of this resource.

Compiled 10 January 2008.