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.

UK-GROWN SOFTWOOD SECTOR

As we all know, the weather has a significant impact on our sector and for many parts of the Country, the closing months of 2010 and early months of 2011 were no exception. The severe winter weather severely hampered timber harvesting, transport and sawmilling operations.

The market for sawn softwood products during 2010 was characterised by the words ‘volatile’ and ‘fragile’ and these conditions continued to prevail during the first half of 2011. Overall, despite the inevitable trials and tribulations of the trade, demand for UK produced wood products has been reasonable, with many producers reporting a very busy Spring. It is pleasing to report that the market share of UK-produced sawn timber has continued to increase and has now reached approximately 40%; a level which could only have been dreamt of 20 years ago. Unfortunately, overall demand for wood in the UK has not increased.

What the second half of 2011 will bring, only time will tell. However, the current economic situation in the UK remains bleak and there has been no meaningful improvement in the construction sector. It is hoped that there will be an upturn after the Summer holiday period, but to what extent remains to be seen. Confidence remains in short supply.

The threat to wood supply from the burgeoning wood energy sector, which is supported by generous Government subsidies, is a growing reality. Whilst wood undoubtedly has a part to play as a renewable fuel, we remain very concerned about the likely impact on wood flows to existing wood processors if several large scale wood-fuelled electricity-only generating plants are built in Britain. To date, the Department for Energy and Climate Change has shown little interest in the impact that subsidies for wood fuels for the energy sector will have on the domestic wood processing sector. The Association has continued its efforts to raise industry concerns about the ‘unintended consequences’ of this aspect of the Government’s renewable energy policy, which could cause irreparable damage to the sawmilling and panelboard sectors alike. We continue to support and promote the ‘Make Wood Work’ campaign, (see www.makewoodwork.co.uk), devised by our colleagues in the Wood Panel Industries Federation, which aims to raise awareness of the issue and the threat to the UK wood processing sector. There must be greater acceptance of a hierarchy of use for wood; wood that is suitable for product manufacture should be used for that purpose in the first instance. It may be subsequently recycled and reused and ultimately, it can be used for heat and/or power purposes, but burning wood in the first instance will simply squander the resource and greatly limit the ability of forests and forest products to deliver valuable economic, social and environmental benefits.

As ever, external factors continue to have a disproportionate effect on the fortunes of the timber trade in the UK. Quite apart from currency effects and global economic fragility, there is increasing demand for wood and wood products from China and India, which when coupled with continuing unrest in North Africa and the likely demand for wood and wood products for reconstruction in Japan, following the earthquake and tsunami, will have an impact on global wood supply, which will inevitably influence demand for UK timber products during 2011 and beyond.

Publication of the latest Production Forecasts for public and private sector woodland in the UK, to be published by the Forestry Commission in the Autumn, is keenly awaited.

Plant health matters have increased in importance over the last year, not least because of the impact of Phytophthora disease in Larch. This disease is but one threat to our forests and woodlands. It is expected that the issue of biosecurity will gain an increasingly higher profile in the forestry sector. One thing is clear; there is no room for complacency in plant health matters and we all have a duty to remain vigilant.

What the future holds for the public forest estate in England is now in the hands of a Government appointed Advisory Panel, which was established following the short-lived and universally unpopular consultation on the future of the ownership and management of the public forest estate in England. The Panel are to report to the Government in Spring 2012 and their recommendations will also include a view on the Government plans to sell some 40,000 hectares from the Forestry Commission estate in England. Fundamental changes to the ownership and management of the public forest estate could not only cause major problems for wood processors in England, but would undoubtedly have impacts for wood processors in Wales and Scotland too.

UK-GROWN HARDWOOD SECTOR

Official statistics show that in 2009, (the period for which the most recent statistics are available), 500,000 green tonnes of hardwood were delivered to UK wood processors. Of that total, 400,000 green tonnes was processed for firewood, with only 73,000 green tonnes being delivered to sawmills, although this was up from the 2008 level of 66,000 green tonnes.

Oak remains the most sought after hardwood in terms of value, with most Oak parcels offered to the market selling well. Demand from the few sawmills processing Oak in the UK has continued to be strong; but imported Oak remains a significant element in the trade. As ever, quality remains a prime consideration in the Oak trade.

The volume of hardwood produced/delivered in 2009 was 533,000 green tonnes, up 23% on 2008 volume. 84% of this volume came from the private sector with 16% from FC. Most of the increase was extra volumes of woodfuel, bringing the total volume produced in 2009 to 400,000 green tonnes, but milling grades also saw a modest increase in deliveries.

The rise in popularity of woodfuel continues to push the demand for hardwood firewood, with an increasingly large volume of hardwood now being used for this purpose.

Report compiled 29 June 2011.