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

"Challenging", "fragile" and "increasing optimism" are perhaps the three most widely used phrases heard during 2009 to describe the changing conditions in the UK softwood market. Whereas 2008 was at best lacklustre and certainly very challenging for the trade, 2009 has been a year of steadily improving fortunes, which by the end of the year had resulted in a mood of increasing optimism. However, this has to be put into perspective, as the markets continue to be very fragile. More encouragingly, as a consequence of tightening supply from some overseas sources, combined with the weak Pound, UK softwood producers are continuing to increase market share, with latest statistics suggesting 30% and rising.

For 2010, there is an expectation that there will be further improvement in demand from most, if not all markets, but once again, external factors, such as the weather, exchange rates and the political scene will exert a significant influence on demand. In addition, we still await a meaningful upturn in the construction industry.

Wood supply issues are of particular and increasing concern to the sector, not least because of the very significant threat to supply posed by the burgeoning wood energy sector. The Association has increased its efforts, in concert with others, especially the Wood Panel Industries Federation, to raise awareness of the irreparable damage which could be done to the UK softwood processing sector if uncontrolled development of subsidised large-scale wood energy plants proceeds and displacement of significant volumes of roundwood (and jobs) from traditional processors results.

The UK wood fibre availability and demand study, which has been commissioned by the industry and undertaken by John Clegg Consulting, will be of particular value in demonstrating the fragility of wood supply in the UK and the risks posed by the proliferation of large-scale wood energy plants. It is essential that development of the wood energy sector is appropriate in terms of scale, location and timing, as well as being sustainable. This independent report presents a clear message about wood supply and demand and the threat posed by large-scale electricity generation using wood fuel. If uncontrolled development of large-scale wood using energy plants proceeds, there is a real risk that the UK forest resource will be squandered and the future of the domestic wood processing sector jeopardised. The message is clear and simple; burning wood should be a last resort - first and foremost, wood should be used in product manufacture; burning wood squanders the opportunity to maximise its carbon benefits.

UK-GROWN HARDWOOD SECTOR

The total volume of UK produced hardwood has been relatively static in recent years; official statistics show 432,000 tonnes were produced in 2008, a small decrease from 440,000 tonnes in 2007.

Oak is, as ever, the principal species by volume for processing. Feedback suggests that the market needs increased volumes of good quality Oak. Imported temperate hardwoods, including Oak, continue to feature prominently in the hardwood trade.

Good veneer grades of Sweet Chestnut and Cherry have been sought-after, but volumes have been small and this has limited the export trade, although there has been renewed interest from veneer buyers on the Continent. Markets for planking grades for UK-grown hardwoods do exist, but they are small-scale. Sweet Chestnut of all grades is also being used for engineered wood products in south-east England. Demand for Sycamore has, in general, been very low. Demand for second grade ‘whitewood’ timbers such as Beech, Ash and Sycamore, which were traditionally used as carcassing in furniture, also continues to decline as the markets diminish. There is still a small market for mining grade hardwood.

The firewood market is by far the biggest market for UK-grown hardwood, with 69% of UK produced hardwood being used for wood fuel, (Forestry Statistics 2009). Here too, quality has an influence; as the number of firewood processing machines increases, so the markets for larger, rougher timber reduce, the premium grades suitable for processors are very attractive.

As ever, quality remains a key requirement for many hardwood markets.

Report compiled 6 May 2010.