UNITED KINGDOM FOREST PRODUCTS ASSOCIATION

UK WOOD PROCESSING SECTOR REPORT - PANEL PRODUCTS AND PULP AND PAPER

UK PANEL PRODUCTS REPORT

2009 started with demand at an all-time low. Most UK panel producers took production shuts in the early part of the year and a number of companies instigated redundancy programmes.

However, by the Spring, the situation had improved considerably and most plants were running nearer to capacity – a very welcome change of events. Exchange rates had a great influence on the UK panel sector throughout 2009. Imports of panels reduced from around 900,000m3 to around 300,000m3 during the year. This helped domestic manufacturers increase their share of the UK market. A number of export opportunities also appeared during the year and most companies took advantage of the favourable exchange rate to increase their export activities. The year ended with strong demand in most sectors.

During the year there was continuing competition for wood fibre material from the emerging biomass-burning energy sector. Two new plants were commissioned in the UK during the year which utilise wood fibre that would previously have been used by the panel sector. The development of the wood energy sector, especially large scale electricity generation using wood fuel, supported by significant Government subsidy, remains a serious concern to the wood panel industry in the UK.

UK PULP AND PAPER SECTOR REPORT

2009 proved to be a very challenging year for the pulp and paper sector; weak demand led to further major production curtailments and increased energy and chemical costs impacted on profitability.

The market situation for newsprint in Europe remained weak, resulting in reduced demand, which was estimated to be 12% lower than 2008. The decline in demand was evident in standard newsprint and coated grades. Deliveries of other paper grades to Europe also fell significantly during the year.

The market for virgin fibre board improved to some degree in the third quarter, but demand in Europe remained lower than in 2008.

In September, the UK’s only integrated pulp and paperboard mill, announced the decision to shut one of the two paperboard machines at its Workington plant. However, it was also announced at the same time that capacity at the remaining paperboard machine would be upgraded and additional investment has also been announced.

Wood fibre supply was fairly well balanced for the first half of the year, as a consequence of reduced demand. In the second half of the year, the situation had changed, mainly due to the continuing weakening of the Pound. This resulted in increased demand, resulting in increased wood usage across all sectors, including the energy sector, with the consequence of shortages of wood fibre by the year end. The situation was compounded by heavy snow and extremely low temperatures, which hampered timber harvesting operations in many parts of the UK at the start of 2010.

There is continued concern within the pulp and paper sector, as well as the wider wood processing industry, over the development of large-scale biomass energy plants. Although wood has a role to play in the mix of renewable fuels, it has to be questioned if burning wood, which would otherwise be suitable for product manufacture, is really making the best use of this resource with its unique carbon attributes.

Report compiled 6 May 2010.