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.
Most producers of British grown softwood products will look back on 2013 with a considerable degree of satisfaction and perhaps some relief too, as there had been concerns about the strength and sustainability of the upturn. Despite a slightly slow start to the year, by April, demand was picking up well and remained strong across almost all market sectors until the end of the year, there wasn't even the usual slowdown during the Summer holiday period. There is every indication that a strong level of demand will continue into 2014.
Inevitably, such high levels of demand had an impact on stock levels and many mills were unable to build up as much stock at the end of 2013 as they would have liked, such was the strength of demand.
As is always the case, high levels of demand quickly show 'pinch points' in the supply chain and the harvesting resource and specialist timber haulage sector are often the first to show the strain.
It is very pleasing to report that UK sawn softwood has maintained market share since 2010 at a little over 40%. Official statistics for 2012 show a market share of 40.6%. This is a remarkable achievement and the gains have primarily been made as a consequence of import substitution. Market share in excess of 40% represents a doubling of market share in a decade.
In 2012, (the year for which the latest official statistics are available), UK sawmills consumed 6.19 million green tonnes of softwood, a 4% increase from 2011. A total of 3.36 million cubic metres of sawn UK softwood were produced in 2012, an increase of 4% from 2011. The principal markets for sawn UK-grown softwood remain unchanged; construction, fencing and pallets and packaging.
On the roundwood supply side of the industry, concerns remain about longer term wood supply and the apparent lack of focus on commercial conifer crops by Government, in England, Wales and Scotland.
The impact of tree pests and diseases is becoming increasingly apparent and presents a number of challenges for growers and processors alike. The effects of Phytophthora ramorum disease of Larch and Dothistroma Needle Blight of Pine are all too apparent. The impact of Larch clearance operations on the availability of Sitka Spruce is becoming a serious concern to the sector. Although a degree of substitution is being seen, Larch is not acceptable to all end users. With regard to replanting, greater consideration is being given to alternative species, with a wide range of species, some more exotic than others, being assessed.
In line with sawmill activity, the supply of sawmill products, (chips, sawdust and bark), has been strong throughout the year, with supply and demand in balance. 2013 saw increasing interest amongst sawmills in the use of a proportion of their sawmill products for on-site heat/energy purposes, as alternatives to fossil fuels. The bark market continues to be influenced by the weather and conditions within the bark market during 2013 were relatively flat, although optimism did improve as the year progressed and brighter prospects for 2014 are expected.
The domestic sawmilling and wood processing sectors remain seriously concerned about the displacement of industrial roundwood from traditional processors to the large-scale electricity generating sector, aided by generous public subsidy (ROCs). Whilst it is recognised that woody biomass has a role to play in the mix of renewable fuel sources in the UK, we continue to emphasise the importance of the hierarchy of use; wood that is suitable for product manufacture should be used for this purpose in the first instance. It can later be recycled and reused and when it has no further use for product manufacture, it can be burnt for energy purposes, preferably in efficient combined heat and power (CHP) plants. The advent of the Renewable Heat Incentive (RHI) poses a similar threat to the domestic wood processing industry.
Tree pests and diseases continue to be a major concern to UK wood processors. Of particular concern is the extent and severity of Phytophthora ramorum disease of Larch. The significant volumes of Larch that are to be felled as a consequence of infection will present challenges for the sector, both growers and processors alike. In addition, there is Dothistroma Needle Blight in Pine and Chalara disease of Ash to contend with, although it must be said that Chalara does not have the significant economic impact of the two other diseases.
These diseases pose serious questions for restocking policy and work is progressing on the assessment of 'alternative' species.
The appointment of a Chief Plant Officer by Defra in April 2014 has been a welcome development. This appointment was one of several recommendations made by the independent Tree Health and Plant Biosecurity Task Force.
Concerns persist about the future of the public forest estate in England, despite Government assurances that it will remain in public ownership. New management arrangements for the public forest estate in England are to be introduced, although the timescale remains uncertain, as it will be subject to Parliamentary approval. However, UKFPA continues to call for the new management body to have at its heart the principal objectives of protecting, improving and expanding the public forest estate in England, thereby increasing the delivery of valuable economic, social and environmental benefits.
In Scotland and Wales, there is increasing concern in the wood processing sector about long term continuity of wood supply from the public forest estate and in particular, the need for greater focus on commercial forest expansion.
Prospects for 2014 seem very encouraging. The strong demand experienced throughout 2013 has continued into 2014 and most sawmills reporting "unprecedented" levels of demand at the start of the year.
The domestic firewood market is the largest market for domestic hardwood in the UK and is continuing to grow. Higher prices have been seen in recent sales.
Oak has retained its popularity and as ever, good quality material is sought after. Continuity of supply and quality remain the key issues for domestically produced Oak. The market for most other domestic hardwood species is relatively small, but here too, quality is a key issue. There is evidence of growing interest in, and demand for Ash, as some buyers seek an alternative to Oak for furniture and small items.
Forestry Commission statistics show that in 2012, (the period for which the most recent statistics are available), 75,000 tonnes of UK grown hardwood were delivered to UK sawmills, down from 81,000 tonnes in 2011, (together with 17,000 tonnes of imported hardwood, down from 20,000 tonnes in 2011). Hardwood production from UK sawmills in 2012 was 48,000 cubic metres, down from 52,000 cubic metres in 2011.
Report compiled 14 April 2014.