26 | Sector Market Update: TTF Softwood Conference
Volumes from the state forestry company Coillte were down more than 420,000m3 (around 20%) in 2020, driving prices up and forcing mills to import logs and sawn timber.
Despite these challenges, the sector remains positive, said Mr Glennon. ROI looked on course to be the only EU country to grow exports in 2020 and its economy grew by 3.4% last year.
Above: Ice in January and February hindered exports from the Baltics
With so much of the conversation being around housing starts driving softwood demand, it was appropriate that the final presentation was given by Noble Francis, economics director at the Construction Products Association.
◄ Notwithstanding that predicted rise in output, UK mills are operating at or close to capacity. “There are next to no unused shifts and no significant additional production capacity is planned,” said Mr Ainslie. “Investments have been on efficiency rather than on increasing volume.” Selling prices were being determined by demand rather than log prices, he said, and there is no sign of a let up – either in spiralling prices or demand. “A 4% increase in UK consumption is very realistic,” he said. “It will only be constrained by supply.” According to Glennon Brothers’ estimates, sawmills in the Republic of Ireland (ROI) represent around 9% of all the UK’s imports of sawn wood (550,000m3
per year), of which
40% is construction timber, 40% fencing and 20% pallet and packaging. More than 95% of all softwood exported from ROI goes to the UK, valued at around €150m. With the UK being such an important
market for ROI, Brexit has been at the forefront of planning, with the objective being to maintain continuity of supply, said Mike Glennon, joint managing director. “A lack of urgency and a shortfall in administrative capacity has led to delays in obtaining phytosanitary certificates for shipments of logs and sawn timber with bark,” said Mr Glennon. “Additional costs have been felt as a result of customs clearance compliance and association admin.” He added that trading between the ROI and the UK fell sharply in January, with exports from ROI to GB down 14% on January 2019 and imports from GB to ROI falling by 65%. “Some of this can be attributed to Brexit stockpiling and challenges associated with Covid-19 but it is too early to assess the likely impact of this yet,” said Mr Glennon. The single biggest challenge Ireland’s sawmilling sector had been facing, he said, was the felling licence “catastrophe”, which had resulted in a dramatic reduction in the supply of Irish-grown logs (see also pp19-21).
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www.ttjonline.com
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Mr Francis said that consumer confidence was at its highest level since February 2020. “Households are more confident about their own finances, the overall economy and about making major purchases,” he said. “The Bank of England estimates that households have accumulated £160bn-worth of savings over the past year – the key to growth will be how keen consumers are to spend it.” The construction sector had experienced a
V-shaped recovery, said Mr Francis, and the severity of the Covid impact depended very much on sector. Infrastructure was the least affected, while private housebuilding had suffered a 60% decline in April 2020. This, had recovered quite quickly, particularly when developers saw house price inflation. Private housing RMI lost 40% in April 2020 but by October was 20% above pre-Covid
levels. It has slowed since then but is still substantially higher than in January 2020. The main driver of construction growth has been in housing, with strong demand boosted by government incentives. However, while demand for housing is strong, the appeal of flats has diminished. Summing up the CPA’s predictions for
2021, Mr Francis said private housing was expected to be up 15.5% and private housing RMI up 10.1%. A 14% increase in total construction is expected and even if output remains at January levels, total construction will be up 9.1%. The key uncertainties, he said, include:
• The two-speed housing market – high demand for houses, not flats;
• changing spending patterns – RMI and DIY are doing well but as travel, holidays and
eating out become possible, consumers may revert to normal spending;
• government policy reliance – much of the growth is driven by government incentives;
• commercial space demand and re-use – some workers won’t return to their offices;
• the effect of rising costs – insurance, imported product prices (not just timber)
and delayed project deadlines;
• imported product supply issues (not just timber);
• labour supply issues.
In conclusion, Mr Francis said that construction is considerably better off than most sectors of the UK economy. ■
Other
China
Europe
N. America +13%
Above: Global softwood demand is predicted to grow by 48 million m3 and surpass 400 million m3 SOURCE: TIMWOOD
to 2025
mnm3
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2025
(est)
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