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timber packaging solutions, at the end of last year (ttjonline.com December 5, 2022 and TTJ January/February 2023) had had a significant effect on the pallet market. Put simply, some mills that had counted Scotts as a customer in the past found that was no longer the case from January 1. “People were panicking and ringing around, offering their pallet wood and prices started falling,” said a contact. “The purchase of Scotts by BSW will change the market,” said another, unequivocally, adding “the market is softening, for sure”.


Another major sawmiller has taken a bullish approach to the slack demand and has put all its efforts into finding new customers – as well as maintaining its existing ones. Seeing the writing on the wall when the market first dipped last summer it changed its strategy and “went after it”. “We rolled our sleeves up, got out on the road and took on a lot of new business, particularly in the UK,” said the contact. “We didn’t drop an hour of production. Our existing customer base stayed loyal to us – they were just ordering less due to demand being less, so we had to spread our wings a bit across new accounts. “We pulled through [H2, 2022] ok and as a result of that 2023 has been exceptionally strong,” he added. “We came back earlier than planned after Christmas because our order book was very strong and we’ve never looked back. Our stock levels are probably as low as they’ve ever been and are at the sweet spot. We don’t want them to get any lower because we are where we want to be in terms of having good work in progress stock coming through.”


The contact said that the closing of the price gap between imported C24 and home- grown C16 had reduced demand for Irish construction timber but that had given them “the opportunity to look at other products out there” and they had put more production into fencing, for example. And, he pointed out, the gap between C24 and C16 has “fortunately started to widen again”. “We’re very flexible and no matter what the order book looks like we can change the production schedule,” he said. “A lot of our customers are taking mixed loads – some C16 and some fencing.”


He added that the mill had been working overtime all last year and had started overtime again at the beginning of February. Other mills said they had maintained their standard production schedules, albeit that is “far below capacity” and may include cutting in different ways and shortening log runs. And several noted the importance of maintaining production in order to retain their labour force.


As for what they are cutting, Coillte says that the spike in demand for small logs


reported at the end of last year has come to an end and there is now “normal distribution of logs going into sawmills.


“They are back cutting large sawlog in the same proportion as they would always do,” said Coillte. “What they are cutting from it might be slightly different but they are taking it – and screaming for it. Demand is very strong for large sawlog as well as small sawlog – for everything actually.” Coillte reports that its intake has been at record levels this year, with one week hitting the highest ever at 47,000m3


of sawlog. “Our


average year to date has been very strong, maybe around 8,000m3


more per week than


last year. However, we’re hearing from our customers that that doesn’t reflect their operational levels but is reflective of their contracted levels on the private side.” Mills contacted by TTJ certainly didn’t report any difficulties regarding log supply and the felling licence application problems that dogged the sector a couple of years ago have abated. However, there are other problems in forestry. “We’re in a reasonable position for felling licences and even have a good portion of 2024 licenced,” said Coillte. “However, road licences are a real problem for us and we are basically operating on a just-in-time road system.”


In a nutshell, while the felling licence may have come through and the customer is ready to access the site, there is no road from which to do so, or the road is going in so late that it hasn’t had time to settle.


“It’s costing us a fortune to maintain roads because we are having to use them sooner than we should,” said Coillte.


And a problem remains with some of the felling licences themselves, too. While the objections to them have diminished, many are subject to Department of Agriculture conditions and this is severely hampering access to sites and making it difficult to have an even flow and spread of material. “We had one licence that had 57 pages of conditions,” said Coillte, while another contact related a tale of a site that couldn’t be harvested due to a badger population on a small part of it despite the fact that a state-led badger cull was going on in an adjacent field. “There are new environmental challenges all the time and the lack of co-ordination [between state departments] is frustrating,” he said.


Coillte said it is working with its customers and with the Department of Agriculture to try to get some regulatory reform but added that there may be more legislative challenges ahead. “We’re hearing there is stuff coming from the EU that is a threat in terms of how licences could be perceived going forward,” said the contact. “Things like continuous cover forestry (CCF) for example. If we have


to go CCF then we will have a problem and we won’t be able to produce as much. These are just threats and haven’t happened yet but we’ve hired a new director of regulatory affairs to help us get through this mire of new regulation.”


As for the here and now, Coillte’s regular contract events and auctions have proceeded as normal and it is committed to its target volume of 1.65 million m3 carrying around 200,000m3


this year. It is also that didn’t sell


from previous years and will offer as much of that as it can, given the situation regarding licence conditions.


By last October log prices had already fallen 25% year-on-year and there were “significant” drops every month since then until March, resulting in a year-on-year decrease in the region of 35-40%. The price stabilised in March, although with its customers “still not overly optimistic” about the market conditions – and the prospect of strong sawn prices – Coillte says it doesn’t know how long that will continue for. It remains hopeful, however, that log prices have “reached the bottom of a very steep fall”. The sawmills have a completely different


take on log prices, of course, with one describing them as on “an upward trajectory”, which didn’t make sense to him given the current sawn prices and demand. The wood energy sector has been blamed for distorting log prices and demand for material but that would seem to be a short- term criticism as it has now “come back to a more sensible and sustainable level” following a difficult winter in terms of managing demand for wood pellets. Prices had got to “a really ridiculous level” for the purchaser but are coming down again now and, of course, there will be less demand in summer. However, firewood is still competing at very high levels for the lowest grade of material. “How long that will last given the rows over pollution I don’t know but there are going to be a lot of unknowns in the sector,” said a commentator.


Energy costs – “three or four times what they used to be” – have continued their vice- like squeeze on profit margins, as have other costs such as wages – “up 10.6% last year – and insurance – “double what it was, for less cover” – but most are phlegmatic. “We will do what we can and, like everyone else, make sure we keep the ball rolling and everyone paid,” said one contact. “There’s only so much you can pass on so we’re having to absorb a lot of it – no different to anyone else,” said another.


And even the gloomiest contact admitted that it was easy to get “caught up in the moment”. “We can’t complain,” he said. “We’ve had a good couple of years and from a long- term perspective we are in very, very good condition.” ■


www.ttjonline.com | May/June 2023 | TTJ


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