While timber price trends are difficult to assess at the best of times, they become well-nigh impossible when external factors outside the control of forest owners and timber processors are factored in. The recent large-scale forest damage throughout central Europe is a case in point. Storm damage and bark beetle infestation, exacerbated by drought conditions last year have combined to release an estimated 51m m3 from forests in Germany, Austria, Switzerland and the Czech Republic.
Normally the impact of logging in these countries has little impact on prices achieved by forest owners and timber processors but the upsurge in exports in central Europe has reached the UK which has a knock-on effect on Irish prices. This has created downward pressure on timber prices throughout Europe including the UK, the marketplace for 90% of Irish sawn timber, fencing and board material exports.
Average standing timber prices achieved by Coillte for the second quarter in 2019 have fallen since the same period in 2018 in all medium to large log size categories (Table 1). In 2018, prices achieved in these categories ranged from €66/m3 to €89/m3, while in the second quarter this year the range was €56m3 to €62/m3. However, last year’s prices, especially from April to September, were exceptionally high.
While prices are not yet available up to this September, sawmillers, private forest owners and David Feeney, Coillte’s director of commercial and supply chain, agree that prices have continued to fall. We won’t know to what extent until third-quarter prices are published later in October.
A comprehensive assessment of timber price trends requires a longer view. Comparisons over the past 10 years demonstrate the variability of annual timber prices which fell to €29/m3 for Coillte sales in 2009 – after the economic crash – and reached a high of €77/m3 last year.
Average quarterly log prices have varied significantly even over the past three and a half years from €49/m3 to €77/m3 (Figure 1). The average price achieved by Coillte for the second quarter this year, while down to €59/m3 , is well up on the average price achieved throughout 2016 but down on 2018.
Competition
Coillte prices are for medium to large logs which are in direct competition with Scandinavian and Baltic countries and now the artificial rapid upsurge of exports from central Europe to the UK. This has been unavoidable as legislation in countries such as Germany requires the quick removal of damaged timber to curtail the spread of bark beetle damage.
Like all unexpected upsurges in timber production, there is a domino effect which creates marketing difficulties for countries normally outside the range of countries affected. When this is combined with Brexit uncertainty and resultant currency fluctuation, especially weak sterling, a number of market dynamics occur.
These include:
Increased competition: while Ireland is currently importing some sawn timber from Germany, the volumes are small. However, increased UK imports of damaged wood from central Europe create strong competition for Irish sawmillers who rely solely on the UK for their exports and board mills who depend heavily on the UK. Price: increased UK imports of central European timber are driving timber prices down in the UK which obviously is creating major challenges for Irish sawn timber as they compete with new suppliers, as well as the traditional big Scandinavian and Baltic producers.Brexit: in addition, Brexit uncertainty and weak sterling are resulting in lower margins in a market which is extremely competitive at the best of times. Brexit has also created uncertainty and lack of investment confidence with reports of some construction and other projects being stalled or postponed.Domestic market: in this scenario, mills are pushing more product into the domestic market and competing heavily with each other which means prices are dropping in Ireland as well as the UK.While prices are down for medium and large logs and their eventual products, markets for small logs (pulpwood) remain good. Outlets for small wood include board products (OSB, MDF and door skins) and wood energy (wood chips and wood pellets). These markets have achieved a boost over the past year as demand has increased from the UK panelboard sector including Kronospan, the OSB mill in Wrexham.
The long-term sustainability of this market may be in question but it has led to a welcome increase in the export – and price – of small logs, in size categories up to 0.224m3. This is borne out by the prices in the UCD wood price quarterly (WPQ) confidential report commissioned by the ITGA (Table 1).
The recent Support Scheme for Renewable Heat (SSRH) is slowly beginning to increase demand for small logs and wood chip. While it is too early to assess this market, it has strong potential as the pressure to increase Ireland’s reliance on renewables continues to grow.
While prices and markets remain uncertain, the advice to growers with first and second thinnings is to thin their crops as prices for small logs are holding firm. However, forest owners with large logs at the final harvest (clearfell) stage should shop around. If not happy with offers, they should hold off until prices increase. In windfirm sites, they can also harvest a further thinning to provide an income stream until they decide to clearfell.
Irish forest owners are fortunate in having extremely competitive timber processors.
They have shown in the past that they can continue to adapt to changing market situations.
They are confident that they can meet the challenge of increased timber supply from central Europe, although none of the mill representatives were prepared to make forecasts about the short- or long-term market impact of Brexit and currency fluctuations.
While timber price trends are difficult to assess at the best of times, they become well-nigh impossible when external factors outside the control of forest owners and timber processors are factored in. The recent large-scale forest damage throughout central Europe is a case in point. Storm damage and bark beetle infestation, exacerbated by drought conditions last year have combined to release an estimated 51m m3 from forests in Germany, Austria, Switzerland and the Czech Republic.
Normally the impact of logging in these countries has little impact on prices achieved by forest owners and timber processors but the upsurge in exports in central Europe has reached the UK which has a knock-on effect on Irish prices. This has created downward pressure on timber prices throughout Europe including the UK, the marketplace for 90% of Irish sawn timber, fencing and board material exports.
Average standing timber prices achieved by Coillte for the second quarter in 2019 have fallen since the same period in 2018 in all medium to large log size categories (Table 1). In 2018, prices achieved in these categories ranged from €66/m3 to €89/m3, while in the second quarter this year the range was €56m3 to €62/m3. However, last year’s prices, especially from April to September, were exceptionally high.
While prices are not yet available up to this September, sawmillers, private forest owners and David Feeney, Coillte’s director of commercial and supply chain, agree that prices have continued to fall. We won’t know to what extent until third-quarter prices are published later in October.
A comprehensive assessment of timber price trends requires a longer view. Comparisons over the past 10 years demonstrate the variability of annual timber prices which fell to €29/m3 for Coillte sales in 2009 – after the economic crash – and reached a high of €77/m3 last year.
Average quarterly log prices have varied significantly even over the past three and a half years from €49/m3 to €77/m3 (Figure 1). The average price achieved by Coillte for the second quarter this year, while down to €59/m3 , is well up on the average price achieved throughout 2016 but down on 2018.
Competition
Coillte prices are for medium to large logs which are in direct competition with Scandinavian and Baltic countries and now the artificial rapid upsurge of exports from central Europe to the UK. This has been unavoidable as legislation in countries such as Germany requires the quick removal of damaged timber to curtail the spread of bark beetle damage.
Like all unexpected upsurges in timber production, there is a domino effect which creates marketing difficulties for countries normally outside the range of countries affected. When this is combined with Brexit uncertainty and resultant currency fluctuation, especially weak sterling, a number of market dynamics occur.
These include:
Increased competition: while Ireland is currently importing some sawn timber from Germany, the volumes are small. However, increased UK imports of damaged wood from central Europe create strong competition for Irish sawmillers who rely solely on the UK for their exports and board mills who depend heavily on the UK. Price: increased UK imports of central European timber are driving timber prices down in the UK which obviously is creating major challenges for Irish sawn timber as they compete with new suppliers, as well as the traditional big Scandinavian and Baltic producers.Brexit: in addition, Brexit uncertainty and weak sterling are resulting in lower margins in a market which is extremely competitive at the best of times. Brexit has also created uncertainty and lack of investment confidence with reports of some construction and other projects being stalled or postponed.Domestic market: in this scenario, mills are pushing more product into the domestic market and competing heavily with each other which means prices are dropping in Ireland as well as the UK.While prices are down for medium and large logs and their eventual products, markets for small logs (pulpwood) remain good. Outlets for small wood include board products (OSB, MDF and door skins) and wood energy (wood chips and wood pellets). These markets have achieved a boost over the past year as demand has increased from the UK panelboard sector including Kronospan, the OSB mill in Wrexham.
The long-term sustainability of this market may be in question but it has led to a welcome increase in the export – and price – of small logs, in size categories up to 0.224m3. This is borne out by the prices in the UCD wood price quarterly (WPQ) confidential report commissioned by the ITGA (Table 1).
The recent Support Scheme for Renewable Heat (SSRH) is slowly beginning to increase demand for small logs and wood chip. While it is too early to assess this market, it has strong potential as the pressure to increase Ireland’s reliance on renewables continues to grow.
While prices and markets remain uncertain, the advice to growers with first and second thinnings is to thin their crops as prices for small logs are holding firm. However, forest owners with large logs at the final harvest (clearfell) stage should shop around. If not happy with offers, they should hold off until prices increase. In windfirm sites, they can also harvest a further thinning to provide an income stream until they decide to clearfell.
Irish forest owners are fortunate in having extremely competitive timber processors.
They have shown in the past that they can continue to adapt to changing market situations.
They are confident that they can meet the challenge of increased timber supply from central Europe, although none of the mill representatives were prepared to make forecasts about the short- or long-term market impact of Brexit and currency fluctuations.
This is a subscriber-only article
SHARING OPTIONS: