Farming Talk: Wood demand giving timber industry boost

Despite the economic downturn and uncertainty within the euro area, the UK timber industry has remained surprisingly upbeat into 2012.

Although the UK is still consuming more wood than it is processing (nearly 80 per cent has to be imported) and the total sawn softwood demand has fallen from 10 million tonnes a year to about seven million, the strong euro and Swedish krona have aided the domestic sawlog market, in that the UK sawn timber for the construction market is enjoying a £20 per cubic metre competitive price advantage over imported suppliers.

Strong interest also continues to be shown by hardwood buyers for most grades of home-grown timber.

UK sawlog processors have increased market share by 15 per cent from 25 per cent to 40 per cent.

The substantial investment by UK sawmillers in the last few years, including Ransfords at Bishop's Castle, who are in the process of commissioning a new sawmill line, and others who have been installing biomass boilers primarily to provide heat for kilns, indicates that the market remains confident and will continue to be buoyant as the demand for new homes increases.

Also, the market for small roundwood continues to be fairly healthy with supplies to panel producers not being adversely affected as yet by the emergence of the gradual demand for biomass. I emphasise 'gradual' as the Renewable Heat Incentive (RHI non-domestic), announced in 2011 and considered to be a key driver of the small roundwood market in the form of biomass, has been slow to take off, possibly due to the slow processing of schemes to achieve Ofgem accreditation.

Despite the mild winter, which has seen a glut of firewood supply, overall, this market is showing a positively upward trend. The target is for 12 per cent of UK heating to be derived from this source by 2020. Demand for heat is currently responsible for 47 per cent of UK energy consumption.

Department of Energy figures show that in 2010, 15 per cent of the 10.1 million green tonnes of timber felled in the UK went to the energy market.

This is a threefold increase on 2007 and looking forward to 2020, it has been forecast that the demand for all biomass feedstock (this includes agricultural crops and agricultural waste as fuels) could reach 6.4 million oven dry tonnes half of which, will be supplied by the domestic market.

If electricity demand under the Renewable Obligation Certificate is added to this with the construction of new combined heat and power plants coming onstream and the second phase of the Renewable Heat Premium Payment scheme, worth £25 million (£10m more than the first phase) to provide support for the installation of renewable heat technologies in the household sector, the total domestic demand for biomass could be in the region of 6.5m to 8.4m ODT.

Martin B Jones is a forestry consultant and managing director of The Woodland Stewardship Company based in Shrewsbury