9 January 1998

Several factors make it a hard 97 for timber

By Louise Rose

DESPITE increased production levels of small round-wood in the UK during 1997, a range of factors limited demand from usual buying sources.

"We will remember 1997 for being a difficult year for timber markets," says Matthew Rivers, director Tilhill Economic Forestry.

And factors affecting UK suppliers included the closure of some processing units for construction works, the landfill tax, new packaging recycling regulations, increased availability of saw mill waste, which caused a growth in the supply of recycled fibre, and the mid-year strength of the £.

The strength of sterling prompted increased imports from the Baltic states, which by the end of last year led to huge stocks building up on the docksides, and a depression in the sawn goods price.

However, Mr Rivers offers some reasons for optimism about the medium-term outlook for 1998. "Sterling has dropped back from its peak and there is considerable investment underway in additional processing capacity in the Welsh Marches, south Wales, the Scottish borders and Ayrshire."

But trends during the early months of this year will depend on the clearance of the stockpiled imports, the stability of sterling and later in the year the possibility of increased construction activity. UK housing starts increased by 20% in 1997 compared to 1996 and there is a possibility that the release of capital receipts from council house sales for new building projects may bolster this demand in 1998 – the projected spend is about £4bn.

Also saw log prices were stable during the first six months of 1997, with strong demand for pallet and fencing timber.

"It seems that domestic fencing benefited from the windfall spending in mid-1997," he said .