Growers shake off Hurricane Darwin as demand for timber keeps increasing

WINDFALL: While forestry owners continue to deal with the aftermath of Hurricane Darwin the outlook for the forestry sector is very positive due to strong domestic and international demand

WORTHY: Forestry keeps confirming its worth as a safe sound investment, now and for the future

WINDFALL: While forestry owners continue to deal with the aftermath of Hurricane Darwin the outlook for the forestry sector is very positive due to strong domestic and international demand

WORTHY: Forestry keeps confirming its worth as a safe sound investment, now and for the future

WINDFALL: While forestry owners continue to deal with the aftermath of Hurricane Darwin the outlook for the forestry sector is very positive due to strong domestic and international demand

William Merivale

April 28 2014 06:04 PM

The aftermath of Hurricane Darwin on timber growers, harvesting contractors and sawmillers alike will continue to be felt for some time.

However all is not as bad as initially feared. While some owners have been badly affected and will incur a much reduced return due to premature clearfell, the overall investment outlook for forestry is very positive.

The market, though, is volatile. In recent months timber prices have fluctuated considerably and it has been difficult for owners to assess the market.

Earlier this year the price for sawlog reached an all-time high, with a parcel of timber offered by Coillte at one roadside auction fetching over €100/t.

This generated much publicity, but it was just one sale and prices are now at least 30pc lower.

While such high prices sound very attractive to the grower they are unsustainable for processors. A wildly fluctuating market is unhealthy for both buyers and sellers.

In Ireland the timber grower is fortunate to have a fairly competitive market, with eight large mills strategically located around the country, and a number of smaller mills operating in niche markets.

None of the large mills are operating at full capacity, so demand for logs is as strong as ever and most of these mills are prepared to travel considerable distances for supply.

For several years Irish timber growers have consistently been paid similar prices for 25-30-year-old Sitka Spruce as their Scandinavian counterparts can achieve for 80-year-old Norway Spruce.

Mistrust

Sometimes there is an understandable degree of mistrust on the part of forest owners when looking to sell their produce, but at the same time we all need to appreciate that our sawmills are operating on tighter margins than their colleagues abroad.

The prices paid here at the very least match and frequently exceed those paid in Britain and Europe.

Hopefully we will soon see a better relationship between the producer groups and sawmills with more transparency, and trust, between all concerned.

Meanwhile, at risk of repeating myself, first thinnings should be regarded first and foremost as a silvicultural, and not a commercial, operation.

Until recently, a first thinning at best broke even and usually incurred a cost, but we're now in the very fortunate position that a surplus from first thinnings is the norm.

This is due to the emerging market for wood as an alternative to fossil fuels. The availability of sufficient raw material combined with the necessary infrastructure investment has allowed the market to develop.

This has resulted in a two-tier market for pulpwood. Prices paid for pulpwood used in the manufacture of oriented strand board (OSB) and medium density fibreboard (MDF) are still at lower rates than those paid by the energy markets.

Overall, the demand for timber will continue to exceed supply both nationally and internationally.

Adaptable

Technological advances in manufacturing and wood engineering, mean more new uses for timber.

Add to that the ongoing quest for renewablesources of energy and everything points to a very positive future for existing and new entrants to forestry and timber production.