A return to more stable trade in 2023

The timber industry is returning to a period of stability compared with recent years, the latest import statistics suggest. Yet wider construction industry forecasts suggest a sharp decline in output is coming. TDUK reports on what this means for the different timber sectors.

It is rare for the majority of imported timber and panel products to record the best month of a year all at the same time.

But this is what happened in May 2023 – the latest month for which data is available – when imported volumes of softwood, hardwood, plywood, particleboard and engineered wood products were higher than in any of the preceding months of 2023. Softwood imports have proved particularly buoyant, with volumes seen in May 8% higher than the 2023 average.

Overall, however, total timber import volumes in the UK during the first five months of 2023 were 378,000m3 lower, or 8% less, than during the same period in 2022. And import volumes in the month of May 2023 were still 5% below those seen during May 2022.

Signs of market stabilisation

In the long term, monthly variations appear to be stabilising following three years of dramatic fluctuation.

TDUK’s Head of Technical and Trade, Nick Boulton, says: “It appears the dramatic peaks and troughs of 2020-2022 have subsided. Monthly variations now seem steadier and more similar to the pre-Covid years.

“Stock levels on the ground in the UK have been strong, with buyers being able to access their desired specifications across all the main product groups and at price levels more reminiscent to those seen pre-COVID. The only notable exception is the shortage of Birch Plywood due to the sanctions imposed on Russia and Belarus.

“Though the overall economic outlook is undeniably negative, these latest figures suggest there is room for some cautious positivity heading into Q3. After several years of supply chains lurching from feast to famine and back again, the first half of 2023 has seen a return to what many buyers and sellers will recognise as stable trading conditions.”

Sectors defying negative construction trends

Although continued weakness in the construction industry and a poor general economic performance so far has reduced the demand for timber and panel products, some sectors have defied the current trend.

One such is the import of planed spruce. While softwood imports in total are 6% lower in 2023 to date, planed spruce has grown, albeit modestly, by 1.4%. The exporting countries outperforming the market and generating this growth are Sweden and Latvia. The 7% growth in volume from Sweden has enabled Sweden to claim 62% of planed spruce imports in 2023 to date.

OSB imports in 2023 to date are 26% higher than in 2022 and higher than any year this century, except for 2021. All of the leading countries have raised volume supplied, led by a nearly threefold increase from Luxembourg. Volumes from Luxembourg were relatively low in 2022 compared to the other leading countries, hence the large numbers. The main countries of Ireland, Latvia and Germany have each increased volume strongly in 2023.

The other growth product alongside OSB in total in 2023 to date is MDF, where import volumes are 5% ahead of the first five months of 2022. MDF imports are now higher than particleboard, OSB, hardwood, coniferous plywood and of a similar size to hardwood plywood. The 5% growth has been generated by Ireland, Germany, China and Brazil all delivering double-digit growth rates in 2023. Volume from Spain is a little lower and the total increase of 5% has taken place despite substantially less volume imported from Belgium. The 5% growth has also taken place despite strong UK MDF production.

May 2023 was also a month of superior performance for all softwood imports. Imports in each of the first four months of 2023 were below the average for each month over the last four years. However, this changed in May 2023 with softwood imports for the month 8% higher than the five-year average for the month of May. This augers well when compared to the lower volumes imported in the second half of 2022.

Reduced construction demand ahead

The overall economic picture for the UK is gloomy, with sticky inflation and high interest rates reducing confidence in the construction sector. This is seen in the latest Construction Products Association (CPA) forecast, with crucial timber demand-driving sectors like private housing and repair, maintenance and improvement (RMI) predicted to decline by 19% and 11% respectively, before likely returning to growth in 2024.

Nick continues: “If construction demand in the UK remains low in the second half of 2023, as predicated by the CPA, the supply and demand balance for structural softwood should remain stable overall but specifications in the most popular sizes and lengths may start to see holes appearing as we progress through Q3.”

The CPA’s latest State of Trade Survey for 2023 Q2 showed a continued split in performance in the construction products manufacturing industry.

Heavyside manufacturers’ sales decreased for a fourth consecutive quarter, whereas sales from lightside producers registered another quarterly increase, adding to a run of growth that began in 2020 Q3.

Looking to the next 12 months, 14% of heavyside manufacturers anticipate a fall in sales, while 46% of lightside manufacturers anticipate an increase.

Strong activity in commercial refurbishment, energy efficiency improvements and fit-out work has driven a three-year run of growth for lightside product manufacturers, which contrasts with reticence for new project starts (particularly for private housing, and commercial and factory newbuilds) that continues to hold back heavyside sales.

Timber products are usually categorised with the heavyside materials manufacturers, but where members are supplying into lightside applications those products ranges may be bucking the general trend.

The CPA’s Summer Forecast expects a sharp 7% overall decline in construction output in 2023, with private new housing and RMI seeing double digit falls before a recovery begins in the second half of 2024.

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