Dramatic price increases for timber

By Donal Magner

Timber prices have escalated over the past eight months to defy most market trends, considering the dramatic downturn in construction during the worst recession in living memory.

Those who predicted that timber prices would continue to fall have been pleasantly surprised.

The slump in prices, from late 2008 and the first half of 2009, has been reversed since late last year and dramatic increases have been recorded over the past two months.

There are two sources for timber prices in Ireland. Private sale prices are supplied by the Irish Timber Growers Association (ITGA) based on data collated confidentially by UCD forestry section, while Coillte provide prices for sales to sawmills.

Other sources worth looking at are prices from the Forest Enterprise and Forest Service for data in Britain and Northern Ireland.

Coillte prices cover a wide range of sales, species and areas, so they are an accurate barometer of price trends in the Republic.

However, because they are limited to sawmill sales, prices for smaller material, mainly pulpwood are either not available or appear sporadically because most small logs (7cm to 14cm top diameter) are sold internally to the company's panel board mills. On the other hand, ITGA prices are for a small number of sales in most categories and may not always reflect national trends.

That said, it can be assumed from data available from Coillte, ITGA and the Forest Enterprise that prices dropped between 2008 and 2009 (Table 1), but Coillte quarterly prices show an increase from the second half of 2009 to last March for medium to large logs (Table 2).

Price trends are also up for small logs 7cm to 14cm top diameter (mainly first thinning and mainly in the average size category up to 0.174m3).

While no prices as yet are available for 2010 in this category, all forestry consultants and buyers for sawmills contacted by the Irish Farmers Journal agree that there have been significant price increases, especially in 2010.

Private sale prices, which averaged between €5 and €8.73/m3 in 2009 have increased to between €7.50 and €14m3 during March and May.

A price of this magnitude would provide revenue of between €300 and €600/ha for first thinnings in fully stocked plantations.

Sawlog

Medium sized logs between 0.225m3 and to 0.374m3 increased from around €25/m3 and €32/m3 between the quarters January to March 2009 and the same period in 2010 (Table 2).

Large sawlog which was between €27/m3 and €35/m3 in 2009 had increased to between €41/m3 and €48/m3 during the quarter January to March 2010.

It will be interesting to see data for the quarter April to June but further price increases are inevitable based on current information. Buyers are now in agreement that prices for standing sales of boxwood material (medium-sized logs) have increased to €45/m3, which equates to around €70/m3 for roadside sales.

Larger logs of around 20cm top diameter, and upwards, are commanding prices of close to €70/m3 standing and €90/m3 at roadside. As a result, some sawmills are paying over €100/m3 for delivered in large logs at the moment.

The increase in timber prices is not just confined to Ireland. Log prices have increased internationally, especially in the northern hemisphere including North America, the Nordic countries, central Europe and Britain.

Canadian and western North American processors are looking to Asia rather than domestic markets where China has eclipsed Japan as the main market for softwoods.

Log price trends in Nordic countries mirror Ireland with increases far higher in the second half of last year than in 2008 with prices in Sweden edging out Finland, according to the Wood Resource Quarterly. Log prices have also increased in Britain admittedly from a very low base.

However, it is log shortages rather than demand that is driving price upwards, both for logs and finished product. Irish processors compete successfully in the British market and have increased exports considerably for a range of products, including construction, fencing and pallet.

Irish sawmills, are also experiencing shortages in supply of suitable logs. Mills have part-filled this deficit by importing logs from Scotland. This is not an easy task especially as they now have been joined by German buyers who also have difficulties in sourcing suitable logs.

Irish mills have shown their ability to compete for logs in Scotland since around 2003. In the past, log prices in Ireland have been up to three times higher than in Britain. The gap has narrowed in 2008 and 2009 (Table 1) but the differential is still significant. Average log prices in Britain are higher than Scotland, although localised prices can be much higher than national averages.

high prices

Either way, the current high prices paid for logs is welcome news for farmers with plantations, regardless of the log size and thinning stage, providing all mills remain solvent.

A spokesperson for one of the sawmills said: ''Mills are paying between €85 and €100/m3 for medium to large logs delivered in. These are processed and exported to Britain, where sawmillers are paying only a fraction of the prices paid in Ireland, so it is debatable if mills can continue to compete in this environment.''

All mills interviewed encouraged farmers to thin plantations and avail of prices up to three times higher than in Britain.

Richard Lowe, of Coillte, said that the ''high log price in Ireland means that there is an active market currently for farm forest owners' timber''. This is a view shared by Donal Whelan of the Irish Timber Growers Association, who urged growers to thin their plantation and sell while good prices last.

He also reminded growers about the availability of a newly developed timber sales dispatch system, which is designed to support growers and encourage thinning of private forests (see panel on page 33).

The message to growers is to prepare their plantations for thinnings and a lucrative harvest, especially now that Minister Connick has reintroduced the roading grant.

Picture Above:At a recent field day in Favour Royal Forest organised by the Society of Irish Foresters and ITGA were Noel Melanaphy, Willie McKenna (seated on Patrick's Chair) and in the front Bill Wright, Trevor Wilson and Ken Ellis. Picture: John McLoughlin