Huge demand for timber for housebuilding and home improvements is likely to benefit UK timber growers in the form of increased prices over the next few years.
The timber market has attracted considerable attention in the press over recent weeks, with reports of timber shortages affecting the construction industry and builders’ merchants.
Although timber markets had a wobble because of market disruption when COVID-19 first struck, by mid-summer 2020 activity had picked back up and as demand soared so did prices.
TIMBER USE IN CONSTRUCTION RISING
According to a recent market statement by the Timber Trade Federation (TTF), there was unprecedented demand for sawn timber products in 2020 which shows little sign of slowing down.
It suggests that as a result of the pandemic, people are re-evaluating their lives and working practices, leading to more house-building, DIY projects, garden improvements, home extensions, home offices and other refurbishments.
Pre-pandemic there had been artificially high stocks of timber and wood products in the UK because people had stockpiled in case of Brexit-related disruption.
However, such was the level of demand from the construction industry in 2020 that by the end of the year no unsold stock existed in the UK.
The volume of softwood timber imports in 2020 rose on 2019 levels and imports have continued at record levels through Q1 2021, but demand continues to outstrip supply.
UK-grown timber supplies are insufficient to replace the level of imported timber demanded by UK buyers.
Other countries are also willing to pay more for sawn timber product, diverting product away from the UK, further tightening the supply dynamics.
FUTURE OUTLOOK FOR WOODLAND VALUES
Looking forward there is little sign that there will be a drop off in demand for timber from the building industry or for domestic refurbishment.
TTF suggests that coupled with the problem of tight supplies the upward price trajectories are “unlikely to change at any time in the near future”.
England’s Tree Action Plan, published on 18 May, also includes a commitment to increase the use of timber in construction yet further.
It suggests that 22% of English new-build houses were built using timber frames in 2016, but in Scotland about 75% are timber framed, proving that building practices are already available to increase timber use.
This suggests that that for the foreseeable future UK timber growers have a captive market to sell their timber and the value of woodland where a commercial crop can be harvested is likely to increase.
Contact Ed Daniels, Head of Forestry at John Clegg & Co, for independent forest asset management and investment advice.