Forestry and timber markets face new challenges over the coming years – report

Global supply chains face unprecedented levels of uncertainty from the fallout of the coronavirus pandemic. This is according to a Savills report on forestry in the UK, titled: The Forestry Market.

As a worldwide public health threat, the Covid-19 virus outbreak has become a fast-evolving global pandemic with both short and long-term economic implications.

While governments around the world enact severe control measures to limit the spread of the disease, global trade and equity markets are scrambling to make sense of potential economic consequences and respond accordingly.

Lockdown environment

At the time of writing, according to the report, domestic timber markets were starting to experience the realities of working in a lockdown environment, and by early April many processors had adopted reduced shift patterns or site closures.

The most significant impact has been in the cessation of building work, which removed sawlog demand in a matter of days.

Some markets have been resilient, namely: roundwood for biomass that feeds some hospital and care home heating systems; and palletwood, on the back of an unprecedented logistical effort to keep the country fed and medical supplies moving.

Naturally, global trade, which supplies 80% of the UK timber requirement, is stalling and supply chains are being tested as processors and factories close, ports idle and shipping movements slow.

With the length and depth of any economic slowdown still largely unknown, the impact of the virus is best classed by an “estimated recovery period”. A prolonged pandemic is expected to have a “significant bearing on general economic activity and substantial follow-on effects to consumer wealth, income and spending”.

Indeed, if the opposite occurs and disease control measures allow for a faster return to normal operation, follow-on effects may be reduced, and some commentators are predicting a strong ‘bounce’ late in 2020 and through next year, stated the report.

For the UK, timber prices will ultimately be driven by availability of imported stock and demand from the house building sector. A large proportion of timber products used in the UK are imported and domestic stocks and processors are not capable of countering any large shortfall.

Supply chains, while paused, are as yet to be majorly affected; however, with isolation and social distancing measures now impacting on non-essential business, including building and construction, major disruption in demand is conceivable over the short to medium term.