Timber and Panel Products had a slow start to the third quarter of 2017, but enquiry levels improved as we moved into September and the improvement is continuing in Q4.
We are finding ways to live with the continuing political uncertainty from protracted Brexit negotiations, but the uncertainty is causing delays to infrastructure investment which will slow timber and panel products growth. However supply problems, particularly for panel products, have had a bigger impact on performance and will influence trade from quarter four into next year. So we’ll see price pressure, regardless of the strength of the pound, with shortages of product and changes in regulations across supplying countries.
The supply of hardwood timber in Q3 was relatively stable and availability generally good. However, legislative changes in Croatia that require kiln drying of Croatian grown European Oak in the country rather than exporting to facilities in other European countries, has delayed supply which is affecting availability. Demand for western red cedar, specifically for cladding, remains strong and prices will continue to rise.
Supply of Far Eastern timber, specifically Meranti, will come under pressure in Q4 and Q1 2018. Changing legislation has reduced the number of sawmills, and demand for logs for plywood will trigger price inflation.
OSB (Oriented Strand Board) supply difficulties show no signs of improvement. Manufacturers in UK and Ireland are limiting allocations and available volume from overseas manufacturers is also limited. Pricing will be stable in Q4 but we expect further increases early in Q1 2018.
Continued MDF (Medium Density Fibreboard) production problems have tightened the supply chain again. So supply difficulties will certainly continue into the next quarter, causing significant price increases over this period.
Costs and supply of veneers for plywood production, along with environmental moves to come away from coal-fired energy, means that production is under pressure in China. These pressures will reduce availability and naturally increase price levels.