“Invisible and inevitable, like a butterfly that beats its wings in one corner of the globe and with that single action changes the weather halfway across the world.” And so it is in the world of timber today - the manifestation of the idea that small causes may have large effects. In the current scheme of things, it is the impact of rather larger events that is causing turmoil in the global timber supply chain, with potentially seismic consequences for how we build in the UK, the world’s second largest importer of timber after China.
The coronavirus impact on timber supply
The Coronavirus pandemic may or may not have started in China, but its biggest impact to date has been in the United States of America. The country’s belated shutdown of industry earlier this year is well documented but not so widely published was the effect this had on timber production there. Some 2.5 million m3 of output was lost and many sawmills closed down before a massive Federal stimulus package stoked a boom in housing starts to around 1.5 million units. Ordinarily this might have been manageable with timber grown in North America, but a combination of insect infestation, forest fires and heavy tariffs placed on Canadian imports - the USA’s largest external supplier - ensured that vastly less lumber has been available to sawmills. This shortage inevitably meant an almost quadrupling in the price of construction softwood and a search for alternative sources of supply. And so America turned to Europe.
Europe steps up to the US plate
Given the exponential rise in prices in the USA, the market there could outbid European users for their own timber and still be economically competitive against its domestic supply. With a roughly 19% premium suddenly available to them, sawmills in Europe have, as a result, been redirecting much of their output towards the States. Purchasers in the UK now find that prices here have risen by around 22% - if they are able to get timber at all from their continental suppliers. UK consumption being what it is, existing softwood stocks have virtually run out and orders from Europe are now dealt with on an allocation basis, meaning that there is no longer certainty of timescales or volumes available.
Supply challenges in the UK
At a time when the housebuilding industry alone is seeking to recover, this is hugely disruptive and expensive in terms of lost time and rising costs, placing offsite manufacture and associated jobs in some jeopardy. The UK construction industry is not unfamiliar with challenges caused by fluctuations in the economy, but the problem highlighted above is unlikely to end soon, with timber frame companies, for example, being held by housebuilding developers to fixed price contracts at a time when they are struggling to obtain material at any price.
And then there’s Brexit
And all this before Brexit arrives on 1 January 2021. Until now, raw sawn timber has been classified as a commodity and there is an expectation that this status will remain to ensure no or low tariffs on imported material. However, a ‘no deal’ resulting from political negotiations has the potential to substantially alter the normal importation process, with timber coming from the European mainland henceforth subject to due diligence checks on legality and risk assessments. The relevant agencies of UK government are already tasked with assessing all European countries on these issues, with even Belgium now considered to be high risk since so much pan-European timber comes here through its ports. With UK importers and distributors unused to the legislation and additional paperwork necessary to ensure speedy transition of material from EU to UK jurisdiction, delays in processing orders and rising costs look likely to be the norm for a very long time.
Impact on UK construction
So what does this mean for UK-grown timber and, more particularly, the Scottish-grown resource? Traditionally reliant upon imported material for 80% of its requirements, the UK construction industry faces significant challenges, as does Scotland’s timber sector which, until now, has been pushing hard to increase the volume of timber frame used in housebuilding in England against the more traditional brick and block methods. This dependency may well have to change and a more pragmatic view taken of home-grown supply if homebuilding market share is not to be lost. The forestry and processing industries primarily produce C16 material - a strength grade eminently suited to platform timber frame construction, but whether it can produce enough of it on a quick turnaround basis remains to be seen. Indeed, we may well be in the midst of a perfect storm - that butterfly effect again - as the forestry sector here substantially curtailed its operations when lockdown was first imposed. The result: reduced log availability to UK sawmills.
Can the forestry sector adapt?
Where previously the Scottish forestry industry was forecasting a 50% increase in the use of Scottish-grown timber in construction from 2.25 to 3 million m3 between 2018-32, this estimate was based on the anticipated average market growth over this period. Should the market expand dramatically and quickly, the industry may now find it hard to meet demand, again with a likely rise in costs of available material. That said, the possibility of price rises of significant magnitude could change the dynamics of the industry, shifting home-grown timber production away from less profitable markets - an indirect benefit, perhaps, of butterflies flapping their wings in North America.
Global now means local
Yet, if ever there was an argument to be made and a time to make it for greater use of home-grown timber in construction, it is here and it is now. Certainty of timber supply is paramount and, given the circumstances highlighted above, where is it likely to be found if not here? There is much that can be achieved with increased utilisation of the home-grown resource, particularly with agencies such as the UN emphasising the need to go local for international sustainability goals are to be achieved. Seen in this light, the Build-Back-Rural initiative is not so much industry-disruptive, as indicative of the emerging zeitgeist. To be responsibly global, we need to maximise use of local resources.