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The response by the forest industry to Brexit has been encouraging so far. It has galvanised the sector in exploring ways to address issues that have already arisen from Brexit, such as the fall in the value of sterling, and future trading challenges.
One important initiative has been the uniting of relevant companies and organisations – north and south – under the Timber Industry Brexit Forum (TIBF).
While members of the timber processing sector have major concerns about the future, there is not the same despondency as there is in other sectors, especially in the food and drinks industry.
Total exports of sawn and panel boards are now at 75%. Sawmills alone have increased exports from 20% to 65% since 2008. While this is a major achievement, it is also viewed as the sector’s Achilles heel, as virtually all sawn products are exported to the UK. However, sawn timber doesn’t attract tariffs, which is likely to continue even if the World Trade Organisation (WTO) has to intervene in what could ultimately be a hard Brexit. On the other hand, a 7% tariff is applied to panel board products.
A forecasted increase in demand for construction timber in the domestic market will take some of the pressure off exports in the medium term.
Long term
While it would be understandable for timber industry stakeholders to address short-term issues, the stakeholders we spoke to haven’t lost sight of medium- to long-term major policy challenges such as ensuring continuity of log supply.
Mike Glennon, joint managing director of Glennon Brothers, outlined the following two major challenges over the coming decades:
He emphasised the need to maximise timber for processing in construction and create the optimum balance between timber for construction, fencing, panel board and energy.
“Much of the increased demand for wood fibre, in the period up to 2020, will be from the growing forest-based biomass energy sector,” he claimed.
“To meet the stated Government targets for renewable energy by 2020, the gross demand for wood biomass for energy use on the island will increase from 1.9m m3 in 2014 to 3.3m m3 in 2020, which will need a major drive to mobilise timber.”
Afforestation
The development of the timber processing industry in Ireland to compete against intensive international competition has been closely aligned with increased afforestation, first by the State and since the early 1990s by the private sector – mainly by farmers.
Mike Glennon is critical of the performance of the afforestation programme. “The current annual planting target of 10,000ha is well down from the previous target of 20,000ha. “However, even these reduced targets are not being met,” he said, pointing to recent afforestation programmes of just over 6,000ha. “Without an increase in the levels of planting, the entire forest products sector will be in jeopardy,” he said. “This is by far the biggest long-term issue facing the sector.”
UK market
The challenges facing the forestry and forest products sector over the coming decades even without Brexit would have tested the resilience of the industry. Brexit adds a new dimension of uncertainty for forest owners, timber processors, wood energy and the State agencies that work with and support the sector.
Regardless of the Brexit outcome, the UK consumes over 9m m3 of timber annually and is the biggest importer of wood in Europe. Competitors such as Sweden, Latvia and Finland – who have 75% of the UK market – will face the same trading challenges as Ireland when the dust settles on Brexit.
Irish timber processors have increased market share against these over the past eight years. This momentum along with recent capital investment puts the industry in a strong position to increase export market share despite the uncertainty that undoubtedly accompanies the UK decision to leave the EU.
However, it is essential that border controls and delays are minimised so that Ireland retains its competitive advantage of delivering quality wood products rapidly to UK customers.
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