The knowns and unknowns of Irish timber production

Compiling data for timber production and prices in Ireland brings Donald Rumsfeld’s statement to mind.

We haven’t quite reached the unknown unknowns stage in Irish timber production, but we begin to understand why the former US secretary of defence resorted to his convoluted statement when faced with an absence of facts to justify a course of action.

In Rumsfeld’s case, instead of answering the question to provide evidence that Iraq was supplying terrorists with weapons of mass destruction, he took the evasive route, leaving his audience with a puzzle instead of an answer.

There is much that is puzzling about timber production in Ireland, especially in relation to:

We have some of the answers but comprehensive data is absent, which makes long-term planning in the industry extremely difficult, especially among purchasers of logs in the timber processing and wood energy markets.

However, the new Forestry Programme 2015-2020 is taking steps to address some of the issues. For example, the requirement that forest owners submit forest management plans (FMPs) to the Forest Service would provide real data on timber mobility in Ireland – where it goes and what we do with it – providing this information is co-ordinated at national level.

So what do we know about timber supply? We know that Coillte supplies 2.3 million cubic metres (m3) of timber annually. The annual volume of timber harvested in private forests is estimated at between 0.3 and 0.4 million m3.

The Coillte production is verifiable, but from discussions with a number of sawmills and forestry consultants, information provided for the private sector has little or no basis in fact.

The number of applications for felling licences annually provides an indication of volumes of timber to be harvested.

We know that private growers have applied for felling licences for close to 1,000ha of clearfells and 17,000ha of thinning annually during the period 2011 to 2013.

Forest Service approval has been granted for an average of 400ha of clearfells and 15,000ha of thinning. With clearfells providing yields of between 250m3 and 450m3/ha and thinning yielding 40m3 to 50m3/ha, it could be reasonably expected that supply from private forests should be between 650,000m3 and 800,000m3.

This bears some resemblance to COFORD forecasts that estimate annual volumes of roundwood timber from the private sector at 680,000m3 between 2012 and 2016.

If this trend were continued, annual production, according to the COFORD forecast, would reach 1.5 million m3 within six years. How much of this reaches the marketplace is one of the known unknowns in Rumsfeld-speak.

To further complicate matters, the windblow caused by last February’s storms will add significant volumes of timber to the clearfell harvest programmes of 2014 and 2015.

Conversely, thinning volumes will be reduced over the coming years, as the prematurely harvested windblown forests no longer feature in thinning yield forecasts.

This shouldn’t throw thinning forecasts too far off kilter if only 2,000ha of private forests and a slightly larger area of Coillte forests were blown down last February, as estimated by the windblow task force.

However, applications for clearfelling extend well beyond the 2,000ha for private plantations.

By the end of September, applications had been made for 7,263ha of clearfell and 2,783ha had been approved, in addition to 12,339ha of thinnings.

Harvesting from these could yield 1.2 million m3 from private forests or close to 1.5 million m3 when all applications are made by the end of the year. Add in Coillte production and close to four million m3 may be available for harvesting next year.

In addition, if private forest owners harvest all timber in clearfell areas not yet approved, a further 1.4 million m3 could be harvested over the coming two years.

While Irish sawmills and panel board mills have the capacity to process this increased volume, some adjustment will be required as windblow clearfells produce timber with smaller average log sizes than normal clearfells.

As much of the windblow was caused to plantations which were relatively young – either before first thinning or immediately after – a high percentage of timber won’t make sawlog quality, so will be relegated to pulp and wood energy markets.

All forest owners who have had forests damaged during the February storms have suffered financially. They miss out on future thinning income and clearfells at the end of normal rotations.

A prematurely blown forest can suffer a loss of up to €25,000/ha compared with a forest which can grow on to full rotation.

Prices

These forest owners will be paying special attention to markets and prices right now, as increased volumes generally result in decreased prices.

Fortunately, the best evidence available shows that the market is holding up. Prices have reduced in Coillte sales for the quarter July to September, but the much-feared collapse has not materialised.

Prices during the second quarter of 2014 increased by up to 15% over 2013 prices (Table 1).

These prices were sourced from Coillte and UCD data provided to the Irish Timber Growers Association (ITGA) for private sales.

We have taken UCD data for log sizes up to 0.224m3 and Coillte data for larger logs. Coillte prices are not available for small logs, as these are used by the company’s Coillte Panel Products for the processing of oriented strand board (OSB) and medium density fibreboard (MDF).

In addition, ITGA data is sourced from a small number of sales, so may not be a true reflection on prices achieved nationally.

Prices for Coillte sales dropped in the third quarter, but are still higher than 2013 prices. Prices were not available for private sales for the third quarter at the time of writing.

It would seem that there is little evidence of panic selling or panic buying so far.

There are a number of reasons for this. There aren’t sufficient harvesting units available to clear the windblown areas quickly, so the market is unlikely to be flooded with logs.

In addition, plantation owners with windblown sales that provide revenue in excess of the annual tax-free threshold (€80,000) are likely to spread their harvesting and income over at least two years.