UK Sawmill View September 2017

2017 Overview Production statistics 2017 commentary UK softwood - longer term availability UK mills – short term issues & concerns

Facts and Figures - Sawn Production UK Year Softwood m3 (000 m3) 2011 3227 2012 3361 2013 3536 2014 3716 2015 3449 2016 3570 Est 2017 3730 Est 2016 % by country England 30% Wales 10% Scotland 51% Northern Ireland 8% Source Forestry Commission UK Wood Production and Trade 2016 Provisional Figures – 18th May 2017

Sawn Softwood – Market Sectors Despite investment in kilns; graders, planers etc., the percentage in construction has not changed in 8 years Source Forestry Commission UK Softwood Forecast

2017 from a UK mill perspective 2016 modest change on 2015. c 3% 2017 estimating 5% growth on 2016 Favourable environment for UK mills – currency Competition and pricing from Eire held back price development until Q3 Irish mills overcommitted – capacity limitations Fencing season was average except for sleepers Growing concerns over treatment specifications; standards and lifespans

Source of UK Softwood Removals Source Forestry Commission Forestry Statistics 2015

UK Round wood Production 2005 - 2014 Source Forestry Commission Forestry Statistics 2015

UK Softwood roundwood for Woodfuel 2006 -2015 Source Forestry Commission Forestry Statistics 2016

UK Softwood saw log exports 175000 to Ireland 25000 to Germany Source Forestry Commission Forestry Statistics 2016

UK – Forecast Roundwood Availability Used this slide before, pretty widely known that UK production grows, levels then drops off, but worth looking at that in more detail Source Forestry Commission UK – Forestry Statistics 2015

Sources Three sources used to create the report. Production Forecast- NFI The National Forest Inventory (NFI) is a rolling programme designed to provide accurate information about the size, distribution, composition and condition of our forests and woodlands and also about the changes taking place in the woodlands through time. It is essential for developing and monitoring the policies and guidance that support the sustainable management of woodland 2009-2015- 15,000 one Ha plot samples 2015-2020 – revisit 2/3rd of original plots plus additional plots added Issue a 25 and 50 year forecast Three sources used to create the report. National Forestry Inventory provides a record of the size and distribution of forests in the UK. This information, together with FC growth and yield models, is used to forecast timber availability. Between 2009-2015 15,000 one Ha plots samples taken. Since 2015, they have been revisiting/ revising and adding additional plots. Every 5 years they issue a new 25 year and 50 year forecast. Part of the report is comparing the difference between the last two issued 25 year reports. FC Annual stats- The information is gathered by the FC issuing an annual questionnaire to the industry then reviewing and publishing the results. Last published set is for 2015.

UK Headline Figures against 2015 Deliveries The last set of published data from the NFI was in 2016. At UK level Blue columns represent the total forecasted softwood, all species, all diameters, available each year Current usage, based on last published data is 10.7M green tonnes. Ten years ago it was 8.8M. 20% rise. Don’t expect use to get to 17M, but a figure of 13-14M is achievable. Volumes are then pushed forward, flattening out future years More fibre is coming to the market How does it look from a Scotland overview?

Scotland Headline Figures against 2015 Deliveries Look at Scotland specifically as its 50% of the UK production and a higher proportion of the construction timber produced Using the same graph format, we can see that Scotland currently supplies 6.8M of Softwood. Head room on availability against current supplies 15 years time forecasted almost double the current usage Forecasted volume never drops below the current usage

Roundwood Issues Location Species mix Tree size Viability of replanting Not all round wood is near sawmills e.g. West Coast Scotland – no mills Generalizing is dangerous - e.g. Scotland has plenty of round wood and more coming on stream – this statement has to be balanced with processing capacity Age of the capacity (old mills – inefficient) Workforce availability and outlets for co-products Investment and production decisions by mills need to be looked at in great detail There is lots of processing capacity in South West Scotland and Borders, so any growth in roundwood availability will be fought over More scope in North Scotland

North East Scotland Diameter Distribution This is an example of one of the regions look at the drop in the volume of SRW and the rise in the average diameter of sawlog Implications for sideboards less 16mm etc

North East Scotland– Species Mix

Other domestic issues Round wood prices have risen in line with sawn prices Mills operating at or close to capacity, limited surge capacity Unrealistic customer expectations – logistics and costs Treatment – specifications; standards; costs Use Class 4 fence posts & sleepers Kiln Capacity constraints for construction timber in 2018 Certification Mills build stock over the winter, when market surges at Easter we use this, but when its gone its gone Mills need to re-think what is commercially sensible to offer, customers need to carry more stock delivering 1 pack to Aberystwyth is not sustainable at current premium levels Treatment £20m3 30 years ago, now its £15m3!!! With what is a much less effective chemical Use Class 4 – ground contact timber is a massive potential problem for the UK timber industry Only 2 mills with additional kilning in 2018

2018 Prognosis Limited volume growth from UK mills Prices will continue to track imported Investments continue, but no major new projects Use Class 4 will be a major and ongoing issue Exchange rates continue to be the dominant factor for UK mills Mills have made money in 2017 , log supply is balanced and they should enjoy a good 2018