The last 12 months won’t be remembered particularly fondly by many in the manufacturing sector.
Global uncertainty, rampant inflation and rising borrowing costs undermined much of the post-pandemic positivity but there appears to be clear signs of better times ahead.
While UK plc stagnated through much of 2023, we have recently seen inflation continue to come down, if a little stubbornly, and investors are now pricing five rate cuts from the Bank of England in 2024 which should feed through into some modest but positive economic growth in the year ahead.
The last quarter of 2023 remained a challenge for manufacturers according to the latest snapshot from S&P Global and the Chartered Institute of Procurement and Supply with factory orders falling generally by more than expected in December although manufacturers remain more optimistic in the UK as a base for their operations than they did a year ago.
Timber sector
The general economic headwinds have inevitably had a negative impact across all aspects of the timber sector, including the timber pallets and packaging sector that has generally had a quieter end to 2023 than it would have hoped.
However, there were a number of sectors that have continued to drive the pallet and packaging market in the final quarter of the year including automotive, with manufacturers establishing after sales positions on existing models as they transition towards newer electric models.
The defence and aerospace sectors are also driving demand, not least in response to the various conflicts currently taking place around the world.
Despite the slowdown in demand, we saw steady growth in timber imports in the second half of 2023 as buyers were importing at a more realistic pace in line with demand compared to the previous three years where concerns over closing markets caused by the war in Ukraine led to significant oversupply in the market.
Another impact of the fall reduction in demand for timber across all sectors has been the fall in sales of forestry land in 2023 after several strong years with forestry values falling by between 10 and 20% for the first time in almost a decade.
According to a report by one of the UK’s leading sales agents, softening timber prices and higher interest rates meant that investors were looking to pay lower prices for assets while owners were sitting tight and waiting for values to rise.
Ethically sourced timber remains at the heart of a sustainable future
Timber remains a key tenet of the UK’s net zero ambitions and demand is likely to grow across a range of areas including construction (recently boosted by the publication of the Government’s ‘Timber in construction roadmap’), wood pellets for energy generation and pallets and packaging as the economy begins to move back towards a growth trajectory.
With this in mind, the parliamentary Environmental Audit Committee has been calling for the Government to refocus on its ambitious tree planting targets and has recommended that these targets be subdivided into clear sub-categories for the types of woodland needed.
Ensuring a long-term supply of high quality and sustainable timber for the UK market will be essential if the UK is to continue driving down its carbon footprint, particularly while sanctions remain in place in Russia and Belarus and much-needed protections are enforced for at-risk forests and woodlands around the world.
At Nicklin we continue to ensure that all our timber is sourced from fully certified suppliers and the European Pallet Association (EPAL) has recently announced that it will severely punish any violators of the ban on use of illegally cut wood after an investigation revealed that illegally logged timber was still finding its way into the UK market.
On a more positive note, the African and Asian timber industries have embarked on a new era of legal and sustainable co-operation, which will hopefully lead to a reduction in unsustainable and often illegal practices and ensuring that only properly sourced timber makes it into the global supply chain.
