The Forestry Commission Standing Sale Price Indices, September 2017 shows sharp upwards movement since September 2016 reflecting exceptionally strong demand for both sawlogs and industrial roundwood.

The timber processors have had to deal with a combination of factors influencing their markets. At the beginning of 2017 sawlog demand increased to sustain higher levels of sawmill production and prices increased steadily as competition for supplies intensified. End user demand was not constant across all product categories and conversely, the availability of industrial roundwood increased during the first half of 2017 and prices were subdued.

By the summer, supply and demand were more balanced and industrial roundwood prices stabilised. Throughout the final quarter demand and prices increased because of additional processing capacity and a reduction in availability of wood chips and sawdust as sawmill production levels dropped in reaction to the lack of sustainably priced sawlogs.

Prices have continued to increase and when the Forestry Commission publishes the Standing Sale Price Indices to March 2018 it is expected to show a further price escalation. The current market conditions are expected to remain unchanged throughout the first half of 2018.

^{Source: Savills Research and Forestry Commission}

Two of the fundamental factors that influence the timber market are new house building and exchange rates. According to the National House Building Council (NHBC), which covers around 80% of all new homes built in the UK, new home completions were up 4% in 2017 and the Government statistics for the first half of 2017 show completions of 92,280 which is the highest level since 2007.

In the autumn budget, the Government announced that it was “determined to fix the broken housing market, and restore the dream of home ownership for a new generation” and pledged to raise the housing supply to 300,000 per year, on average, by the mid 2020s, which would be the highest level since the 1970s.

Although the detailed approach may differ, the need to deal with the housing crisis has broad political support which provides a degree of optimism that a substantial increase in new house building will be achieved.

Sawn softwood consumption is strongly correlated to new house building activity, so any increase in this sector should have a positive effect on UK timber prices.