South Africa is now officially in recession. Sawmilling is driven primarily by the construction industry, so if the construction sector slows down, the sawmilling industry follows. Sawmillers are already feeling the pinch, and business will get more difficult going forward.
This is the view of SSA Executive Director, Roy Southey, speaking to SA Forestry editor Chris Chapman, after the recent SSA AGM.
Lumber sales from structural sawmills into the local construction industry are already declining, as the accompanying table by Crickmay & Associates indicates.
Apart from the immediate challenges posed by recession, Roy said that access to raw materials (sawlogs) is the biggest challenge facing the sub-sector. The land area planted under sawlog regimes is more or less finite – no significant expansion is possible in South Africa under current regulations.
Currently supply of raw material and demand are more or less in balance, but with the population expanding along with the need for more housing, the demand for sawn timber will inevitably increase.
Studies done on sawmilling resources in South Africa in the past few years have predicted a widening gap between the supply of logs and the demand for sawn lumber going forward.
Access to good quality logs is one of the biggest constraints to growth and development of the sawmills – particularly the independent sawmills. Sawmilling companies that are vertically integrated, i.e. they own or manage their own timber plantations, have far more room to manoeuver, and therefore are in a better position to expand and develop their sawmilling operations.
The independent sawmillers and so-called bushmillers are heavily dependent upon the state and its operational arms for sawlog resources. Now there is a cloud of uncertainty hanging over much of this resource, as Safcol has indicated their intention to get more involved in processing. Inevitably this would reduce the volume of logs made available for purchase by independent sawmillers. The fact that Safcol has assured SSA that they will not stop supplying logs to sawmills that they are already supplying, has not entirely cleared away the uncertainty.
One independent sawmiller told SA Forestry that his sawmill only has a one-year log supply contract with Safcol (who is their biggest supplier of raw material), making it almost impossible to plan ahead.
Sawmillers said that the only way they can flourish and grow is to have a more secure raw material supply, which would make it less risky to invest further in their businesses.
Roy says that the government needs to address this situation and provide more certainty to sawmillers.
Another major issue is the quality of the resource. Roy says that SSA is working with growers to try and improve the quality of logs being supplied to the sawmilling industry. Stellenbosch University is currently engaged in a research project to study the impact of silviculture practices in an effort to improve the quality of sawlogs. This research is funded by FSA, SSA and independent stakeholders.
Recovery: this is a massive challenge and one that the sawmilling sub-sector alone must address. This refers to the volume percentage of raw log that is turned into utilizable lumber – the rest is used to make steam for own use or is utilized as lower value residue.
Currently the average recovery rate in SA is 49% – that means less than half of the raw log is turned into saleable lumber. According to Roy, the global average is between 55 – 60%, and sawmillers in SA need to get closer to that benchmark.
Recoveries can be improved in a number of ways:
• Application of technology e.g by using thinner kerf saws, or improving log scanning software etc
• Log quality: obviously better quality logs will enable sawmillers to improve their recovery rate. Improvement in wood quality must be addressed by the growers.
• Product development and innovation: sawmillers need to develop new, innovative products that make it possible to use more of the log, offcuts and residues. This could include laminated veneer lumber products, better use of offcuts in finger-jointing lines or turning residues into higher value saleable products.
• Human resources: improved management and training of sawmill staff will also improve recoveries.
Roy is of the opinion that more research is required to explore ways of improving log quality, improving sawmilling techniques and technology, and developing innovative new products. He says government needs to partner with the sawmillers and research institutes to support research that will assist the sub-sector to improve their efficiencies and become more competitive.
SSA represents 40 sawmills, which collectively process around 60% of the national log intake.
*First published in SA Forestry magazine, June 2017