Our definition of timber merchants is limited to include merchant companies that specialise in timber and wood products, or merchants for which timber accounts for the majority of the turnover. Although many builders merchants with a more general product focus have significant sales of timber and wood products, our definition generally excludes builders merchants, except when the majority of a company’s turnover is believed to be derived from timber product sales. Our definition also excludes companies that sell predominantly manufactured products, such as Magnet and Howdens Joinery.

The timber merchants market appears to have remained relatively stable during the review period and in 2004, was estimated to be worth around £1175m.

The financial performance of timber merchant companies has, in general, been in line with the fluctuations in the overall timber distribution market. However, in recent years, there has been significant consolidation and integration in the overall merchants market, characterised by larger builders merchants acquiring smaller timber merchants. This has resulted in a small, but steady, decline over the last 3-4 years in the number of companies that fit our definition of timber merchants. This has meant that, despite the favourable market for timber and wood products, the timber merchants market has been in decline since 2002.

During the last three years, the overall merchants sector has remained relatively buoyant with growth rates of 3-4% each year. The main driver during this period has been the continued growth of RMI work, particularly within the domestic/DIY sector, with consumers continuing to invest in home improvements. Another positive influence on the market has been the effect of campaigns such as Wood for Good, which has raised the profile of timber and wood products in many markets.

Also, a diversification of product offerings in order to respond to the changing pattern of demand in the market has led to higher sales of added value and new products.  It appears the market is moving from being highly specialised to more generalist, with many companies extending their product offering to include many of the products builders merchants would offer, and many others operating across the timber industry, at more than one level of the supply chain. However, despite recent levels of consolidation, the market remains very fragmented.

Key negative influences on the market during the period have been price pressures and increasing competition in the market.  The market has also suffered from unfavourable weather conditions in some years and supply problems related to fluctuations in the global supply and demand for timber. Higher manufacturing and transportation costs have affected margins, although raw material price increases, which have followed a long period of low prices, have been at least in part passed on to customers.

The key issues in the market at present are product quality and environmental concerns. During the last few years there has been a marked increase in the number of timber merchants acquiring certification and in the level of interest among customers in certified products.

Sawn and planed wood account for nearly half of timber merchants sales by value, with sheet and board material accounting for around 12% of the market in value terms, although by volume they are estimated to account for significantly more. Manufactured products and other products have gained share in recent years, and this is likely to continue in line with the trend for timber merchants attempting to broaden their appeal.

Timber and wood products are supplied into the UK market by a wide range of companies including Timber Importers and Agents, Timber Distributors, Sawmillers, Builders Merchants, Timber Merchants, DIY retailers and Manufacturers. However, few companies in the timber trade can be defined as specialist timber merchants. It is estimated that specialist timber merchants account for around 18% of the total timber products distribution market, with builders merchants having recently overtaken timber merchants in terms of share.

The majority of timber merchants are smaller companies operating from one or two locations, with the larger companies operating regionally, or with a particular product focus. The five largest companies are estimated to account for around 23% of the market, by value. The leading timber merchants include Howarth Timber, Arnold Laver, Timbmet, Jewson, Wolseley, Alsford Timber, Champion Timber and Rembrand Timber.

The timber products market is now estimated to be worth in excess of £6.3 billion at merchant selling prices, representing an increase of 2% in value terms on the previous year. Product sectors showing significant growth include timber frames, solid and engineered wood flooring and decking.

The timber products market appears relatively strong, with traders showing clear optimism for the near future. We estimate that the market for timber products will continue to grow at a rate of 2-3% per annum, with the panels sector showing strongest growth due to expected price increases in this sector.

The end-user market for sawn and planed wood is very wide ranging, and timber merchants key customer groups include general builders, housebuilders, civil engineers, manufacturers and shopfitters, with some sales into the DIY, retail and builders merchants sectors. The most important customer groups by far are general builders and housebuilders, which account for more than 75% of all sales by volume.

Opportunities for timber merchants are likely to include further diversification into other product areas, integration of the supply chain, increased processing and manufacturing capability and added value services. The DIY market is expected to continue to provide opportunities, and timber frame housing should provide a strong growth area for the timber products market in general.  However, quality and environmental issues will need to be continuously addressed, and market growth in the future may be inhibited by a predicted increase in direct sales, cost increases including transportation costs and further acquisition activity in the builders merchants market. Changes in customer preferences and a continued decline of wood in some key markets also provide threats to timber merchants future growth.

The market value is expected to continue to decline during 2005, reflecting further consolidation and integration activity among the larger merchants. Growth is expected to come predominantly from sales of added value products and services, and the expansion of product ranges. The future for timber and wood products seems very positive, and the many initiatives promoting the use of timber are likely to have an even higher impact during the next five years.