Mr. Pat Glennon:

I am Pat Glennon from Glennon Brothers. We employ 360 people directly and a further 170 indirectly. We operate two sawmills in Ireland, in Fermoy and Longford, and two sawmills in Scotland.

I thank the committee for inviting the Irish Timber Council to discuss the implications of the proposed sale of Coillte's harvesting rights. The Irish Timber Council was founded in 1918 primarily to represent the sawmill industry in Ireland. Today, we represent 2,500 people working in ten sawmills throughout the country. I would like to outline our key concerns for the sawmill industry and the threats that it faces as a result of the proposed sale of Coillte's harvesting rights. The Irish Timber Council is completely opposed to the sale. We will also discuss a number of guarantees we are calling on the Government to put in place in order to protect the security of sawmill operators should the sale proceed. However, these safeguards should only be seen as a last resort.

The forestry and forest products sector generates €2.2 billion annually, or 1.3% of the country's GDP. The forestry sector is a vital employer, with 12,000 people working in the sector. Timber is one of our most valuable indigenous natural resources and in 2011 alone we exported forest products worth €308 million. Forestry is also part of our heritage, as is obvious from the 18 million visits made annually to the Coillte estate. Ireland has a strong history associated with timber and we need to guarantee future supplies.

The Irish sawmill sector converts logs into products predominately aimed at the construction sector but also for the pallet and packaging market and fencing sectors. Our residues - bark, sawdust and wood chip - supply the horticulture, energy and board mill sectors. The sawmill sector provides much needed employment for 2,500 people, practically all in rural areas where job prospects are otherwise extremely limited. In 2011, sawmills in the Republic of Ireland exported sawn timber to the value of €83 million. In recent years the sector has invested over €200 million in creating a modern, efficient and customer focused industry. It is the main supplier to the board mills and the energy sector.

We commissioned a report with EPS consulting to examine the impact of the proposed sale of Coillte's harvesting rights on the sawmill sector. We have supplied a copy of this report to the committee. The report underlines our members' concerns and sets out reasons for not proceeding with the sale. The Irish Timber Council is opposed to the sale for several reasons. The net realisable value from the sale of harvest rights will be so small as to be completely disproportionate to the negative impact on the sawmill sector. The ten sawmills that comprise the Irish Timber Council have purchased 100% of the logs produced by Coillte since the formation of that company and, indeed, the Forest and Wildlife Service before that. As this accounts for 80% of our raw material supply, we are almost entirely dependent on Coillte's harvested output. There is no viable alternative supply source. Naturally, therefore, the proposed sale of Coillte's harvesting rights is a significant concern for the council.

Ireland has a disease free status, which effectively means we cannot import logs unless the bark has been removed. Although we can import logs with bark from a small area in north-west Scotland on the basis that the beetle has not been found in that area, the position is unsustainable in the long term. In any case, the industry in Scotland is consuming the logs from the area in question.

Irish sawmills are paying a premium for Coillte logs, which are currently 29% more expensive than logs in the United Kingdom. As such, the Government is receiving full rent for its existing crop. Any purchaser of the harvesting rights will have to increase prices further to maximise the return on his or her investment. This will undoubtedly result in sawmills closing and jobs being lost. Log prices are critical as the raw material costs account for between 65% and 70% of the end market value. If, of example, we produce 1 cu. m of sawed timber for €100, the raw material cost will be €70.

A disruption in supply to the sawmills will result in a shortfall of residue product used by the boards mills. The negative impacts and threats on the sawmill sector will far outweigh the realisable value from the proposed sale of the harvesting rights. The new purchaser could export some or all of the anticipated production, thereby depriving our sector of its critical raw material. We harvest, or Coillte invoices to our sector, 1.5 million cu. m of timber per annum. To put this figure in perspective, China imported 8 million cu. m of timber last year alone. Allowing a new purchaser to buy significant volumes of unprocessed logs would force the closure of some sawmills, resulting in job losses in rural communities and depriving the Exchequer of much needed revenue. People may believe that the argument regarding China is a red herring. Last year, China bought between 500,000 and 600,000 cu. m of timber from France, which was delivered to Shanghai at $140 per cubic metre. It would add only 36 hours to the journey of a ship bound for China from France if it were to dock in Ireland to collect timber. As such, the additional transport cost would be minimal. The major cost incurred is the loading and unloading of logs, whereas the cost of an additional 36 hours in journey time would be a pittance. If this were to happen and Ireland were to lose 500,000 cu. m of its harvest, it would result in one large and two medium sawmills closing immediately. This prospect presents a significant threat.

The purchaser could also withhold supply, thereby increasing prices to an unsustainable level. If it were to bring to market only 1 million cu. m of timber instead of 1.5 million cu. m, the effect would be the same. It will hike the prices on the 1 million cu. m that are being purchased, while the remaining 500,000 cu. m would be in forestry that is continuing to grow. One can assume that any new purchaser would want to make a significant rate of return on the investment. As a result, securing a higher price for the saw log would have to be a commercial imperative.

Who are the buyers for this asset? The two or three entities we envisage having an interest would be pension funds or large forest products companies, of which there are two or three in Sweden and Finland alone. Given that the latter have a turnover in excess of €1 billion, they could pay for the harvesting rights out of their petty cash. The four sawmills represented here are competing with sawmills in the UK market. The collapse of the construction sector resulted in the number of new homes being built each year falling from 90,000 to 8,000. However, all the Irish mills are exporting strongly into the United Kingdom. If strategic players conclude that the proper strategic decision for them is to buy Irish forestry assets, it will be game over, so to speak, for Irish sawmills because they will be unable to control the raw materials or price and the industry will be strangled.

Furthermore, the purchaser of Coillte harvesting rights would not have any commercial imperative to supply saw logs at regular intervals to meet the demands of the Irish sawmill sector. If the Government proceeds with the unwise decision to sell harvesting rights to Irish forestry, guarantees must be put in place to protect the security of the sawmill operators. These guarantees are as follows. Sawmill operators must be guaranteed that 1.5 million cu. m of timber will come to the market annually. The rights must not be sold in their entirety to any single player as this would create a private monopoly and they should, therefore, be split up and offered in groups. There must be a market related log pricing structure in order that we can protect both buyer and seller. In addition, the purchaser must be tied into a commitment to engage in replanting.

Our key message to the Government is that it must not sell the harvesting rights as any benefit to the Exchequer arising from the sale would be small and disproportionate compared to the negative impact on the sawmilling sector. A private monopoly must not be created as this would be to the detriment of the industry.

Ireland's favourable soil type and climate mean our forests grow trees twice as fast as any central European country. The Government should capitalise on this natural advantage by focusing on encouraging Irish sawmills to add value, increase employment and export more processed product. In line with this, we call on the Government to publish its long-awaited forest sector review without further delay and announce the measures it intends to take to secure the future of the forestry sector in general and sawmill sector in particular. We believe a decision on the sale is imminent and we strongly appeal to the Government to realise the impact the proposed sale could have on rural communities nationwide.

I have tried to address the key issues outlined in our recently published report and hope I have made a meaningful contribution to the work of the joint committee. I thank Deputies and Senators again for their invitation to address the joint committee. We will be pleased to take questions from members.