Building industry suffers as Russian timber crisis continues

by | Jun 27, 2022

A leading building industry expert has recently warned Australians that the fallout from the Russian crisis, combined with ongoing economic challenges within the local building and construction industry, will create tensions within the industry that are expected to be the new normal.

building constructionIn a recent interview with The Fifth Estate, Intrapac Property Chief and National President of the Urban Development Institute of Australia, Max Shifman said laminated veneered lumber (LVL), structural timber, and soft timber supplies were “definitely a concern” for the development and construction industries that are already struggling to keep up with demand due to supply constraints.

According to the report, Russia and Belarus imports account for up to 50 per cent of Australia’s supply of LVL and engineered wood products (EWPs), including formwork LV, which is essential for all concrete constructions for multi-residential, high-rise, commercial buildings, as well as i-joist beams and timber flooring systems.

Importers are now planning to hold crisis talks to discuss the supply issues with the Federal Government next week, according to the report.

“It is not only timber. There are issues with everything from concrete pipes to plasterboard to steel in some areas. It is really very concerning and has been for some time. And it does not appear as though there is going to be any short-term fix for it. We have recently seen the price of raw aluminium go up in the order of 40 per cent due to the lack of supplies. That filters through into all sorts of things that you would need for building materials, including aluminium windows for example.” 

“In a construction program, if you are missing something along the way, the rest of the program gets blown out. And so you might have seen reports of house building times, pushing out dramatically and that is going to continue,” Mr Shifman said in the report.

Delays caused by skills and supply shortages mean the amount of building works being completed on a monthly basis is consistently dropping.

“You cannot get those efficient construction programs to line up anymore because, at any given point, you are either missing a piece of material or you are missing the labour to install it, and it is dragging everything out. And that is going to be a dynamic that continues for the foreseeable future.”

“There has to be a conversation around working with builders and clients to see if there is a middle ground that can be struck. Builders are stretched to the point where they just walk away from their businesses, but also that clients appreciate that we have just gone through an unprecedented and unexpected period,” Mr Shifman said in the report.

While Mr Shifman says it is easy to look back and say the Morrison Government’s housing-focused stimulus packages exacerbated the issue – no one could have predicted the challenges that lay ahead within the building industry.

“But what we did not anticipate was the level of supply chain crunch that would arise subsequently, because other parts of the world had similar ideas. We just saw this incredible boom in housing starts globally,” he said in the report.

All of these factors, combined with surging inflation and interest rates, will mean that the pipeline for new project starts will slow dramatically, with a spill over impact on house prices. The higher risk and less certainty will prevent the industry from locking in prices, Mr Shifman said.

“A return to normal migration rates, which we need to have because we are all struggling with a lack of labour across so many industries, is likely to push up house prices. At the same time, a lot of projects won’t be viable because of the higher costs. That is going to be the new normal for a while,” he said in the report.