Timber for 500 Aussie homes abandoned
Five hundred homes worth of timber, destined for Melbourne, was recently abandoned in a Shanghai dock after a shipping company accepted a lucrative offer to divert course to Los Angeles, according to a recent report by The Age.
The Master Builders Association of Victoria (MBAV) warned the incident could worsen Australia’s timber shortage and lead to unfinished homes nationally.
After arriving in Shanghai in late July, the shipping company was then offered 60 per cent more to use its shipping containers, according to the MBAV, prompting the ship to dump the timber at a Chinese port and leave for the US with new goods on board, according to the report.
It is still unclear how the company was able to take this action, given it had a contract to deliver the goods to Australia.
Ongoing demand and prices for building products, such as timber and steel, have risen steeply which has been exacerbated by a worldwide shortage of shipping containers, according to Federal Trade Minister Dan Tehan. Minister Tehan said that the government was investigating the economic impact of the shipping disruption, while industry leaders said a “perfect storm” of booming demand and tight supply had caused shipping costs to spike threefold.
Recent ABS figures show Australian timber prices rose by 11.8 per cent in the past year and 6.5 per cent in the June quarter. One-fifth of the timber used by Australia’s building industry is imported and some merchants are paying 60 per cent more for imported timber than local product, according to the report.
The dumped timber could inflame the domestic shortages and drive-up costs for Victorian builders who are going broke in record numbers, according to MBAV Chief Executive Rebecca Casson.
“This has the potential to push things over the edge … Basically we will have unfinished homes. We are aware of some Australian merchants that import from major European companies that have experienced difficulty getting product to Australia. There is currently a load of 50 containers, the equivalent of 500 homes, stranded overseas that were abandoned,” she said.
Mr Tehan also pointed out in the report that the pandemic had disrupted the shipping sector and asked organisations that had experienced difficulty importing goods to contact the government.
He said shipping activity rebounded more quickly in countries such as China which got out of lockdowns earlier in 2020, causing a disproportionate number of containers to end up in those places. Insufficient quantity of containers in Europe and North America was the knock-on effect, as nations on those continents emerged from lockdown and rebooted economic activity late last year and early this year, he said in the report.
“The current misallocation of containers is something the government has been strongly looking at. It’s not an easily resolvable issue. There are up to six-month delays getting into the largest ports like Los Angeles, plus we’re seeing increasing demand and cost of containers to deal with the misallocation,” Mr Tehan said.
Australian Timber Importers Federation General Manager, John Halkett, said it was unsurprising an international shipping company would divert course from Australia to the US. He said shipping costs and port delays had risen dramatically, and it was more financially attractive for companies to deliver to the northern hemisphere.
“There is a perfect storm of demand for building products both in Australia and Europe and the US, and serious issues with supply caused by disruption to shipping and logistics,” he said in the report.
Bushfires, a temporary pause for South Australian mills due to its recent lockdown, delays due to the Suez Canal blockage, and a worldwide vessel shortage are also contributing to the issue.
Ms Casson fears building and construction insolvencies will rise further if supply issues continue and said some businesses were being quoted 18 per cent timber price increases for September orders.
According to the report, Victoria accounted for 40 per cent of all building and construction industry insolvencies in Australia and its share of all Victorian insolvencies is at a record high. In the first four months of 2021, there were 145 industry insolvencies in Victoria – up 34.3 per cent on the same time last year.