Timber supply remains extremely tight both domestically and internationally, particularly as Europe and America look to the building and construction industries as a way out of the pandemic’s economic woes. In Australia, supply issues are continually exacerbated by demand with importers now looking to the Northern Hemisphere for supply relief.
Australian Timber Importers Federation (ATIF) General Manager, John Halkett says he is not surprised that the supply of imported timber remains tight and expensive.
“When you have a high bulk, low-value product like timber this takes lots of containers and you run into trouble. A 40-foot container has about 35 cubic metres of timber which is a few houses – but you need a lot of containers which is why shipping costs are having such a huge impact on the industry. I do not believe supply chain problems will change for at least 12 months.”
While the Australian housing market remains strong and transport and logistics issues continue, supply chain woes are here to stay, according to Mr Halkett, who said this is because engineered wood products and structured pine framing are both in critical demand.
“Demand for products like Laminated Veneer Lumber (LVL) and Cross Laminated Timber (CLT) have increased substantially with many of these products imported from Northern Hemisphere suppliers including Finland, Russia, Canada and China. However, supply-demand was again exacerbated when New Zealand ceased manufacturing these products, while Australia’s manufacturing capacity remains limited,” Mr Halkett said.
“New Zealand ceased supply of these products due to competitive issues and economies of scale. When it comes to sawn timber most economies have the same fixed costs. So, if you have got a sawmill in the Czech Republic that processes timber in millions of tonnes of logs per year, they have the same fixed costs as the one in New Zealand that processes 30,000 cubic metres per year. Logs from Russia sent into the Czech Republic and put onto a ship at the other side of the planet – are being sold down the road for a similar price that is produced in Oberon, New South Wales. This is just one of many issues the domestic industry have to come to terms with,” he said.
Production costs within the domestic timber market also remain notably higher than international production costs, making it challenging for Australia to compete on a national scale. Mr Halkett said that to rectify this problem Australia needs to implement a lot more systems locally to be able to adequately compete with imported products where the labour component of manufacturing costs a lot less.
“Australian manufacturing operations struggle with the issue of competitiveness and the timber industry is no different,” he said.
Another issue now adding to local timber supply woes is the expected closure of the native forest sector in Western Australia and Victoria as State Governments plan to close down hardwood sectors that include Victorian Ash and Tassie Oak.
“If this happens this will put real pressure on hardwood users who tend to work within more of a specialist market. I do wonder where these State Governments expect hardwood to come from if they do close down these sectors. I am already aware of a number of Victorian builders who use the hardwood species for windows and doors, who have switched from Australian domestic hardwoods to imported hardwoods from the Solomon Islands – including Rosewood,” he said.
“The tragedy of this is that forest management practices in the Solomon Islands are not the same quality as they are here in Australia. We would be better off continuing to access Victorian Ash and species from Western Australia – that are world-famous hardwoods – rather than import from the Solomons where the environmental controls are not as robust. There just does not seem to be a lot of science involved in these decisions.”
“There is such a huge demand for locally made products but we are closing down the areas that provide crucial hardwood supplies. These closures also affect regional businesses right across Gippsland in Victoria and South Western WA. There is a serious number of jobs involved in these decisions. It was only recently that the Federal Government placed a strong emphasis on building up local manufacturing industries, but now we have State Governments closing these industries down. It just does not make sense,” Mr Halkett said.
Softwood plantations are also in dire need of assistance, according to Mr Halkett, due to a lack of investment in existing domestic plantations.
“Given what happened with the 2019/2020 bushfires, softwood plantations need our assistance now more than ever. In Tumbarumba, in southern New South Wales 40 per cent of the softwood plantations were impacted by fires. This will not only see less domestic structural pine in the market but also exacerbate the current and ongoing supply issue.”
“Even if we try to source these products overseas, despite the efforts of the ATIF, there is not a lot of international wood that will come to Australia because the Australian market is quite challenging. Our sizes are different from North American wood for example and the compliance requirements in Australia are high. Generally, suppliers see Australia as a challenging market. As one producer said to me from Canada ‘why would I send a shipload of stuff to Sydney when I can send it to Seattle when I can get a better price and they are not as fussy,” he said.
As supply challenges linger, the ATIF has the difficult job of encouraging domestic tree planting and manufacturing within the local market, while also developing markets in the Northern Hemisphere to source additional softwood supplies.
“ATIF representatives need to travel to ensure ongoing supply relations but face-to-face meetings are proving difficult to schedule as the pandemic continues. Improving supply arrangements generally, for example with Canada – means talking to suppliers and giving them an understanding of Australia’s specification and compliance requirements. For example, in the case of Lodgepol Pine 90×35 timber framing, I completed three trips to Vancouver to help move forward imports. The same sort of arrangements apply when dealing Russia because the Russians are transiting from a round log export. But to try and travel to St Petersburg to have discussions with Russian authorities and trade associations is difficult. In saying this my discussions with Russian entities continue and I imagine supply from here is set to increase soon,” he said.
“A substantial timber importers meeting is scheduled to be held Melbourne in late February where we will discuss issues in relation to Federal Government controlled systems, including quarantine, illegal logging, codes and standards – this is all on the agenda,” he said.
While there are no immediate solutions to the ongoing timber supply challenges, Mr Halkett said the ATIF will continue to work diligently with Federal and State Governments to access plantations and ensure more trees will be put in the ground. The ATIF will also push governments to take more of a proactive position in relation to both hardwood and softwood supplies.
“The state governments control the forests and national parks which is why the people who really call the shots are the state premiers. I think during the pandemic we have realised we need to manufacture a lot more of our own requirements in Australia, whether this is with face masks or building products. Victorian and Western Australian State Governments also need to have another good look at how closing down native forest operations will significantly effect the quality of our hardwood supply and also need to consider where they think decking and furniture materials will come from in the immediate future,” he said.
Exploring further avenues of supply, particularly of structural softwoods and interacting with trade associations will remain a priority for the ATIF throughout 2022. Mr Halkett said the building and construction industries can be assured that importers and wholesalers will employ their best endeavours to supply the timber needs throughout 2022 and beyond.
New challenges set to threaten timber industry – TABMA
Although timber supply woes continue to wreak havoc on the building industry currently, TABMA General Manager, Membership Alicia Oelkers says supply issues will not rectify until the beginning of next year. And it seems supply issues may be the least of the industry’s problems with fresh market challenges set to take hold in 2022.
While there is an abundance of jobs available for builders for the remainder of 2022, next year may be a different story according to Ms Oelkers who says most new challenges will stem from businesses tackling labour shortages as more people are forced into isolation due to COVID infections.
“The reduction in staff availability is affecting all aspects of the timber industry including domestic deliveries – which is now having a huge effect on the local building industry. It feels like the situation with timber supply is now worse than it has ever been because there are so many more factors affecting supply. Now that COVID cases are high, positive cases are being forced into isolation for at least a week which means there is less staff and more difficulty in transporting timber from the mill or from the port to the warehouses and then from the warehouses to the yards.”
“Labour shortages and the fear that builders’ businesses will collapse due to price rises and lack of labour are the most prevalent concerns within the timber industry currently. Upon speaking with a member last week, he said his workforce is consistently down 20 per cent – which is five to eight people at any one time because they are either testing positive or in isolation. This is a huge problem for members and for most industries currently.”
“We have another member who has a substantial number of frames and trusses that they cannot deliver to the site because the builders are not ready because they cannot get roofers in. Timber is only the very beginning of supply chain problems for the builder. There are also substantial shortages in hardware, so a builder may have the ability to put up a frame but they cannot get door handles, or taps. It is just never-ending,” she said.
Several prominent builders have already gone into insolvency including one well-known developer on the Sunshine Coast who recently closed its doors $11 million of debt. The developer’s closure was directly attributed to price rises in timber and building materials as well as lack of supply and labour.
“While some supply issues may be rectified at the end of this year, timber members are concerned that many builders will close their doors in 2022 due to lack of supply, price rises and staffing issues. Early last year a lot of builders quoted projects at a much lower price before the price increases became out of hand and a lot of are still building from those early contracts, which is putting a lot of pressure on them.
“Then there is also the ongoing issue that frame and truss plants have a huge backlog of work which means a delay in house builds and builders do not have the product or the labour to build houses,” Ms Oelkers said.
For now, TABMA’s members remain quite busy, however they do fear that some builders will be forced to close their businesses especially now the insolvency laws have reverted back to pre-pandemic laws. Ms Oelkers said the Federal Government temporarily changed insolvency laws in 2020, “to help struggling businesses stave off worried creditors while protecting company directors from being charged with insolvent trading.”
“Another issue for builders lies in the cost of land, with one of our Sydney members saying land costs have increased so much so that the HomeBuilder scheme was just not viable because it was capped at a purchase price not available in this area. The HomeBuilder scheme’s capped-price was raised slightly in New South Wales and Victoria but was still below what a house and land package was worth at the time, so this was of no assistance to builders in this area at all.”
“While State Governments also continue to invest heavily in local mills, in Maryborough the Hyne Mill just had substantial flooding and this stalled transport for some time. All other mills are suffering from labour shortages due to COVID, with the high demand not even close to being met because of the low staffing levels. Even though a lot of the mills could easily book in another shift to meet demand, they simply do not have the staff to cover these shifts which is why the labour shortage is such a huge issue,” she said.
The only solution retailers can draw from currently is to ensure they stock up as much as possible when timber does become available. However, Ms Oelkers pointed out that this is concerning because there is a now a lot of money sitting in yards in the way of stock.
“Their cash flow is quickly turning into stock just to make sure they have a lot on hand and due to the price rises, there is a lot of valuable stock stored in yards now more than ever before.”
When it comes to price increases, and predicting what may occur in Australia over the next 12 months, Ms Oelkers said TABMA continues to look overseas for projections and has found the price of softwood lumber in the US continues to rise, with the same price rises expected in Australia over the next few months.
“One of our members said he was looking at an invoice for a timber product he bought ten months ago and could see that it had gone up 100 per cent,” she said.
Despite all of the current and upcoming challenges within the timber industry, suppliers and retailers have become more innovative with alternative products and solutions. One of which includes the increasing popularity of composite decking. Ms Oelkers believes composite decking has become popular because there are now more companies offering a variety of brands as well. While it is a higher price point, it does not require the maintenance that timber requires on a yearly basis, she said.
“Now that residential blocks have reduced in size land, our members are seeing the use of composite decking being used more in outdoor spaces along with tiles as well. In saying this timber decking still remains in extremely high demand due to its warmth and visual appeal,” Ms Oelkers said.
Supply to regain once COVID reaches an endemic status
Australasian Timber Flooring Association (ATFA) Chief Executive Officer, Randy Flierman recently spoke with AHJ on the current timber supply crisis saying that the considerable pressure supply chains are under is expected to continue throughout 2022. He also pointed out that there may be no relief in sight until the severity of the virus settles to endemic levels.
“It is still too difficult to predict when imported product supply will improve. Once we are finally past the changing variants of COVID we would expect to see supply chains repaired within six months. In saying this, local production of solid and engineered flooring products is continually improving,” Mr Flierman said.
It seems the pandemic’s end is not too far in sight with epidemiologists recently reporting that due to high vaccination rates, COVID is more likely to lose its pandemic status and will reduce in severity to become more of an endemic in 2023.
While the reduction of the pandemic’s severity will see global supply chains gain momentum, Mr Flierman believes local supply is recovering this year with the only exception being Western Australia where government intervention continues to gravely affect the industry.
“Generally, our timber flooring mills are in New South Wales with a few in Queensland and Victoria. Mills are often demand-driven and their level of production has gradually improved with time,” he said.
The Federal Government’s HomeBuilder Program also continues to stimulate building activity, according to Mr Flierman, as well as apprentice employment in the timber flooring sector.
“While the building sector continues to grow at record levels, timber for internal floors and outdoor decking is also growing in popularity and market share. I believe this is because timber flooring and decking are healthy, natural and aesthetically beautiful. It also provides a sense of warmth to the home and definitely adds value to the resale price of a property.”
“The outdoor decking space has also remained in high demand throughout COVID as Australians continue to spend money on their outdoor space so they can enjoy entertaining or residing outdoors in a safe environment. In saying this, the outdoor decking space was already popular before COVID and I believe this growth will continue even once the pandemic is over,” Mr Flierman said.
While it seems solid timber flooring supplies have now recovered from the substantial bushfires throughout Victoria and New South Wales in 2019, there are still logistical supply issues for products such as engineered flooring, laminate and hybrid flooring due to COVID affected supply chains and freight logistics, according to Mr Flierman.
For now, the substantial delays in supply chains along with price increases continue to delay supply in all components of the flooring industry including engineered, laminate, hybrid and consumables such as coatings and adhesives.
“As demand remains high and supply remains low, I do not see the price increases subsiding any time soon,” he said.
MGA TMA members close books as supplies wane
Like most Australian independent retailers currently, MGA TMA members have felt the need to implement many new strategies to cope with on-going supply issues throughout the pandemic. MGA TMA National Membership Manager, Marie-Claire McKiernan says one member has made the decision to close their books and no longer service new customers so they have the ability to focus on existing customers and ongoing orders.
Surprisingly this approach is being implemented more and more by timber merchants, particularly as the strategy of ensuring customers order well in advance is no longer a viable option because all orders are now on allocation from the supplier. Ms McKiernan says each month the allocation is becoming tighter and members simply cannot order more timber because the supply is just not available.
“It is for this reason that our members are looking at product alternatives. In saying this there really is not much available for the main lines. For now, members believe it is important to maintain good working relationships with their suppliers to ensure an ongoing supply throughout this time.”
“Unfortunately, we see no medium-term relief of supply issues and we expect issues to continue well into 2023. There is just too much backed-up demand as well as an overflow of works in the pipeline as well. Some of our members believe that the timber supply issue has plateaued. That being said, it will not improve any time soon.”
For now, supply issues will be exacerbated particularly by the expected closing down of native logging in Victoria and Western Australia.
“Lockdown restrictions, government mandates and issues with staff availability has affected most businesses. Australian business owners are doing all they can but there is no quick fix. Our hands are tied with government decisions including the more recent issue of forestry being locked up and loopholes allowing vexatious litigation against government agencies. The Federal Government absolutely needs to work on securing the future of softwood plantations but this is not a short-term fix. It does not take five years for timber to grow – it takes 30 years.”
“The new regime of locking up forests will certainly make local timber supply harder to source. While we do not have a crystal ball to see what will happen, we do hope that demand will stabilise here and overseas, with ongoing demand in American and European markets also impacting Australia’s supply chain,” she said.
When it comes to demand for engineered wood products and structured pine framing Ms McKiernan pointed out that both varieties are fighting for the same wood fibre from the same forest meaning both are severely impacted. Looking overseas, wood fibre is also in short supply so there are challenges in every aspect of the industry currently.
Price rises are also set to continue, she says, particularly because so much of the timber that is utilised in Australian building is imported.
“We are at the mercy of international shipping and these costs have increased astronomically over the past couple of years and must be passed on. Supply and demand are still a major factor. There is very little profit margin in timber,” she said.
While Ms McKiernan agrees there are alternatives to timber framing, including the use of steel framing which can be used to ensure urgent projects progress, steel is not sustainable like timber and is also attracting a high price of late.
Looking to current market trends, MGA TMA reported a growing trend for blonde wide boards by Australian consumers, particularly within new home builds.
“Even though both timber decking and flooring are restricted with supply, homeowners are opting to wait for supply and opt for timber flooring based on environmental and health considerations. Timber also ensures spectacular looking flooring, that will add value to the home.”
“And with a significant number of new homes being built, we continue to see high demand for decking. COVID considerations have meant some Australian’s are still opting not to travel, meaning that disposable income is available to invest in DIY home projects and renovations,” she said.