Timber Update August 2021

by | Aug 16, 2021

Timber Update August 2021

Timber price surge cut wood-be homeowners

Global demand for critical building materials could bring Australia’s residential construction industry to its knees, according to recent data compiled by Grafa.

Australian builders have been left without their most critical material as a global construction boom sends timber prices into orbit – up 380 per cent to a record high in May this year.

For households waiting to move into their new home, time and cost blowouts are likely to continue due to the scarce and expensive supply of timber, according to Grafa analyst, ‘Data Dan’ Petrie.

“In uncovering what was behind lagging construction times, the analysis team at Grafa found that record high timber prices had caused a supply shortage that will plague the industry for the foreseeable future. While timber prices have since fallen from a record high, supplies are unlikely to become cheaper any time soon with scarce imported inventories fetching top dollar,” Mr Petrie said.

Construction businesses are now on the receiving end of critical supply shortages and are being forced to wait on $1.6 billion of residential construction activity stimulated by the Federal Government’s HomeBuilder grants.

“This shortage is going to be felt the worst by young people who have received the HomeBuilder grant, and that is going to have a flow-on effect to the economy as more and more projects are put on hold indefinitely,” Mr Petrie said.

Of the 99,000 families who applied for the grant to build their dream home, 9,800 (10 per cent) have been left in limbo, likely forced to resign their lease without knowing when construction will conclude.

The coinciding graph highlights the difference between residential projects commenced and completed quarterly, as well as diminishing capacity of construction businesses during the latest boom.

“Because of affordability constraints and critical value thresholds to remain eligible for the grant, some households have been left with no choice but to put projects on hold indefinitely until the current shortage ends,” Mr Petrie said.

Wait times are likely to continue with construction activity being spurred on by record low interest rates and a raft of federal and state incentives aimed at bolstering the sector over the last 18 months. Grafa is a financial data, news and analysis platform. 

Ash to expand its plants and range 

Australian Sustainable Hardwoods (ASH), located in Heyfield Victoria, will soon become the first company nationally to manufacture engineered flooring from plantation timber.

The local manufacturer’s new $3.2 million project to produce engineered flooring from plantation timber has been fast-tracked after receiving a $1.6 million grant from the State Government, with the business’ directors also planning to launch the product to the market in March 2022, according to a recent Gippsland Times report.

ASH is now set to install a new manufacturing line to produce engineered flooring made from plantation shining gum and radiata pine plywood, while also expanding its online and retail outlet.

Three additional grant recipients across Gippsland, Victoria are also attempting to diversify their businesses and avoid closure by experimenting with new products using different timber sources.

Gippsland timber mill, Yarram’s Radial Timber, received $397,000 under the fund to introduce a small log line and experiment with processing plantation timber.

Also in Gippsland, Longwarry Sawmill received $246,000 to use recycled and reclaimed timber to make new timber products, while Brunt’s Harvesting in Orbost received $40,000 that is now set to undertake a feasibility study for transition to plantation harvesting, according to the report.

ASH has recently been changing the way it does business to continue its viability beyond 2030, particularly since the State Government’s announcement that the native timber industry will be phased out.

ASH is also seeking to stay ahead of a drop-off in supply in 2024 by investing in major capital, transforming the business into a manufacturing base with diverse feed stock and planning to establish a line of plantation-based products.

The manufacturer took note of growth in the engineered flooring market after firmly establishing itself as a major player in the staircase tread market, according to the report.

While plantation timber requires more fine tuning than native timber, plantation shining gum proved to be a workable option and was used in the first prototype, according to the report. The new retail outlet will also sell the engineered flooring including some of its existing products, such as staircase and furniture components, while open new markets to ASH as it prepares to transition from native timber joinery to products manufactured from plantation timber.

The manufacturer has also continued to purchase plantation mountain gum from New South Wales, hardwood from HVP Plantations, and logs and sawn timber from Tasmania in order to diversify its feed stock from VicForests-supplied timber, according to the report.

Recently on-site to announce the project was Agriculture Minister Mary-Anne Thomas, who said the government supported innovation in the timber industry as it transitioned from native to plantation timber.

“This is a really great project for ASH because it is about creating new employment in the timber industry. We expect 22 new jobs as a consequence of this investment,” she said.

Ms Thomas said in the report that the funding was ensuring mills had future opportunities within the industry, and look to what is increasingly in demand – manufactured timber.

Transport issues hinder Kangaroo Island timber solution 

Although tonnes of structural grade timber is ready to be shipped to sawmills from Kangaroo Island in South Australia, transport issues and high costs continue to hamper efforts, according to a recent www.indaily.com.au report.

Listed company, Kangaroo Island Plantation Timber, reported that it has about 300,000 tonnes of structural logs available to be shipped and the logs would produce about 100,000 tonnes of structural timber, enough to build about 10,000 homes and ease shortages.

Representing close to 10 per cent of the state’s plantations, Kangaroo Island Plantation Timber has about 14,200 hectares of plantations, about 80 per cent hardwood (blue gum) and 20 per cent softwood pine, which is used to produce structural timber, according to the report.

However, around 95 per cent was damaged in the Kangaroo Island fires that began on December 20, 2019 and burnt 210,000ha – almost half of the island – across a 612 kilometres perimeter before being declared contained on January 21, 2020.

While the company received more than $60 million in insurance payout following the fires, it has since been in a race against time to salvage the timber and ship it off the island before it rots, according to the report. In total, KIPT estimated in the report that it has 4.5 million tonnes of bushfire-affected timber that could still be salvaged and sold, according to the report.

It says its window to ship burnt softwood pine trees before they decayed was now a little over a year while the hardwood blue gums could potentially last up to another four years.

KIPT Managing Director Keith Lamb said the 4.5 million tonnes of timber on the island included 1.5 million tonnes of standing pine softwood logs, of which about 20 per cent is considered structural grade.

“That is 300,000 tonnes and this would produce about 100,000 tonnes of structural timber. That is about enough for 10,0000 homes, which represents about one year’s construction in the Adelaide market,” he said in the report.

“Normally there would be a bit more than that but the impact of the fire means we are harvesting different forests at different ages when they are not fully mature. It is a very unique opportunity to plug a gap that has been created by a breakdown in the supply chain due to COVID,” he said.

KIPT’s plans to set up an export hub on the island have been in place since long before the 2019-20 fires, while the company has also revealed plans in 2017 to build a $40 million port at Smith Bay, on the island’s north coast. The proposal has been declared a major project by the State Government but has faced strong opposition from local businesses, including the neighbouring Yumbah Aquaculture abalone farm. The project is yet to be given approval.

In the meantime, KIPT began using SeaLink’s ferry service from Penneshaw to Cape Jervis in February to begin trucking softwood logs to the mainland. The loaded trucks then drive from Cape Jervis to Port Adelaide where KIPT has established a depot to store timber before it can be on sold to local sawmills or shipped overseas.

KIPT is also working on plans to barge logs from Kingscote.

Local entrepreneur David Harris said in the report that he is in talks with the company to use his wharf lease in American River to barge logs to Port Adelaide.

“We will continue to use SeaLink, it is very important for us to maintain that service. But the challenge for us is a passenger service, not an industrial service and we have to meet the ferry schedule, there are limited spots available to us and it is not viable to get all the timber off.”

It is one thing to make the timber available, but the other challenge is the capacity of local sawmills to cut it, according to the report. There are two major sawmills in South Australia that supply structural timber, both in the South East, but both are at capacity. It is for this reason that the State Government recently announced a $2 million fund to increase the supply of structural timber for local South Australian home builders.