Timber Update July 2021

by | Jul 14, 2021

Timber Update July 2021

New sawmill for the Adelaide Hills

A new long-term log supply agreement with ForestrySA will now see a $4.5 million sawmill to be built in the Adelaide Hills which is expected to not only increase timber supply, but also create local jobs, according to a recent Timberbiz report.

Currently operating a small mill at Nuriootpa, KSI Sawmills will build the new mill in a strategic location that offers improved transportation routes central to both local timber plantations and downstream markets.

At a cost of $4.5 million, the new mill will see KSI Sawmills more than double its current production to approximately 60,000m3 annually and create nearly 30 jobs. 

Minister for Primary Industries and Regional Development David Baham said the new local log processing program will inject over $12 million in direct value into South Australia’s economy each year.

“I congratulate KSI Sawmills for making this significant investment in South Australia’s timber industry which will increase supply and create local jobs. This investment has been made possible thanks to a new 10-year log supply agreement between ForestrySA and KSI Sawmills,” Mr Baham said.

“KSI will predominantly consume lower grade log from ForestrySA’s plantations in the Adelaide Hills. The majority of timber products will be consumed by the local packaging industry. Some higher-grade products will meet structural grade and be consumed by the local building and construction industry, while residue materials will support Adelaide Hills based agriculture. This will lead to improved product utilisation and better environmental outcomes with less waste and better estate management for ForestrySA,”
he said.

Mr Basham said a recent tender process for log supply from ForestrySA has resulted in new long-term supply agreements, helping to secure the future of the domestic processing industry including KSI Sawmills.

“New arrangements will allow for all logs of sawmill quality to be provided to the processing industry for increased value-adding, predominantly in South Australia. ForestrySA’s direct contribution to the economy in regional South Australia has increased by more than 50 per cent as a result,” he said.

Builders struggle to cater to new housing boom 

The global timber shortage in the building supply chain continues to cause major delays and soaring costs, particularly as more homes are being built than ever before, spurred on by the Morrison Government’s HomeBuilder program, according to a recent ABC News report. 

However, across the country, new home builds and renovations are taking longer due to a scarcity of timber, with record new house starts in Victoria adding to the problem, according to the report.

Experts say there are several reasons behind the shortage, including the implementation of the HomeBuilder program which is proving to be more popular than ever. With so many other countries using construction as stimulus, there is global competition for materials.

While normally one fifth of construction timber is imported, in the US the spot price for timber soared by 400 per cent. As a result, international traders were sending all their material to the United States.

To compound the issue, shipping costs are at a record high and there have also been delays due to the impact and knock-on effects of the Suez Canal blockage.

However, the Master Builders Association of Victoria, Rebecca Casson, said the increased cost of building was being absorbed by builders, sending many of them broke.

Federal Housing Minister Michael Sukkar.

“Master Builders Victoria is concerned about builders who have entered contracts and cannot absorb ever-increasing costs which, by law, cannot be passed onto consumers.”

The MBA said that in the first four months of 2021, there were 145 building and construction insolvencies in Victoria — up 34.3 per cent on the same time last year.

Housing Minister Michael Sukkar said the Federal Government was looking at ways to alleviate the supply squeeze on builders.

“Some other sawmills are almost exhausting their supply of timber and so they have got the capacity to do it. If there are ways in which we can facilitate or help them get that supply, then they will be able to continue feeding into the market,” Housing Minister Michael Sukkar said in the report.

Unions call for more logs and plantations

Unions, representing New South Wales forestry and timber workers, are calling on the Berejiklian-Barilaro Government to take urgent action to alleviate the national timber shortage, according to a recent Mirage News report.

The unions are calling for the establishment of an NSW Forest Industry Advisory Council to ensure better management of the state’s timber resources in the wake of the 2019/20 bushfires and current impacts on global supply chains.

The CFMEU Manufacturing Division and the Australian Workers Union have made a joint submission to a NSW Parliamentary Inquiry recommending the new body, which the union wants to focus on reducing the state’s dependence on imported timber, according to the report.

CFMEU Manufacturing National Secretary Michael O’Connor said the current shortage, fuelled by strong domestic and global demand, will become the norm if action is not taken.

The unions presented evidence in their submission from members at AKD Softwoods and Visy Pulp and Paper Mill in Tumut, Notaras & Sons in South Grafton, Hurford Hardwoods in Kempsey, Warnervale Frame and Truss Plant, Sweetmans Timber in the Hunter Valley, Hyne Timber Tumbarumba, Frames and Trusses Albion Park Rail, and Boral Narooma, according to the report.

The submission calls for interim measures to maximise hardwood and softwood production to alleviate the timber shortage, training, and transition assistance for laid off timber workers in addition to a long-term plan to support the industry.

The unions have made 17 recommendations through the Parliamentary Committee and union delegates from the mills around the state will travel to Sydney for the forthcoming public hearings.

Timber shortage sees Alpine truss held back 

A worldwide shortage of timber has now hampered a Wangaratta business’s plans to employ an additional 30 staff, according to a recent Timberbiz report.

Managing Director of Tone Road’s Alpine Truss, George Prothero said the shortage was felt Australia-wide due to damage wrought on plantations by the New South Wales bushfires in February last year, compounded by a lack of imported timber due to a US housing boom. 

“It is restricting our business. The availability of wood has dropped, with our sawmills down by about 30 per cent in production, and what we would usually get from Europe going to the US because they are paying more for it,” Mr Prothero said in the report.

The 20-year-old business had been able to retain existing staff numbers through the shortage but had not been able to employ more people as planned, he said

“We could have put on another 30 or so, and we have also had to turn back customers,” he said.

HomeBuilder grants offered by the Federal Government – which were established last year to stimulate the construction industry in response to COVID and set timelines for building to begin – had created extra work but had not taken into account the dearth of timber available, he said in the report.

“There is that much work because of these government grants, but there is not the raw material available. And it is adding so much extra cost to building a house – probably about a 60 per cent increase on the cost of the raw material, which is going to affect a lot of businesses, and catch builders out because they are on fixed contracts due to these grants,” he said.

“We have been really lucky with our supply of raw material; we are in a good position compared to some of our competitors and are sourcing from Tumut and Mount Gambier – but we have more work than we can handle because the grants have been brought forward. There are also concerns that when the grants finish, a lot of work will be brought to a halt; we could all come to a standstill. Governments could have stretched the grants over a longer period.”

“What has got to happen now for us is the US market has to slow down; it is in a boom time at the moment and they are taking all the timber they can get and paying more than us. We also need our own market to stabilise,” Mr Prothero said.

It seems that prices had also risen substantially, further complicating the issue for those seeking to build under the Federal Government grants, and for builders working within contracts. He said he was in communication with the Frame and Truss Manufacturers Association of Australia, which was advocating for the industry and working to raise the associated issues with governments at all levels.

FTMA Executive Officer Kersten Gentle said in the report that it was pleasing the Federal Government’s announcement in mid-April would extend the construction commencement requirement under the HomeBuilder grant from six months to 18 months.

Ms Gentle said the FTMA had worked with a number of other industry associations to create a lobbying paper which was sent to all Australian political leaders to offer an insight into what could alleviate the situation.

“The other issue is our concern that the increased cost to building may push some homeowners over the $750,000 limit set in the HomeBuilder program, and this is also something we are raising with the (Federal) Housing Minister (Michael Sukkar).”

“Builders are the only ones who can slow things down, but the policies in place must enable them to do that. This is a world shortage, not just Australia; American prices have increased by close to 400 per cent, and this time last year sawmills were closing, thinking we would be going over a cliff with COVID-19, but it was obviously the opposite,” she said.

You can’t have a Cabinet without timber

Australia’s peak forest industries association has urged the Coalition and Labor to elevate the forestry portfolio to Cabinet in recognition of the sector’s significant economic contribution and the essential products and services it provides.

Australia’s $24 billion-a-year forest industries employ more than 80,000 people across the supply chain to produce timber for our building industry and vital everyday items like toilet paper, renewable packaging, and other single-use plastic replacements, according to Australian Forest Products Association (AFPA) Chief Executive Officer, Ross Hampton.

“Our message is simple: 2020-21 has shown us that you cannot have a Cabinet without timber. Forest industries are the backbone of the construction industry that is currently keeping the Australian economy strong, we make the toilet paper that is flying off the shelves, and we will play a vital role in any national net-zero target,” Mr Hampton said.

“It is time the whole-of-government impact of our industry is recognised with the appointment of a dedicated Forestry Minister to Cabinet. There is no better candidate for the role than our Assistant Minister for Forestry, Senator Jonno Duniam, who has proven he is up to the task. Our sector should also be acknowledged in the Department’s name, which should revert to the Department of Agriculture, Forestry and Fisheries,” he said.

Mr Hampton said all Australian governments should work together on a national timber strategy to ensure Australia has the forest resource required to meet future timber needs.

“The current housing timber shortage should be a wake-up call to decision-makers that we cannot rely on imports to meet our timber needs. Housing timber is a sovereign capability issue alongside fuel and food, and at the moment we are failing,” he said.

“Unless we take immediate national action to grow our plantation resource to meet future timber needs and stop the closure of yet more sustainable native forestry operations, we will fail future generations. The Aussie dream of owning a home will be out of reach for our children and our children’s children. The best time to plant more timber trees was 30 years ago. The next best time is today,” Mr Hampton concluded.

What weakened the timber supply?

The Federal Government is being urged to intervene in the national timber industry, as foresty and construction unions forecast the industry will not have the ability to meet demand of the current nationwide building and construction boom, according to a recent ABC report.

The HomeBuilder program is said to be one of the major drivers of building and construction activity currently.

The pandemic has also fuelled an ongoing need for Australians to upgrade their living space, however materials of building products are simply no longer fullfilling this need.

Modelling by the CFMEU recommends the amount of construction across the nation will require 2.1 million cubic metres of timber framing this year, however the existing capability throughout the country’s sawmills is only 1.8 million cubic metres, according to the ABC report.

An international construction boom is also draining supplies while the 2019 bushfires have also hit domestic forestry reserves.

CFMEU National Secretary Michael O’Connor contacted Housing Minister Michael Sukkar, Industry Minister Christian Porter and Assistant Minister for Forestry Jonathon Duniam for an urgent meeting to plan support for the forestry sector.

“Otherwise, what will happen is that not only will we have not addressed the current crisis that we have, this crisis will get a lot worse,”he told the ABC. 

Some sawmills throughout Australia are running all the time, awash with supplies, while others are struggling to access any timber and are fearing closure.

Senator Duniam said in the report that the Federal Government was “doing everything we can together with the industry to meet the growing demand”.

“The government convened a roundtable on June 10 with representatives from the building and forestry sector to discuss possible solutions to issues surrounding timber supply. We will continue to work in in partnership with industry and individual businesses as the economy recovers from the 2019-20 bushfires and impacts of COVID,” he said.

Executive Officer of the Framework and Truss Manufacturers Association of Australia Kersten Gentle stated it was an amazing shift in fortunes for the building sector.

“From what I have been told, Albury (in NSW) normally does 600 homes per years and they have already signed up 2000 homes for the year,” Ms Gentle claimed.

“You have got builders all over the country that would normally do about 70 houses, they have signed up 200 houses; or home builders that would do 2000 houses have signed up 3000 homes. This time last year people were winding down their businesses thinking that the market was going to crash. Nobody in Australia predicted we would have this massive housing boom,” she said.

Ms Gentle said that while timber was a clear worry for the forestry industry, the construction boom was placing significant stress on a large range of building products, including roof covering iron and blocks.

The Federal Government has already tweaked its HomeBuilder plan twice to expand the time for jobs to get underway and remain qualified for grants.

Initially it was three months but this was stretched to six months, prior to being kicked out to 18 months in April this year.

However with enhanced need for products forcing prices up, Ms Gentle said further tinkering could be needed, specifically for new house builds.