Timber Update May 2021
AFPA welcomes Federal Government extension of HomeBuilder start date
The Australian Forest Products Association (AFPA) has welcomed the Federal Government’s extension to the timeframe for construction commencements under its HomeBuilder program, according to AFPA Chief Executive Officer, Ross Hampton.
As the deadline for applications under HomeBuilder approached at the end of March 2021, the AFPA called on the Federal Government to extend the construction timeframe permitted under the program as a means of taking the heat out of the market and allowing the structural timber supply chain to meet demand more easily.
“Australia’s forest industries welcome the Federal Government’s HomeBuilder changes. By making this sensible, practical change the Government has ensured that the HomeBuilder stimulus can continue to contribute to Australia’s economic recovery from the COVID pandemic,” Mr Hampton said.
“The domestic industry supplies around 80 per cent of timber used in Australian home construction and ramped up production to keep pace with record demand, spurred in part by HomeBuilder. Extending the timeframe for new builds will take the pressure off and allow more time for stock to be produced and delivered to builders,” he said.
HomeBuilder was a welcome stimulus during uncertain times, particularly as COVID took hold throughout 2020, according to Mr Hampton. The boom is welcomed by forest industries, and also highlights significant supply constraints of Australian timber.
“We do not have enough trees in the ground right now to meet future demand and the Federal Government urgently needs to do more to incentivise new plantings. That includes removing Carbon Farming Initiative (CFI) water rule barriers so forest growers and farmers can access payments under the Emissions Reduction Fund (ERF) in all Regional Forestry Hubs,” Mr Hampton said.
“Aussie timber is the number one choice for builders because it is easy to use, low cost, versatile and environmentally friendly, and this current demand surge should be a wake-up call to the nation that unless we kick-start new tree plantings, these products we take for granted today may not be so accessible in the future,” Mr Hampton concluded.
Daniel Andrews’ plan felled
The Victorian Labor Government has recently admitted that its promise to transition the state’s native regrowth timber industry to solely plantation-based timber by 2030 is a “sham,” according to a recent report by the Australian Forest Products Association (AFPA), after The Age Newspaper revealed that Victoria’s Agriculture Minister Mary-Anne Thomas conceded that the promised plantations will not be ready by 2030.
According to The Age, “Victorian Agriculture Minister Mary-Anne Thomas said the Government had been clear that plantation trees planted now will not be ready by 2030 and that they will not be replacing native forests tree-for-tree.”
The admission comes after 18 months of Premier Daniel Andrews and his Ministers repeatedly promising that there will be minimal job losses when the Government ends native forest harvesting in 2030 because it will transition sawmills to plantation logs.
“Everything the Andrews Government has promised the thousands of regional workers, their families and their communities to this point has today been exposed as a lie,” Australian Forest Products Association Chief Executive Officer Ross Hampton
“Everyone in regional Victoria has known that the plan was a sham from the start and now it has been exposed. Anyone who knows anything about tree growth rates has known from the start that – even if hardwood plantation trees could fill all the timber needs of Victoria – they would take many decades to grow and tens of thousands of hectares of agricultural land which the Government has not even purchased yet,” he said.
Mr Hampton commended Federal Nationals Member for Gippsland Darren Chester and the CFMEU’s Michael O’Connor for relentlessly pursuing an answer from the Government which drew out this admission.
“It is time the Victorian Labor Government came clean with the workers in the industry and the dozens of regional communities across Victoria that the timber industry underpins and admitted that there will be mass unemployment unless this decision is reversed,” Mr Hampton said.
Aussie timber prices set to soar
With the price of lumber now skyrocketing to US$1,048 per thousand board feet, it seems that timber prices are now out of control in the US, up nearly 400 per cent more than it was a year ago, according to a recent stockhead.com.au report.
The price hike is not only due to a result of reduced production during COVID’s early months, but also a DIY and housing boom sparked by low interest rates which is now seeing share prices of wood suppliers increase significantly.
With Australia now entering a construction boom of its own, it is expected the same price hikes could occur in Australia, according to the report.
Big River Chief Executive Officer, Jim Bindon recently told Stockhead that while the US situation does not have a direct impact on Australia, wood suppliers and consumers here are grappling with challenges of their own.
“There is an insignificant amount of lumber that comes in from the US to Australia. But there are indirect impacts. European lumber or timber products, some of which are imported into Australia, are being diverted into the US because of the material price increases there,” Mr Bindon said in the report.
“Redirecting some European product away from Australia is also hitting a couple of structural products used in housing, which have led to small price increases,” he said.
Shortages within Australia are a result of several factors including increases in detached housing which is also linked to the Australian HomeBuilder scheme, according to Mr Bindon.
“The major fires in Australia a bit over a year ago took out quite a substantial amount of the pine resource. That has also reduced the Australian manufacturing fraternity’s ability to just ramp up production to meet the uptick in demand,” he said in the report.
There are also the restricted imports that are due in part to escalating US prices, but also mostly because freight and shipping capacity has been severely interrupted by COVID.
“A lot of these products come out of Eastern Europe and some of those countries have still got quite extensive problems with COVID-19. It is a bit of a triple whammy – we have lost Australian resources, we have less imports coming in, and you have a spike in demand,” he said.
“I think it will all smooth itself out certainly by the end of this calendar year. I think it is just a small timing issue around those three factors,” Mr Bindon said in the report.
While Mr Bindon believes Aussie timber futures will not go through the roof anytime soon, it is a good time to invest in an Australian-based, construction-facing business.
“We are moving into a three-to-four-year upswing in the construction cycle. I am sure that is why all the building materials companies are materially higher than their 12-month low. People are seeing the cycle has moved. Those that do not like the cyclicality of building products have stayed out for the last few years, and I think those very same investors are seeing this as an opportune time to jump back in,” Mr Bindon said.