TIMBER UPDATE November 2021

by | Nov 15, 2021

Timber Framing Collective’s first campaign

The Timber Framing Collective launched its first communications campaign nationally which seeks to shift on-going narratives around the timber industry’s “supply issues”, to be interpreted as more of a “demand challenge”. 

Titled ‘Supply and Demand’ the new campaign is specifically designed to assist stakeholders within the supply chain to understand the current state of play and the main drivers of the unprecedented demand. It also aims to empower those in the supply chain to share industry messages with their network, customers and contacts to create greater awareness of the current situation. 

Timber Framing Collective Spokesperson Marita Pierce-Indugula, said that upon understanding the pressure the building demand surge has placed on the supply chain, stakeholders need to remember that, back in mid-2020, everyone was concerned about having no demand for new housing. 

“The market’s response to stimulus such as HomeBuilder has been astounding and is still continuing. Given structural timber’s usage early in the building cycle we have been in the spotlight, but it is impacting mostly building materials. Our message is to stick with timber. Increased use of timber framing means more carbon is removed from the atmosphere creating a cleaner, better world for everyone.”

“Importantly, the campaign will also look to create a shared understanding that we can weather this perfect storm together and to keep up proactive communications along your supply chain,” Ms Pierce-Indugula said.

The campaign is spearheaded by an open letter from the industry (see highlighted story) and is supported by a series of social posts that will run across Facebook, LinkedIn and Instagram for the remainder of 2021. 

Those from the industry that are interested in sharing the messages through the supply chain are encouraged to visit www.timberframingcollective.com.au. Here they can download the assets for usage in their own communication channels or to simply engage with the ‘Timber Framing – The Ultimate Renewable’ social posts via their preferred social media platform. 

This ‘Supply and Demand’ messaging is expected to pave the way for the Timber Framing Collective’s next strategic focus on the outstanding environmental benefits of timber framing.

In response to current supply challenges, the Timber Framing Collective recently released the following open letter as part of its on-going campaign to create greater awareness of the current situation. Below is the released letter to the industry…

Building and construction is currently experiencing a perfect storm. 
The COVID-19 pandemic has unexpectedly generated a substantial increase in residential building activity. This unprecedented demand for materials, together with COVID-19 related supply challenges, is creating limited availability of key resources and resulting in longer lead times in many sectors, including the timber framing industry. 
And, at the same time, Australians are choosing to use more timber than ever before. 

There are two main reasons for this:
• Government stimulus packages and low interest rates have seen new house approvals reach their highest ever numbers, and at the same time we are witnessing record demand for house renovations. 
• More people working and studying from home has driven an increase in the home alterations and improvements market, and also encouraged a move to rebuild in regional and coastal areas.
Let us get the job done. 

The industry knows that timber is in high demand and is geared to providing a strong and stable supply. However, the current building boom has defied most predictions and we are now having to double down on our efforts to give Australians the timber they need. 

Local sawmills are working harder than ever to optimise production and the vast majority of Australian-produced timber still stays here in Australia – with just three per cent of domestic softwood sales earmarked for export (mainly low-grade product unsuitable for structural use).

At the same time, importers of framing timber are pro-actively seeking out additional sustainable sources and working with Government to streamline the import process to further speed up and improve supply. 

We do not want to let anyone down, that is why we are doing all we can to increase efficiency, streamline production and reduce timber waste. 

We are also investing considerable time and effort to advise and promote Government policy that supports more tree planting, to further reduce the potential risk of not being more self-sufficient in timber products. 
The future is looking positive. 

We understand the frustrations of not having the tools to do the job. It not only affects productivity and profits – but also staff morale, customer confidence and company reputation. 
To all those affected by the increased demand for timber, we want you to know that we recognise your concerns and are here to offer our full support. 

In addition, we continue to encourage significant new investment in timber growing, sourcing and production technology, helping to create a sure and stable supply for the future. And that means we will be growing more trees, removing more carbon from the atmosphere and creating a cleaner, better world for everyone. 

It is a challenge right now but we are strong enough to weather the storm. If we work collectively together, we can grow together. 

Log prices dip slightly as global demand continues 

Log prices have reduced slightly in October as shipping costs took a bigger share of returns, even though Chinese demand did see European sawn timber markets remain strong, according to a recent interest.co.nz report. 

While China’s CFR sale prices for logs are reasonable it seems that extremely high shipping costs continue to adversely affect the New Zealand AWG prices, according to the New Zealand report.

The report outlined that the October AWG prices for export logs dropped an average of $1.10 per JASm3 in the main North Island ports, while domestic prices for structural logs dropped by $5 per tonne in many regions. The PF Olsen Log Price Index also dropped $1 in October to $119 with the index currently $4 below the two-year average, $5 below the three year-average and $6 below the five-year average. When looking at the domestic log market, pruned log supply is strong as mills attract log supply from further afield due to improved price differentials to export pruned prices. According to the report, pruned logs are only exported when there is no domestic sale option or the shorter export length enables improved grade recovery.

The domestic sawn timber markets also remain strong with good demand across all grades. The report indicated that the market is heading into stronger demand for industrial grades due to the upcoming, busy packaging season. Export markets for swan timber remain challenging due to difficult container supply channels, with one processer switching from producing clear sawn timber to domestic structural grades due to the difficulties. 

Another supplier said it is nearly impossible to transport sawn timber to the West Coast of the USA as container lines continue to avoid this area due to excessive delays. However Europe’s demand for clear sawn timber remains strong with buyers wanting to fix supply agreements as far ahead as possible.     

The AWG price range between exporters and ports within the export log market is also quite expansive, with exporters using different strategies for different ports as well as different shipping costs due to some fixed options, all mixed in with various foreign exchange management. 

China

The CFR price for A-grade logs in China has remained variable but the top end is still $182 USD per JASm3 for October, according to the report. While there is pressure on this pricing for November shipments, Southern Yellow Pine (SYP) has dropped to $140 USD per JAS for 20 centimetre SED logs. 

After the Chinese holiday week at the start of October, the daily port off-take also increased by 10k per day to 75-80k while softwood inventory levels dropped slightly to 4.8m m3. China’s congestion issue remains with the report not forecasted to improve in quarter four. This congestion may ease in quarter one as Chinese demand for commodities slows down.

In New Zealand log supply is estimated to be 15-20 per cent down in November as forest owners reduce harvest levels and this may also see a shortage of log supply when Chinese demand does increase. European spruce supply will not increase much as containers are scarce, while the report also indicated that the domestic price for spruce sawn timber has fallen by approximately one third in the last two months.   

The Caixin China General Manufacturing PMI rose to 50 in September up from 49.2, while the level of new orders rose for the first time in three months and sentiment strengthened to its highest point since June. Countering this positive outlook, new construction starts in September fell 13.54 per cent from a year earlier which is the sixth straight monthly decline and is the longest negative run since 2015. Demand for logs has also been more uncertain due to credit issues in the property development sector and power shortages.

Last year the Chinese Government introduced credit tightening policies due to large debt in property development as well as property tax changes. Evergrande has restarted some projects as they have bought time to repay some creditors, but still face significant challenges ahead. 

China’s energy crisis is expected to have a positive long-term effect on timber demand as China is aware of the higher energy costs of steel and concrete. Mandating the use of more wood in their buildings has begun, according to the report, and this may be negative for short term demand.

India

Six log vessels are expected to arrive in Kandla in November, according to the report. Due to the anticipated oversupply situation in November, demand is weak and the price for Uruguay lumber is INR 581 per CFT and Radiata lumber is INR 641 per CFT. 

Normally, the new business year starts in Northern and Western India after the Diwali festival, with fresh demand, however this year is different with sentiment low and strong log demand not anticipated.

With Tuticorin entering the Northeast Monsoon season in late October, this could continue until mid-December, seeing sentiments improve in January, but this demand will likely be filled by supply from Uruguay.

Lumber not to return to pre-pandemic levels

The price of lumber will not go back to levels seen before the pandemic and will continue to see a steady increase over the next few years, Frost Investment Advisors Chief Investment Officer, Mace McCain, recently stated in a Business Insider Report.

The trend line for lumber will see a sustained five per cent rate increase, folding in transportation and labour costs as well as inflationary pressures, according to Mr McCain.

Lumber futures rose 4.86 per cent on November 3, to $US646 ($AU869) per thousand board feet and currently sit 62 per cent below its record high of $US1,711 ($AU2,303) reached in May of this year. According to the report, in November 2020, lumber futures were trading at $US526 ($AU708) per thousand board feet.

“We are past delta peak,” Mr McCain said, pointing to the ADP’s monthly jobs report released in early November.

The US private sector added more jobs than expected in October signalling much stronger job growth after months of dismal recovery, with private payrolls rising by 571,000 last month, ADP said in its monthly employment report. This marks the strongest one-month gain since June.

“We are in the next recovery phase of the economy. There are more workers being employed and going back to work, and that is going to help the supplier lumber. There will be more mills open and we are going to see more lumber become available,” Mr McCain said in the report.

Despite the positive news, the US economy is expected to see persistent labor and supply shortages, on top of the constant demand brought on by the housing crisis, which is also why he says lumber will be a good hedge against inflation.

“We think that the pricing will be resilient in lumber over the next several years. It is one of the commodities I think that will inflate because of the continued demand,” he said.

The integral homebuilding material is a key building block of the US economy and its rising prices have helped push up inflation to 30-year highs, according to the report. The Federal Reserve recently reported it would begin tapering its asset purchases later in November after deploying unprecedented economic support for 20 months.

Tumbarumba Mill project underway

Above: (Left) Quad roll log turner being craned in. (Right) Justin Clancy MP and Hyne’s Gary Evans explaining the new quad roll log turner.

Hyne Timber recently welcomed Justin Clancy MP to its Tumbarumba Mill where Site Manager, Gary Evans also gave an update on the Tumbarumba Mill Optimisation Project.

The project is co-funded by the New South Wales Government as part of the New South Wales Bushfire Industry Recovery Package, and includes various upgrades, new technology and efficiency gains throughout the mill.

Site Manager, Gary Evans said the mill faces a long future of sourcing logs from further afield with high freight costs so gaining efficiencies at the site is essential.

“Most recently, as part of the site improvements with the support of the New South Wales Government, we have installed and commissioned a new and upgraded Quad Roll Log Turner. In short, trees are natural and usually not dead straight. This machine is the latest, high-speed, high precision log scan and log rotation system to help us to process those logs in the most efficient way to get the highest recovery,” Mr Evans said.

The unique equipment was purchased from USNR in Canada to complement the rest of the saw line and presented a unique opportunity to engage local suppliers to assist with the install as opposed to flying in the Canadian suppliers with the current COVID overseas travel restrictions.

“Using local skills and trades saw approximately $50,000 diverted to local suppliers including electrical, civil, hydraulics and fabrication from communities such as Gundagai, Albury, Wagga Wagga and Tumbarumba.”

“We had to remove part of the Mill roof to crane in the Log Turner which was also no mean feat, requiring two cranes, lots of planning and careful mid-air transfer to avoid a sprinkler main line, work which was successfully undertaken by local crane suppliers and operators. The equipment was up and running immediately, fully functional and we are already seeing the performance improvements.” Mr Evans said.

Hyne Timber is committed to its Tumbarumba operations and is pleased to be partnering with the New South Wales Government to accelerate investment to remain at the forefront of sawmilling technology.

Justin Clancy MP, Member for Albury, said he was very pleased to see the recent, new installations at Hyne Tumbarumba.

“These improvements are with the latest in sawmilling technology. And along with the New South Wales Government assisting Hyne to obtain further timber supply from Walcha, they help secure the viability of the mill. After many challenges following the bushfires this offers a positive way forward,” Mr Clancy said.

The successful installation of the Quad Roll Log Turner sees Hyne Timber currently ahead of schedule in delivering its milestones for the New South Wales Bushfire Industry Recovery Package.

The total Tumbarumba Mill Optimisation Project cost is $5,979,043 with $2,989,522 support committed from the New South Wales Government.

Building material shortages – construction site theft

chain and padlock on gate at construction site – lock on closed fence

Home building site theft has risen substantially as timber shortages continue and building material prices continue to increase. Hard-to-get items are now hot property for thieves, especially with the cost of building materials souring between 10 to 20 per cent over the past 12 months, a recent Domain report has revealed.

Master Builders Association of Victoria recently reported that thefts have increased “dramatically” over the past few months in regional cities, including Ballarat, Bendigo and Geelong. 

A particularly brazen theft occurred in Geelong on October 20, when a $14,000 seven-metre-long fibreglass pool was stolen after it was placed on the back of a truck. 

MBAV Executive Director of Legal Compliance Tristan Moseley said building site theft has become more common as home builders struggled with timber shortages and delays in completing builds.

“Theft from building sites has always been an issue but with supply chain shortages there has been a spike. The main thing we are hearing about is timber. It has become a hot item because it is difficult to get your hands on and it is expensive,” Mr Mosley said.

“There may be some desperate builders needing materials to finish a job. It really is a dog act to steal from a building site because what they are doing is stealing from working families and from small businesses,” he said in the report.

Western Australia-based PACT Site Security Director Craig Pages-Oliver also said there had been a significant rise in thefts this year – up 60 per cent compared to two years ago.

The company has now been forced to place GPS trackers in timber and other goods to find where stolen building materials are being taken, particularly around metropolitan areas.

Queensland housing estates have also seen a rise in thefts, particularly around the Sunshine Coast. Last month Queensland Police reported that thieves had cut padlocks and jimmied open doors to steal items ranging from hammers to hot-water services. 

Master Builders Association of Queensland Deputy Chief Executive, Paul Bidwell said he is expecting more thefts over the Christmas break as building sites are left unattended, with the MBAQ currently advising members to secure building sites through regular security patrols and installing CCTV cameras.