Before COVID, builders ordering frame and trusses would expect their product to arrive within about four weeks, according to a recent survey by the Master Builders Association of Victoria.
Nowadays, that survey indicates that the same products take around four months to arrive.
For laminated veneer timber, meanwhile, wait times have blown out from as little as 1.5 weeks to as much as sixteen weeks.
Such has been the experience of builders around Australia as a shortfall of timber has emerged.
In a recent WoodsSolutions webinar, Christine Briggs, National Marketing Manager of Colac based forestry and timber products company AKD Softwoods; Gavin Mathhew, Chief Executive Officer of the Engineered Wood Products Association of Australasia (EWPAA); and John Halkett, General Manager of the Australian Timber Importers Federation (ATIF,) talked about what is driving the shortfall and what needs to be done.
At the outset, it should be acknowledged that problems are not restricted to timber. Around the nation, many building products are in short supply.
Broadly speaking, the shortage is being driven by record demand and tightly constrained supply.
On the former issue, the surge in demand is being driven by record levels of activity in detached home construction and home renovations.
Around the nation, BIS Oxford Economics expects the overall number of detached home commencements to top 130,000 in both 2020/21 and 2021/22. This compares with a previous record of 121,490 in 2017/18.
Predominantly, this has been driven by the Commonwealth HomeBuilder program along with state- based incentives for new home construction.
Demand is also being supported by record low interest rates, a shift in preference toward lower density housing and greater spending on home renovations as consumers spend more time in their homes and redirect travel money toward home improvement.
Briggs says the impact of this cannot be understated. Speaking of structural softwood, she says almost 80 percent of local consumption goes into either detached home construction (43 percent) or home renovations (35 percent).
At the same time, there are significant disruptions to supply.
Domestically, Briggs says around 40 percent of sawlog supply was decimated in the 2019/20 bushfires. Whilst mills have worked to process bushfire impacted logs, the ability to do this has now laregely been exhausted.
Beyond this, several factors are disrupting import supply.
Courtesy of stimulus efforts internationally, demand for timber is running hot worldwide. This is seeing producers in Asia (from which Australia sources two-thirds of its engineered wood product) and Europe (where we source a further 20 percent of EWP) redirecting product toward markets in Europe and the US.
Beyond that, international trade generally is being disrupted by a shortfall in shipping containers. In Europe, Halkett talks of a three-month wait for new containers. Container prices, meanwhile, have climbed from around $Us1,800 to $US5,000.
Locally, Halkett says Australian port charges have doubled between 2019 and 2021.
All these problems, Halkett says, are being further exacerbated by challenges which limit the attractiveness of Australia as a market to overseas producers. Australia, he says, is seen as a ‘demanding customer’ when it comes to the need to comply with requirements associated with the National Construction Code, sanitation and illegal logging. Recently, he says, a Canadian sawmill had to spend $3 million to change the stamping system on the final product to ensure that the stamps which indicated a grade of MGB10 under the requisite Australian standard were at 1.2-meter intervals on the product face.
The impact of this varies for different products.
On structural softwood products, Briggs says AKD expects a supply shortfall of seven to ten percent in both FY21 and FY22 before the market returns to balance in 2022/23.
With domestic supply accounting for 75 to 80 percent of consumption, this part of the market has been affected by the bushfires.
Whilst the industry has expanded output by around 15 percent since COVID began, Briggs says this has been more than offset by a spike in demand. According to AKD’s forecasts, overall structural softwood demand is expected to rise to record levels of 2.288 billion cubic metres in FY21 and 2.312 cubic meters in FY22. This is up by more than 30 percent compared with the 1.766 billion cubic meters registered in FY 2020 and well above the previous record of 2.107 cubic meters set in FY2018.
Briggs says a particular challenge revolves around the contrast between the cyclical nature of the building cycle and the decades-long timeframe needed to grow and harvest timber products.
Turning to engineered wood products (EWP), Matthew said the relative impact of domestic and international challenges varies according to different product types.
In the case of particleboard and sawntimber, these are 91 percent and 75 percent sourced locally. These products are mostly vulnerable to the localised challenges referred to above.
With products such as LVL and plywood, however, imports account for 70 percent and 76 percent of local consumption. For these products, any increase in local supply will have less impact.
As is the case for structural softwood, Matthew says domestic EWP plants are running at full capacity.
Thus far, price increases in Australia have not matched those elsewhere.
In the US, Matthew says prices for lumber, OBS and plywood have surged in 2021 and now sit and between four and six times their levels in 2020.
In Australia, prices have been less volatile. In the March quarter edition of its Timber Market Survey, forestry consulting firm Indufor reported that prices for medium density fibreboard, particleboard T&G, plywood C/D grade, LVL and I-joist/I-beams increased by four, two, six, ten and four percent respectively in the twelve months to March.
Still, Matthew cautions that this may not fully reflect experience on the ground due to the lag before on-ground conditions flow through into reported data. At any rate, he says prices have risen further since the data was collected in March.
What can be done?
Both Briggs and Matthew stress that the domestic industry is doing what it can to maximise output volumes.
Briggs also stresses that local sawmills are committed to the Australian market – to which they sell around 97 percent of output.
Speaking of her own firm, Briggs says AKD has sought to offset losses from its Tumut and Highland Pine Obern mills in New South Wales by ramping up production at its Caboolture mill in Queensland.
In addition, AKD is adopting several other measures.
Short term, this involves maintaining fair allocations and along with clear communication to provide customers with realistic expectations about available stock volumes.
On this score, the company’s primary focus has been to maintain volumes for existing customers.
It has also sought to maximise the highest value cut (structural timber) at its sawmills.
Longer term, ADK will seek to maximise output and recover greater volumes of product for use by using precision sawmilling technology such as shape sawing and thinner saws.
It will also introduce new products which use new kiln technology to create a lower carbon footprint.
Next, it is working with the building supply chain on opportunities to design systems which use grades that are not over-specified or over fit for purpose,
As things stand, Briggs says there is a large safety factor in the current specification of grades. She says AKD will work with the supply chain to see how this can be made ‘wiser and smarter’ in coming years.
Beyond that, she says efficiencies need to be maximised throughout the building and construction process to ensure that product gets from seedling to installed structure as quickly and cheaply as possible.
In relation to EWP, meanwhile, Matthew says the industry continues to invest in innovative products such as LVL systems, GLT, CLT, panels systems and hybrid products.
The industry is also ramping up investment and production. All up, nine new plants and existing plant upgrades have been announced over the past six years. These include facilities for CLT, particleboard, GLT, timber recycling for particle board and wood plastic composite products.
Nevertheless, he says more needs to be done.
First, he says Australia needs to increase the stock of for-harvest trees.
Australia, Matthews says, currently has just under two million hectares of timber plantations. But he says this has been declining as a result of underinvestment and a lack of government leadership as well as the burning of significant areas during recent bushfires.
He says this should be addressed through a joint government commitment to implement the existing ‘One Billion Trees’ program, incentives for storage of carbon in new production trees and renewable timber forests, greater encouragement of farm forestry and removal of red tape and unnecessary regulation.
He stresses the need to ensure that imported products comply with Australian standards and are fit for purpose. Those in the supply chain should apply due diligence and be willing to ask questions to ensure that their products are compliant, he says.
Speaking of imports, meanwhile, Halkett says there will be an increasing requirement for these over coming decades notwithstanding aforementioned efforts from domestic producers.
He also stresses that there is no silver bullet or great resource to suddenly ship to Australia.
Still, ATIF is taking several steps.
Notwithstanding Australia’s lack of attractiveness as a market, it is talking with additional suppliers about importing product into Australia.
It is also talking with the Commonwealth about mechanisms which may improve the prospects of increasing timber volume imports from northern hemisphere sources such as Sweden, Russia, Lithuania and Canada.
One issue here involves addressing challenges regarding communication with Russian entities and trade associations. In particular, ATIF has asked Agriculture Minister David Littleproud to help improve its ability to liaise directly with Russian government agencies and entities.
Russia, Halkett says, is a source of opportunity as existing import volumes are modest and a nation-wide ban on log exports in the country set to commence in 2022 will see more product processed directly within Russia. This will provide opportunities to increase sawn volumes coming into Australia.
Finally, there are opportunities to harmonise requirements around codes, standards and quarantine and to address issues around tariff and non-tariff barriers.
As part of all this, import associations are working with freight and customs entities at the behest of the Commonwealth to prepare a paper which identifies options to increase timber import volumes.
That paper, which is well advanced and is currently in draft form, is likely to suggest a two-step process.
First, it will propose a roundtable of relevant trade entities across building and construction and the supply chain along with government entities and the Department of Foreign Affairs and Trade and the Department of Agriculture to scope out areas where the current situation could be improved.
Should that show promise, the paper will propose a working group to examine some of these issues. This would examine ways to better communicate with suppliers; issues around standards, codes and requirements; and areas where it could be suggested to the Forest and Wood Products Association of Australia that work could be done to look at grades in order to improve Australia’s attractiveness as a supply destination.
Finally, Briggs encourages builders to stick with timber.
Despite today’s shortages, she says timber framing remains an environmentally friendly choice which acts as a permanent store of greenhouse gasses.
Halkett, meanwhile, stresses the importance of increasing timber import supply.
“There is no doubt that in the next decade and beyond – given the situation in Australia with regard to domestic supply, given the demographics in Australia and the changes we are now seeing in relation to housing approvals and building additions and alterations – that there is going to be a need for increased imports of timber products,” he said.
“Otherwise, we will all be living in steel houses.”