Shortage due to mill closures, not exports

Wednesday 7 Apr 2021

The root cause of supply restrictions of structural timber relates to chronic, long term underinvestment in wood processing rather than a shortage of trees, forestry sector players say.

Grant Dodson, chief executive of City Forests and chair of the Southern Wood Council, said while demand in Asian and other markets for New Zealand logs remained solid, domestic mills were now “flat out” due to escalated building sector demand.

In contrast to complaints by producers that the current supply issue stems from China’s inflated and subsidised prices for NZ logs, Dodson said domestic use still represented about 43% of its market.

“So, this really starts with processors, who are limited by a lack of capacity,” he said. Dodson said the closure of up to 15 mills by the country’s largest structural timber supplier Carter Holt Harvey (CHH) in recent years, hadn’t done the industry any favours.

After announcing the closure of its Whangarei operation last year, CHH admitted it had been having production issues with its newly expanded Kawerau sawmill operations.

That saw CHH surprise the market last week by shutting down supply to its smaller customers and prioritising Placemakers, owned by Fletcher Building, and Carters Building Supplies. The latter, like CHH, is part-owned by Kiwi billionaire Graeme Hart’s Rank Group.

That move left building supplies cooperative ITM and Mitre10 scrambling for alternative supplies on the back of a residential building boom that saw building consents track up 5% to a record 39,725 dwellings for the year to February. This was pushed by record Auckland consents for terrace housing. The CHH move has sparked a Commerce Commission enquiry.

Chinese exports - James Treadwell, president of the NZ Institute of Forestry, agreed it’s not an export-related issue “as about 90% of logs that are exported don’t meet the structural specification for domestic mills anyway”.

“What we’re exporting is what the domestic mills don’t want in general,” he said.

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Source: BusinessDesk

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