Builders stockpiling timber as they brace for supply shortages

April 6, 2021

By: The Working Forest Staff

STUFF.CO.NZ — New Zealand’s structural timber shortage has been looming for months and some builders have been stockpiling timber in warehouses to ensure they have enough supply, a builders’ association says.

New Zealand Certified Builders Association chairman Mike Craig said the shortage had resulted in what he called “the toilet paper effect”, a reference to toilet paper stockpiling witnessed during times of panic buying in the Covid-19 pandemic.

“Businesses have been stockpiling timber in warehouses,” Craig said.

He said that made it difficult to know how much stock was in the market and how severe the timber shortage was.

Since around November, the practice had been reasonably widespread amongst builders who had enough capital to do it, he said.

“If you’ve got capital, and you can spend you’re going to do it because it keeps your business going.

“You’ve got to call it good business sense at the end of the day because you’re trying to protect your business and your customers.”

His comments come after Carter Holt Harvey stopped supplying to Mitre 10, and ITM with structural timber.

Its decision to keep supplying large customers including Fletcher Building-owned PlaceMakers and its own subsidiary, Carters, has drawn the attention of the Commerce Commission.

It’s not the first time Carter Holt Harvey has been in the regulator’s sights. In 2011 the High Court fined Carter Holt Harvey $1.85 million for price-fixing in the Auckland commercial timber market in a what Justice Venning described as a “classic case of price-fixing,”

Craig said Carters alone would make up more than half of the timber product market and mostly catered to large building firms.

Smaller companies tended to buy from Bunnings, Mitre 10, and ITM, he said.

“Builders have got accounts to most of the suppliers around their area, but they have loyalties. You pick a business that looks after your demand.”

Smaller operators were now more likely to go to Carters or Placemakers if they couldn’t purchase product from their regular supplier, he said.

The timber shortage had been apparent throughout the pandemic and builders were now having to plan jobs well in advance, he said.

Craig’s business Mike Craig Builders was fully booked well into next year, he said.

“Most builders just drive into the store and pick up what they want, now you’ve got to think ahead.”

In normal times builders would plan four weeks ahead for delivery.

“That might be 14 weeks now plus.”

Ockham Construction manager Will Deihl said the supply shortage had not come as a surprise.

It meant Ockham would need to be more organized and pre-order timber months in advance from its suppliers Carters and Placemakers.

“We will be pre-ordering as early as possible,” Deihl said.

“We talk regularly with our suppliers to make sure that we’re not going to end up hamstringing ourselves.”

He said it might mean it would need to have more storage on-site for timber products.

“We like to keep as little on-site as possible, obviously, because we don’t have a lot of space.

“I don’t think we’d choose an offsite storage facility purely because of the cost side of things.”

Registered Master Builders chief executive David Kelly said building supply shortages had been an issue for some time, with Covid-19 having an impact on global supply lines.

“They are now escalating further, and the Carter Holt Harvey announcement is one part of that.”

“Our members are saying it is not just timber that is hard to get, but a variety of products, from taps through to glue.”

It was a concern for the sector, and in particular, for the smaller building companies, he said.

Larger builders typically had arrangements in place and supply agreements, so were likely to be less impacted than a standalone builder, he said.

“It is critical to the industry that we are able to communicate across the supply chain, so builders know how to plan.”

WHO’S TO BLAME?

Some in the construction sector have attributed the timber shortage to high volumes of logs being exported to China for a better price than what the New Zealand market can afford, resulting in a shortfall in New Zealand.

The New Zealand Wood Processors and Manufacturers Association said earlier in the week the wood processing industry was in dire straits without government help.

Shipping New Zealand logs to China ended up making the price of logs in New Zealand too high for local processors, it said.

Metals New Zealand chief executive Nick Collins said the shortage of timber in New Zealand was not just a symptom of Covid-19 but was underpinned by record log exports from New Zealand to China.

“China is in effect setting the price for New Zealand logs which undermines the profitability of local manufacturers and processors.”

The Government needed to look closely at investment settings for local manufacturers, especially accelerated depreciation to encourage investment in better manufacturing technology, he said.

“A failure to act upon investment settings for manufacturing will continue to see local manufacturing close as international players move value-added production to countries which offer more favourable, more secure investment incentives.”

The Building Industries Federation also said growth in log exports to China had compounded the issue.

However, Carter Holt Harvey, the Forest Owners Association and the Farm Foresters Association say log supply is not the issue.

Carter Holt Harvey said it was the largest producer of structural timber in the country and since 2018, had been investing in capacity expansion. The initial stage of this was completed early 2020 resulting in a 40 per cent increase in supply. Further capacity expansion was also “well underway”.

Some in the construction sector say the timber shortage is due to high volumes of log exports to China.

Forest Owners Association president Phil Taylor said the volume of the New Zealand timber market had been stable for at least 20 years.

“On top of that you can’t expect processors to have capacity on stand-by for extra sales at a level which hasn’t happened in the past 20 years.”

The Wood Processors and Manufacturers Association was using an unrelated timber shortage to try to get government support for intervening against exports, he said.

Farm Foresters Association president Graham West said farm foresters were getting into the peak years of harvesting from their 1990s plantings and did not want the Government to interfere with their long-awaited harvest.

“The logs supplied for export, are generally not suitable to meet the house construction grades here in New Zealand. There is not that much overlap.”

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