Andrew Morton vice president of URS Forestry described Australia’s post GFC wood markets at the Forest Investments Market Outlook (FIMO) conference in Melbourne this week. Source: Timberbiz
URS Forestry, part of URS Corporation an international services company, is an advisor to private sector industrials and financiers, as well as public sector organisations in the form of government departments and development agencies.
FIMO was held in Melbourne on 14-15 April.
“Carter Holt Harvey were not in a good position 12 months ago,” Mr Morton said.
“In May last year Boral made some substantial restructuring in their timber division, that’s 12 months ago and things were pretty dire at that time.”
This year Boral has had a substantial turnaround to profitability in 12 months, though he said that they still have some challenges in front of them.
He also said that Hyne timber has been trading in a more reasonable position than they have been for some time and we are seeing some positive changes but they too face challenges.
Mr Morton said that we are finally seeing hardwood chip prices moving up and a lot of exports are moving at a reasonable level at this time as well.
With regards to softwood he said that we have seen a massive expansion in production capacity since 1980.
“We’ve more than tripled our production capacity in Australia. Our consumption has risen through that period and we’ve pushed back on imports, we’ve become more competitive however, we haven’t exported a lot,” Mr Morton said.
“In the last couple of years consumption has declined. We had a peak in 2007, to which we haven’t returned. At this point in time we’ve backed off from where we were three or four years ago.”
With respect to softwood imports, he said the levels are relatively low compared with what they were in the 1980s but they sustained themselves through the GFC and have remained fairly steady.
While New Zealand has been an important trader with Australia, it is declining in proportional terms and the European trade is expanding particularly in the structural lumbar markets.
With respect to particleboard and MDF, it has been similar to the lumber side of the equation and we’ve had a massive expansion production capacity in Australia.
We exported a lot during the 1980s but that has fallen away as we’ve become uncompetitive in the marketplace.
On the hardboard side, Mr Morton said that there was some expansion but then it flatlined and it’s remained relatively steady.
He said a key trend is that LVL has been in decline now for eight years in price terms.
However, treated decking has found a more expansive market, as it has moved beyond the home market into the renovations and landscaping markets and so it has been able to prosper more readily than other structural products.
In terms of housing regional areas in Australia vary, with New South Wales new housing starts relatively flat.
Mr Morton said that Victoria has really underpinned a lot of the housing expansion post GFC, and there’s been a large increase in Western Australia but Queensland has been flat.
It is a different story on the multi residential side. In New South Wales there’s been a rapid spike in multi residential construction, Queensland has had an up-lift too, whereas in Victoria it has declined.
On the international front Australia has been a major supplier in hardwood market to Japan going into the GFC but it has since declined quite substantially with the Vietnamese entering that marketplace.
According to Mr Morton, Australia was the most expensive supplier into the market as we went into the GFC and it is still relatively expensive but it is becoming more competitive.
With respect to China’s hardwood wood chip imports, this is a recent phenomenon, and trading has been in similar volumes as into Japan.
The main suppliers have been Vietnam and Australia but the pricing has been volatile and Australia has trouble competing on price but this is an important emerging market from an Australian perspective according to Mr Morton.
