IN THE KNOW —
Timber shortage – why, how long and what it means for NZ Certified Builders
The current shortage of framing timber in New Zealand is a result of a global phenomenon compounded by unfortunate timing missteps by New Zealand’s largest supplier Carter Holt Harvey (CHH). So, what does it mean for New Zealand Certified Builders members, how long will it last and what are the options?
A year ago, the construction industry was at the top of the cycle. Sawmillers, like any manufacturers, invest in capacity based on forecast demand. Then COVID-19 arrived, interest rates were slashed, borders were closed, and people around the world decided it was a great time to build the bach, extend the house, or catch up on the global housing shortage. A further building boom ensued, pushing demand beyond what was already the top of the natural market cycle. There are now similar or worse shortages in Australia, UK, Europe and the USA. This also explains why New Zealand cannot readily turn to imported framing timber to solve this short-term problem. I spoke with an Australia distributor early this month who is starting to sell framing to merchants at A$1,000 per cubic meter. We are still a long way from there in New Zealand.
Missteps The global shortage might not have affected New Zealand had it not been for two events at CHH in the last 18 months. To put this in context one needs to understand the structure and trends in the framing supply market in New Zealand.
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There is a long term global trend toward very large scale sawmilling operations, and consolidation of the sector as a result. Red Stag has led this with the construction of the Southern Hemisphere’s largest sawmill in Rotorua. It produces over 600,000 cubic meters of timber annually and supplies 25 percent of the New Zealand framing market. CHH owned the second, third and fourth largest sawmills based in Kawarau, Whangarei and Nelson respectively, with around 40 percent market share. In response to a shortage of high density ‘structural’ sawlogs in Northland CHH elected to close the Whangarei mill and scale up the Kawarau mill. That was an entirely rational thing to do and something the industry expected would happen for many years. It would have been fine had the Kawarau upgrade worked as planned. Unfortunately, the upgrade required an extra long Christmas shutdown this year and the site has struggled to produce the capacity expected since then. I expect it will succeed in due course; these things can take some time. With the benefit of hindsight, it would have been better to await the successful Kawarau upgrade before closing the Whangarei mill this time last year.
