Leading independent economic forecaster and industry analyst, BIS Shrapnel
reports that the Australian sawn timber industry is experiencing a temporary threat from imports as a result of a strong dollar and a global surplus of timber following the Global Financial Crisis.
Though imports have increased by 30% in the two years to 2011, they are not a significant long term threat as they are still well below the historical levels of 20 years ago.
According to BIS Shrapnel’s Sawn Timber in Australia, 2012 to 2026 report, increased domestic production capacity in the last two decades has resulted in a reduction in sawn timber imports, with a corresponding growth in exports in the past five years.
Based on a major survey of builders, end users and merchants, the report analyses the significant differences in the hardwood and softwood sawn timber sectors. The report finds that Australian producers are currently facing increased pressure from imports at a time when the domestic housing market has been rather sluggish, and when domestic producers have sufficient capacity to supply much of the domestic market.
Average annual domestic demand for sawn timber will increase from 4.9 million to 5.4 million cubic metres between 2012 and 2015 and rise again in the decade to 2026, from 5.4 million to 5.7 million cubic metres, compared to demand in 2011 of only 5.1 million cubic metres.
Highlights of BIS Shrapnel’s Sawn Timber in Australia report:
- 2013 will continue to present challenges from imports
- International and domestic conditions to be more favourable to producers by 2014 with a declining dollar
- Improved global demand for timber in response to a stronger housing market in the US and strong demand in Asian markets
- Demand for sawn timber in Australia during the next decade to be driven by sharp growth in the building and construction sector
- Strong growth in 2014-2015 for residential construction sector, which uses more than 70% of sawn timber produced locally
- Average annual domestic demand for sawn timber forecast to increase from 4.9 million to 5.4 million cubic metres between 2012 and 2015
BIS Shrapnel report author and senior manager, Bernie Neufeld says that expected production of sawn timber ranging between 4.5 million and 5.2 million cubic metres will not be able to meet demand over the long term.
Hardwood sawn timber
During the past three decades the hardwood sector has been subject to constraints arising from community pressures and government legislation to conserve resources. Consequently, production and demand for hardwood has declined by almost 50% over the past decade. BIS Shrapnel expects further declines of 7% to 12% during the five-year period 2012 to 2016. Exports are expected to decline by 50% and imports will increase marginally.
Despite declining demand, local prices are expected to experience upward pressure due to limitations on domestic production and supply, and rising import prices.
Softwood sawn timber
Major government-initiated softwood plantation programs are starting to pay significant dividends in the Australian sawn timber market. These long term investments have supported the development of modern, larger-scale and more technology-savvy saw mill operations that are in a position to be more competitive with imports and in export markets, and to expand capacity as domestic and global markets improve.
The softwood sector has experienced considerable consolidation during the last five years and further restructuring is likely over the forecast period. The demand for softwood sawn timber increased by 15% in the last decade. However, production increased by 21%, as consumers shifted from using hardwood to softwood.
BIS Shrapnel expects the demand for softwood to continue to increase from 4.2 million cubic metres in 2012 to 5 million cubic metres by 2026, and production to increase to 4.6 million cubic metres.
BIS Shrapnel is Australia's leading provider of industry research, analysis and forecasting services.