Softwood sawn timber production climbs 21% in 10 years
BIS Shrapnel report author and senior manager, Bernie Neufeld, says expected production of sawn timber will not be able to meet demand over the long term. Production of sawn timber will range between 4.5 million and 5.2 million cubic metres. This will not be sufficient to meet the projected demand.
“Unless domestic capacity is significantly increased to meet projected demand then imports will likely rise again over the long term,” says Neufeld. “This suggests the Australian industry has the potential to accommodate new mills to service the domestic market and potential export markets. There is a need to expand the plantation resource to allow this to happen.”
Over the past decade, production and demand for hardwood has declined by almost 50 per cent. BIS Shrapnel expects further declines of seven per cent to 12 per cent during the five-year period 2012 to 2016. Exports are expected to decline by 50 per cent and imports to 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.
The softwood sector has experienced considerable consolidation during the last five years and further restructuring is likely over the forecast period. “With United States-based Weyerhaeuser selling its operations to Carter Holt in the last decade and Gunns purchasing several mills, including Auspine, there are now three producers – Carter Holt Harvey, Gunns and Hyne – which have the largest share of the market. AKD, D&R Henderson, and Wespine have smaller but still significant shares,” says Neufeld.
“There are likely to be further changes over the next five years, as Gunns reviews timber and pulp mill options, and the owners of Carter Holt Harvey review investment strategy options. This could result in further consolidation. While this may reduce domestic competition, it will likely make the industry more competitive with imports, and in export markets.”
The demand for softwood sawn timber increased by 15 per cent in the last decade. However, production increased by 21 per cent, 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 five million cubic metres by 2026, and production to increase to 4.6 million cubic metres.
“There will still be a requirement for imports, and a constraint on exports, unless the plantation resource and industry capacity is increased,” says Neufeld. “Strong demand and limited supply suggest strong price growth.”
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