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Imports pose threat to Australian timber producers

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.


August 8, 2012
By Bernie Neufeld

In the two years to 2011, imports have increased by 30 per cent.

However, imports are not a significant long term threat, as they are still well below the historical levels of 20 years ago. According to industry analyst BIS Shrapnel’s Sawn Timber in Australia, 2012 to 2026 report, in the last two decades there has been a significant reduction in sawn timber imports, as domestic production capacity has expanded. At the same time, exports have grown rapidly in the past five years.

Based on a major survey of builders, other end users and merchants, the report analyses the significant differences in the hardwood and softwood sawn timber sectors. The report found 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.

BIS Shrapnel believes that 2013 will continue to present challenges from imports. However, by 2014, international and domestic conditions are expected to be more favourable to producers as the dollar declines. Global demand for timber will also improve in response to a stronger housing market in the US and strong demand in Asian markets.

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The report projects that the demand for sawn timber in Australia during the next decade will be driven by sharp growth in the building and construction sector. Due to the current undersupply of residential dwellings in Australia, BIS Shrapnel forecasts the residential construction sector, which uses more than 70 per cent of the sawn timber produced locally, will grow particularly strongly during 2014 and 2015.

Average annual domestic demand for sawn timber is forecast to 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. This is compared to demand in 2011 of only 5.1 million cubic metres.

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.”