Download - Structural Pine Supply & Demand Trends Christine Briggs National Sales & Marketing Manager
Structural Pine Supply & Demand Trends
Christine Briggs National Sales & Marketing Manager
2007/ 08 Australian Sawnwood Market, million m3
1.120% 0.1
2%
3.867%
0.611%
Hardwood Production Hardwoood Imports
Softwood Production Softwood Imports
Outline
From feast to famine – our industry has seen significant changes in the availability of structural timber during the last 3 years.
Supply & demand issues facing the industry A forward view – will Australia ever be self-sufficient in structural pine
supply; predictions of the balance going forward Impact of some key housing and construction trends on grade and
end section pine framing demand Partners in the supply channel and PSA’s strategies for cycle
management
A Recent Snapshot of Softwood Market Balance in Australia
-150
-100
-50
-
50
100
150
200
250
('000
m3)
2005 2006 2007 2008
Softwood Market Balance
v
Market Balance Components
*Sources – ABS, ABARE, BIS
Shrapnel & PSA Estimates
Softwood Demand Supply Balance
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
('000
m3)
Local Prod Export Imports Demand
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
('000
m3)
2004 2005 2006 2007 2008 2009 2010 2011
Forecast Softwood Demand
OtheruseOtherbuildingMultiunitsA&A
Detached
Softwood Demand Drivers
The major segment user of softwood (detached housing) reduced usage of softwood by 75,000m3 in 2005, overall the use of softwood reduced by 125,000m3 that year.
*Sources –BIS Shrapnel & PSA
Estimates
Bigger Building Trends Aussies are building bigger and bigger… The average Aussie home is now approx 260m2.
Avg Floor Area for Total New Houses Approved M2
150
170
190
210
230
250
270
290
310
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Dec-0
7
Year Ended J une
M2
NSW VI C QLD SA WA TAS TOTAL
*Source – BIS Shrapnel
Building Trends In the early 90’s, 2 out of 3 new homes built were single storey. So far this decade, approx 60% of all new homes built are more than 2 storey and
in raw number, the single storey homes have halved!
*Source – Australian Bureau of Statistics
Number of New Residential Buildings by Number of Storey's
0
500
1000
1500
2000
2500
J ul-1
991
J an-
1992
J ul-1
992
J an-
1993
J ul-1
993
J an-
1994
J ul-1
994
J an-
1995
J ul-1
995
J an-
1996
J ul-1
996
J an-
1997
J ul-1
997
J an-
1998
J ul-1
998
J an-
1999
J ul-1
999
J an-
2000
J ul-2
000
J an-
2001
J ul-2
001
J an-
2002
J ul-2
002
J an-
2003
J ul-2
003
J an-
2004
J ul-2
004
J an-
2005
J ul-2
005
J an-
2006
J ul-2
006
J an-
2007
J ul-2
007
J an-
2008
One storey Two or more storeys Trendline
Log Supply
Source: DAFF
Softwood log supply increased significantly over the past 15 years For the next 15 – 20 years it is projected to be steady after which modest increases are
forecast
Domestic Pine Framing SupplyStructural Framing M3
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Domestic sawmillers worked hard to meet the gap in supply left by the departure of imports over 2006/ 07. 60% of local cut in structural framing = 2.1 million m3 pa
Framing produced now is approx 40,000m3 more compared to 2003.*Source – A3P Sales Stats
Increase in log processed over 2004-2008 = 3,050,000 m3
Log Recovery
Upgrades in processing technology help to further improve recovery. If all Oz sawmillers gained an extra 1% of recovery this could mean approx 20,000m3 increment of framing a year!
Softwood Sawmill Cut - 1 million m3 log-in
300,00030%
500,00050%
50,0005%
50,0005%
100,00010%
Structural Chip/ Bark
Merch 12/ 19mm Recovery Boards
Industrial/ Heartwood products
Log Length Sawmillers are constrained by the forest and their owners in terms of supply
to meet market requirements 30% 4.8m, 30% 5.4m & 40% 6.0m is a typical log mix diet targeted by the
forest owners in Australia (some 3.6m) Best match - log lengths to customer framing length demand is below
6.0m, 30%
5.4m, 25%
5.1m, 3%
4.8m, 12%
2.4/ 2.7m, 12%
<2.4m, 3%
3.0/ 3.6/ 4.2m, 3%
Industry Narrows Grading Split 2007
Merch/ROS 21%
F4 & F5 6%
M10 54%
M12 14%M15 4%
Local Softwood Grade Trends
Demand for M12 is increasing Demand for lower grade (F4 & F5) material is decreasing
*Source – A3P Industry Sales
Stat’s
Size TrendsQLD
70mm53%
90mm47%
VIC
70mm16%
90mm84%
NSW
70mm36%
90mm64%
Blue Pine Framing Trend – Now Almost 30% of Domestically Produced Framing
H2F Framing Sales
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
0%
5%
10%
15%
20%
25%
30%
M3 H2F % Framing H2F treated
*Source – A3P Industry Sales Stats
Steel Framing – still not a viable alternative
Steel framing market share has remained relatively steady over the last decade nationally at approx 9%.
However, steel prices are on the way up as key input material prices rise worldwide.
Rising steel costs are a double edge sword for fabricators
Material Price I ndex for House Construction
60.0
80.0
100.0
120.0
140.0
160.0
180.0
Sep-8
5
Sep-8
6
Sep-8
7
Sep-8
8
Sep-8
9
Sep-9
0
Sep-9
1
Sep-9
2
Sep-9
3
Sep-9
4
Sep-9
5
Sep-9
6
Sep-9
7
Sep-9
8
Sep-9
9
Sep-0
0
Sep-0
1
Sep-0
2
Sep-0
3
Sep-0
4
Sep-0
5
Sep-0
6
Sep-0
7
Structural timber ; Clay bricks ; Cement ; Steel beams and sections
*Source – ABS
Imports – the new market driver?
From a 300,000m3 drop in the peak in last cycle, 2007 saw a volume of imports around 420,000 m3.
Our best estimates are that imports will rise by 320,000m3 in 2008 – does this tip us back into a surplus?
*Sources – ABS, ABARE, BIS
Shrapnel & PSA estimates
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Q3 20
05Q4
2005
Q1 20
06Q2
2006
Q3 20
06Q4
2006
Q1 20
07Q2
2007
Q3 20
07Q4
2007
Q1 20
08Curre
nt Q
Europe South America North America New Zealand Other Total
World Lumber Prices
Australia is now an attractive market for softwood framing imports as:– Domestic timber prices have increased– World timber prices drop and the US market hits an all time low in housing starts
*Source – World Wood Markets
Framing Price Indicies
0.5
0.7
0.9
1.1
1.3
1.5
1.7
Feb-
06
Apr-0
6
Jul-0
6
Sep-0
6
Nov-0
6
Feb-
07
Apr-0
7
Jul-0
7
Sep-0
7
Nov-0
7
Jan-
08
Mar
-08
May
-08
Index
J apan UK Aust (USD) Aust (AUD) US UK (EUR)
Looking beyond 2008…
Note key assumptions re imports and dwelling commencements levels to support these scenarios in the coming years.
*Sources – ABS, ABARE, BIS
Shrapnel & PSA Estimates
-150
-100
-50
-
50
100
150
200
250
('000
m3)
2005 2006 2007 2008 2009 2010 2011
Softwood Market Balance
What does this mean for Fabricators & Users? Fabricators and users should consider their cycle management
approach. Loyalty and consistency of business over the cycle is valued by both
suppliers and users alike. Suppliers would look for the ability to hedge up share when demand is
slow. Work closely with your customers and suppliers to support growth where
possible – e.g. length mix opportunities. Understand your supplier/ sawmillers order management process. Value of mix within pine framing and also mix across product categories Longer notice period on price increases than price decreases – ideally
aiming for price consistency