Since 1985, BIS Shrapnel, one of Australia’s leading macro-economic forecasters and building industry specilaists, has been producing its sawn timber in Australia report. The latest edition, covering 2015 to 2030 has just been released. The following, supplied by BIS Shrrapnel, gives a flavour of what the report includes.
The consumption of sawn timber in Australia has been variable in recent years. Sawn timber consumption increased to just under 6 million m3 in 2007/08 but fell to around 5 million m3 in 2008/09 as the effects of the Global Financial Crisis were felt. Sawn wood consumption recovered some ground in 2009/10 but then weakened through to 2011/12. Sawn wood consumption has lifted over the past three years, benefitting from increased new residential building activity.
Residential dwelling commencements, Australia, by type
A number of changes in the residential construction sector and in building practices have also weighed on sawn timber demand, including:
- A trend towards high density dwellings, particularly in Sydney, Melbourne and Brisbane.
- The widespread use of concrete slabs for ground level flooring in place of suspended timber flooring.
- The increased use of competing products in a number of applications. For example, aluminium has largely supplanted wood in window frames, steel has a large share of the fascia board market, I-beams and LVL have gained significant shares of the beam and joist segment.
There is a clear risk of increased competition to traditional sawn wood products in residential building applications over the medium and longer run. Examples include further potential growth in the use of engineered wood products and growth in the use of composite materials for decking surfaces.
Australian Sawn Timber Consumption Per Capita
The demand for sawn timber is expected to peak in 2014/15 and 2015/16 as the residential building cycle peaks. The demand for sawn timber is then expected to be lower over 2017/18 and 2018/19 as the residential building cycle also turns down. The weaker demand for sawn timber over this period is expected to result in a fall in both domestic supply and also imports of sawn timber products. However, it is likely that imports of sawn timber products, which have been strong in recent years, will maintain a presence in the Australian market, with importers possibly prepared to weather pressure on margins for a period in order to maintain a market presence. Sawn timber prices may come under downward pressure over this period, as a lower price would be a signal to temporarily rationalise supply. However, much will also depend on international wood market conditions. It is possible that if international sawn timber markets are firmer over this time that the pressure on domestic prices might be mitigated.
The consumption of softwood timber in construction is concentrated in a relatively narrow range of applications. These include wall framing, roof framing, deck substructures, pergolas and other outdoor applications. There is a risk that competition from competing products in these applications may increase over the forecast period.
The level of sawn wood imports is likely to be influenced by the strength of domestic sawn wood consumption, movements in the exchange rate, and the competitive behaviour of industry participants. We expect that the level of imports will fall back as the domestic demand for sawn wood declines in 2017/18 and 2018/19, but will still remain significant by historical standards. The volume of imports is likely to remain significant over the longer run, but the forecast low Australian dollar should assist domestic producers.
Key points with respect to forecast sawn timber demand on a state basis:
- Sawn timber demand in NSW is forecast to peak in 2015/16, and then cycle lower through to 2017/18, influenced by the forecast trend in residential building.
- Sawn timber demand in Victoria is forecast to peak in 2014/15 and then decline in the following three years.
- The demand for sawn timber in Queensland is forecast to remain relatively firm, influenced by population growth.
- The demand for sawn timber in SA is forecast to be variable about a relatively subdued underlying trend.
- The demand for sawn timber in WA is forecast to fall sharply from its estimated peak in 2013/14 over the period to 2017/18.
The residential construction cycle is expected to remain the main driver of the ups and downs of sawn timber demand. We assume there is a further modest decline in sawn timber consumption per new, detached dwelling over the forecast period, reflecting some substitution from wood products to competing products. The moderate trend forecast for detached dwelling commencements is also likely to be a factor tempering the demand for sawn timber.
On our numbering, the trend in domestic demand for sawn timber and the assumed level of imports implies that there may be some spare potential capacity (given potential saw log availability) in the production of sawn timber in the long run. Further growth in production may be possible but would be dependent upon sawn timber producers recapturing market share in selected construction applications where market share has been lost to competing products, increasing exports, regaining market share away from imports, or the development of new product opportunities.
BIS Shrapnel’s new Sawn Timber in Australia 2015-2030 report assesses both cyclical and long term prospects for sawn timber demand, supply and prices. The report analyses the Australian demand for sawn timber in detail, building on our underlying economic and building industry forecasts. For more information please visit http://www.bis.com.au/reports/sawn_timber_au_r.html
