Sydney, Australia – 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, according to leading independent economic forecaster and industry analyst, BIS Shrapnel. 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 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.

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.”


During the past three decades the hardwood sector has been subject to constraints arising from community pressures and government legislation to conserve resources. Structural changes to the industry during the same period has seen smaller companies exit the industry, or absorbed by larger players such as Boral and Gunns.

Due to these factors, production and demand for hardwood has declined by almost 50 per cent over the past decade. 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.

“We are forecasting that the Australian dollar will remain strong against the US dollar until 2014. This will curtail strong price rises, but beyond 2014 the dollar is projected to decline, which will raise the price of imported hardwood,” says Neufeld. “Locally produced hardwood will also be under supply pressure due to government policy and limited availability, which will place upward pressure on prices.”


Major government-initiated softwood plantation programs are starting to pay significant dividends in the Australian sawn timber market. In Victoria, Queensland, Tasmania and South Australia these plantations have been or are in the process of being sold to private investors. 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. There is also scope for expanding softwood and hardwood plantations with log qualities capable of producing sawn timber for domestic and export markets.

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.”

Source: BIS Shrapnel

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