- TIMBERBIZ.COM.AU - A La Une - 25/Jul 00:43

Victorian sawmills at reduced capacity and laying off staff

Victorian sawmills are operating at reduced capacity and laying off staff amid weakened demand for timber products on the back of a slowdown in housing construction. Source: The Financial Review Andrew White, the chief executive of the Victorian Forest Products Association, said while the industry had been initially braced for significant supply shortages to meet increased housing demand, they were now struggling to sell their timber. “Some mills have had to downsize their workforce, and they haven’t been able to operate at full capacity,” White said. “There aren’t as many houses being built, and the wood is not going out … We can be doing a lot more, but a lot of these issues are out our control because of the market dynamics.” The Victorian executive director of the Property Council, Cath Evans, called on the state government to reduce taxes and remove red tape, saying the property sector was hamstrung by a “punishing tax regime, economic headwinds and declining investor confidence”. The VFPA said the state’s housing market slump was putting pressure on timber growers and producers, with some of the mills now running only four days a week, and one major sawmill running at 75% capacity. Two years ago, research for Forest and Wood Products Australia found demand for sawn softwood, such as pine timber for house frames, would be three times domestic production capacity. “We have this ironic situation of surplus pine products,” White said. “We want more houses to be built but build times for houses has gone from six months to 10 months, and there are well-documented shortages in supply chains and trades [people], and over regulation of issues at a local level.” White’s parent company, the Australian Forest Products Association, in a submission to a parliamentary inquiry last year revealed domestic timber sales had fallen by more than 500,000 cubic metres since the COVID-19 pandemic, and that the industry had the capacity to supply an additional 50,000 timber frames for new homes annually. The VFPA has also blamed the Allan government’s Big Build infrastructure agenda for drawing apprentices away from regional Victoria to work on major projects in Melbourne, as well as “lengthy and complicated” planning and building approval processes that delay housing developments. A total of 14,804 dwellings commenced in Victoria in the three months to March, according to Australian Bureau of Statistics data released this month, the highest of any state or territory and a 17% lift on the December quarter. Although Victoria recorded the highest number of commencements in the 12 months to March, its 3% annual growth was slower than NSW (6%) and Queensland (9%). The number of houses under construction in Victoria in the March quarter was 22,817, a decline of 2% on the previous quarter. In the 12 months to March, 15% fewer homes were being built compared to the previous year. Housing Industry Association senior economist Tom Devitt said home building was starting to pick up and the impact would soon flow through to the rest of the supply chain. “Early in the pandemic when there was an enormous surge in new homes, it led to a progressively larger and larger demand every step along the supply chain,” Devitt said. “When the demand moderates, the correction becomes even bigger at each stage of the supply chain. Most of those up and down the supply chain have played out but there’s a chance there’s still some of that [continued downturn] happening, especially in products like timber, which was impacted so acutely during the pandemic.” Evans, speaking for the Property Council, said planning approvals needed to be sped up. “These factors have led to project delays and a slowed pipeline, which in turn can impact demand for key materials like timber,” he said. “This is an example of the flow-on effect delays in housing supply are having on the broader sector. To unlock short-term growth in housing construction, we need a sharper focus on delivery.” A Victorian government spokesman said ABS data showed the state was leading the nation on building and approving homes, and the government had fast-tracked almost 5000 homes since it expanded the Development Facilitation Program to include residential developments that had 10 per cent affordable housing. Evans, speaking for the Property Council, said planning approvals needed to be sped up. “These factors have led to project delays and a slowed pipeline, which in turn can impact demand for key materials like timber,” he said. “This is an example of the flow-on effect delays in housing supply are having on the broader sector. To unlock short-term growth in housing construction, we need a sharper focus on delivery.” A Victorian government spokesman said ABS data showed the state was leading the nation on building and approving homes, and the government had fast-tracked almost 5000 homes since it expanded the Development Facilitation Program to include residential developments that had 10% affordable housing.