Timber in 'tight' supply, prices forecast to rise 5-6% after New Year

Timber is in "tight" supply after mill shutdowns. Photo / Mark Mitchell

Just as the great Kiwi summer DIY season is upon us, timber throughout New Zealand is heading into shorter supply, particularly for decking, landscaping and outdoor jobs.

Chiefs of Placemakers, Bunnings and Mitre 10 said demand had risen sharply lately.

Bruce McEwen, chief executive of distribution for Fletcher Building, which owns the national 63-store Placemakers chain, and Bunnings chief executive Jacqui Coombes acknowledged a somewhat unusual situation.

Jared Bernard, Mitre 10 NZ's building products merchandise manager, said that since the first lockdown the business had seen customers invest in improving their homes.

"A key area has been within landscaping – customers wanting to build a new deck, put up a fence and so on. Mitre 10 is working closely with our supplier base to mitigate any stock shortages, but demand has surged so much that the supply of some timber products is challenged," Bernard said.

Fletcher's McEwen said timber supply volumes were well down and although products were available now, reserves were short.

Bunnings' Coombes said demand for decking timber in particular had temporarily exceeded supply at some higher-volume stores nationally but suppliers were supporting Bunnings with fresh stock every week to meet demand.

McEwen said: "Timber supply is tight right across New Zealand. That means everything from structural framing products through to the landscaping products like decking, fence palings, railings, etc. We've got a tight market."

The Covid shutdown and gloomy economic forecasts had combined to create the situation, he said.

"You've got the perfect storm: after-effects of the Covid shutdown and a busy market, at volumes no one forecast. So when you go back to May and June, demand was forecast to be much lower than it really has been," McEwen said.

Volumes of pine and hardwoods were much lower than usual at this time of the year.

"Fletcher itself and a number of other businesses were predicting much lower market activity than what has come through. There's normally a stock build process in the quieter winter months. But Covid changed that," he said.

A backlog of product was not only needed for when the shutdown came off and building work resumed but the strength of the market had taken everyone by surprise, he said.

"Normally, timber plants would produce for the spring build season. But the shutdowns meant a lower level of productivity from timber plants," he said.

Lack of supply would mean price rises.

"There are price increases coming through in the New Year. It all depends on the product. That could be in the 5 per cent to 6 per cent range," McEwen said.

One would-be Auckland deck-builder expressed surprise at the situation.

"I've spoken with the timber rep yesterday and there is an Auckland-wide shortage of decking timber. Another builder is saying the same thing. There's a definite shortage of all hardwood and pine's very tight too," the office worker said.

A Christchurch relative who was erecting a fence said he could possibly be out of work soon due to the timber shortage.

McEwen acknowledged concern and said customers thinking of doing building should plan, talk to their builder or landscaper and encourage them to make orders sooner rather than later.

Outdoor decking - part of the great Kiwi DIY tradition. Photo / supplied

"Be aware the market is tight and plan in advance. The more you plan, the better outcome you'll get. The sooner you buy, the cheaper it will be due to those price rises," McEwen said.

Also, New Zealand import hardwoods for decking like Kwila "and of course that's got its own dynamics, coming from countries with their own Covid challenges like Indonesia and across Asia".

It wasn't only timber that was in short supply in the construction area. Other imported products suffered supply chain disruptions too, he said citing safety gear as well.

"I don't think anyone was predicting the demand that has occurred. You've got that classic supply/demand imbalance," McEwen said.

Fletcher also forecast yesterday that in the six months to December 31, 2020, operating earnings would rise by $100 million. It too highlighted the strength of the market and demand and chief executive Ross Taylor said that business would increase new home-building from about 750 a year to 1000 a year.

Stats NZ has been highlighting strong building activity lately.

In the year ended September 2020, 37,725 new dwellings were consented, up 3.5 per cent from the previous year. Auckland alone had consents issued for 15,470 residences, up 5.7 per cent.

This month, Stats NZ said that for the first time, the monthly value of building consents issued in Auckland exceeded $1b and accounted for about 44 per cent of the national total of $2.4b.

Auckland makes up about one-third of New Zealand's population, it noted.

"This is the first time a region has issued more than $1b worth of building consents in a single month, with more than $700m coming from residential projects," acting construction statistics manager Bryan Downes said on November 2.

"This reflects both the rising volumes of building consents and higher construction costs," Downes said.