By PAULA OLIVER
Australia's home-building slump is hitting Kiwi timber giant Carter Holt Harvey, forcing it to mothball a sawmill and rethink export strategies.
Australian building levels reached frenzy point before the July introduction of GST, as people rushed to put up new houses before construction prices rose.
But the after-effect of the boom has been a massive bust, and Carter Holt Harvey's wood products chief executive, Devon McLean, admits that there is no clear indication of when it may pick up.
"It's a very important market for both our Australian and New Zealand operations. In a typical year we would move between 100,000 and 150,000 cu m of timber across the Tasman, but at the moment we're moving virtually none.
"It's gone from the hottest market in a decade to the coldest market in the space of six months."
Mr McLean estimates the slowdown to be as much as a 40 per cent drop on previous years. Australian figures show the fall to be the highest recorded, and total building activity for the September quarter fell 27 per cent.
In reaction, Carter Holt has mothballed its small sawmill at Mt Burr, in South Australia. The mill employed 35 people, and most have been moved to other Carter Holt sites.
Mr McLean said it was more a case of "when" rather than "if" for the future of the sawmill, but the decision was taken to mothball it now because of the market situation.
Carter Holt is battling not only an Australian decline in housing activity but also a drop in New Zealand's home-building market.
Mr McLean said both markets traditionally picked up during October and November, but it had not happened this year.
It could now be February before there were any firm signs of a recovery, but that was not ideal because it was the end of summer.
"New Zealand dropped before Australia, but not as rapidly.
"Some areas are busy - particularly rural areas, where the low NZ dollar is putting earnings in farmers' pockets - but in Auckland it's slow."
Carter Holt is exporting more timber to areas it would not usually target in response to the slowdown.
Mr McLean said Carters had a mill sending more wood to Asia, which is normally less attractive because of its lower margins. Another was pushing heavily into the United States.
Shifts at mills had been altered, but it was important to keep them running to keep costs at a reasonable level, he said.
"We've been able to switch some capacity because of the dollar, but if the currency moves too far on us then some of those options might force us to have another rethink."
The slump was not likely to have a big impact on Carter Holt's third-quarter result, because other parts of the company were experiencing strong periods, Mr McLean said.
"Because we're such a mixed bag, I don't think that housing starts in Australia are enough to knock the company's result around.
"I think we're adjusting well, and are getting close to where we need to be."
Housing slump hits Carters
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