Carter Holt shutdown on wood supply is “sign of a system under tension”

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The moment Carter Holt Harvey stopped supplying wood products to major retailers could not have been more problematic for the government, a building expert said.

The logging company, partly owned by New Zealand’s richest person, Graeme Hart, has stopped supplying Miter 10 and ITM. Miter 10 said on Saturday that Carter Holt Harvey Woodproducts could not supply it with lumber for the foreseeable future.

Its decision to continue supplying major customers, including PlaceMakers, owned by Fletcher Building, and its own subsidiary, Carters, caught the attention of the Trade Commission.

On Monday afternoon, Carter Holt Harvey chief executive Prafull Kesha said there had been “short-term supply issues across the industry.” Carter Holt, New Zealand’s largest lumber producer, had increased capacity since 2018.

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“CHH continues to fulfill its contractual obligations. The supply reduction is about 10 percent of CHH’s lumber volume, ”Kesha said in a statement.

Professor John Tookey, professor of construction management at Auckland University of Technology, said the timing could not have been more problematic for the government after its recent announcements in the housing market.

The current supply problem is likely to be short-term, says AUT professor John Tookey.

FASTER BRADEN / STUFF

The current supply problem is likely to be short-term, says AUT professor John Tookey.

Last week, the government said it would spend billions of dollars trying to speed up the supply of housing as part of a package of policies aimed at increasing housing affordability.

“We are dealing with a system under tension, and if that wasn’t what came out of wood in terms of wood processing, it would be a matter of skills, and if it wasn’t a matter of skills, it would be a matter of consent. process, ”Tookey said.

The current supply issue was short-term, exacerbated by the Covid-19 disruption, and was likely to be resolved within months. However, the industry’s relatively unattractive margins would not attract any other player in the market.

“It won’t be a turning point for the industry, I don’t think so,” Tookey said.

New Zealand housing permits hit an all-time high – up 5.8% for the year through January 2021 to 39,881 – but still below demand.

“It must be higher than that, but the problem to note is simply the fact that it took us 11, 12 years to rebuild the industry after the global financial crisis… and we’re still way short,” Tookey said.

New Zealand's obsession with custom house building means the sector's productivity is relatively low, says John Tookey.

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New Zealand’s obsession with custom house building means the sector’s productivity is relatively low, says John Tookey.

New Zealand’s timber industry was trying to catch up with the big investment other countries had made in timber processing, he said.

New Zealand manufacturing had to become more flexible, and the country’s obsession with custom-built homes meant the sector’s productivity was comparatively low.

“Go into one of the houses in the group and look at the number of ‘standard’ houses – there will be 40. Well, it’s not very standard,” Tookey said.

Marc Hunter, managing director of Latitude Homes, said his business has yet to be affected. All of his wood supply came from Carter Holt.

“I spoke to Carter Holt this morning. They are advising that the shortage is due to Covid lockdowns last year and that they just haven’t cut enough wood, that’s their company’s position.

“We haven’t experienced any delays or shortages yet. They believe they are in control and the backlog is taken care of.

“I guess we’re a big customer for Carters and I think any business in a situation like this would prioritize their bigger customers.”

The company was monitoring the situation and believed that everything would be fine in terms of supply.

Demand for new homes was “madness”, with Latitude Homes currently working on a few hundred homes at a time, he estimated. It was busier than in the previous boom in 2004-05, before the GFC.

Steel framing was a viable option if that was a problem, Hunter said. It was slightly more expensive for standard construction, but more economical on architectural houses.

“We have already made steel frame houses, it is not a big problem for us. But we are by no means at the point of crisis. “

Marc Hunter, managing director of Latitude Homes, says his business has not been affected.

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Marc Hunter, managing director of Latitude Homes, says his business has not been affected.

Nick Collins, director of the National Association of Steel Framed Housing, said the lightweight steel framing was made in New Zealand by New Zealand Steel, and the manufacturer had the ability to increase supply if needed.

New Zealand Wood Processors and Manufacturers Association chief executive Dr Jon Tanner said the wood processing industry was in dire straits without government help.

Shipping the “wedge of wood” from New Zealand to China in the form of logs ended up making the price of logs in New Zealand unprofitable for local processors, Tanner said.

“We have very expensive logs, and this high price is created because the Chinese government sets the prices.

“Any company looking to invest in timber processing around the world will take a very careful look at the price of our logs and ask themselves why would I go to New Zealand? The main cost of wood processing is actually the purchase of logs.

New Zealand was unusual in that it traded raw logs internationally, Tanner said.

“Other countries desperately want timber resources, and we sell them to the world – it’s a completely open market, and we say it creates an uneven playing field for us. That’s why you see factories closing.

The organization had presented ideas to the government, including tax measures, such as depreciation of capital investments and tax breaks for companies, and government procurement policies.

“Only the government can solve this problem because it controls the rules of the game for international markets. “


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