Spotlight on plywood
Australia’s rising consumption of plywood is increasingly being fuelled by imports, even as consumption of other products languish.
FOR THE year-ended June 2014, IndustryEdge analysis demonstrates, as reported in the recently released Forest & Wood Strategic Review, that apparent consumption of plywood in Australia was 546.5 km3, a rise of 6.1% on the prior year. As the chart below shows, demand has grown in Australia, over the last decade, by an average 3.5% per annum.
The significance of this stable growth is important for two reasons.
The first, immediately apparent in the above chart, is that a significant proportion of demand is met by imports. In 2014, that proportion was 52.5% or 287.2 km3, with all of the major grades or formats of plywood being well represented in the imports.
The second element of that stability is less obvious and is reflected in the simple chart below, showing relative growth rates of the major timber building products over the last decade. It exemplifies, in the simplest possible way, that of all of the relevant timber building products, plywood is on the rise.
In the context of growing demand, and of course, the current housing boom, the differential growth between timber building products is cause to pause for thought.
As the ‘high rise’ proportion of domestic housing grows, many traditional timber building products (eg. Sawnwood) have found they have little role in the new housing formats. Not so for plywood, which includes engineered timber beams such as LVL and other products that compete well against their high rise competitors, aluminium, steel and even concrete. The driver for their growth has demonstrably been innovation that can be wrapped up in the concept of plywood products being part of the pantheon of ‘engineered’ products. The implication is that their success is directly linked to the extent to which they have been transformed in order to deliver a solution for a specific purpose or need.
IndustryEdge is regularly asked for updated data on plywood production and wood panels opportunities in Australia. There is a general recognition underlying most of those information requests, that plywood production represents an opportunity that has been under-exploited. Yet, as the industry often discusses, few of these assessments end in investment. Ta Ann’s new facility, at Smithton in Tasmania, is the exception.
While it is true that many more investments are considered than proceed in any situation, we need to examine the conditions that lead to the negative conclusions, as much as those that lead to the positive conclusions and result in an investment proceeding.
Regular challenges to expansion of plywood production in Australia, expressed by industry, include the disaggregation of adequate volumes of suitable wood supply and concerns about security of access to supply. The latter is primarily a concern about resource from native forests, but is not exclusively so.
The other issue regularly commented upon is the extent of aggressive, price driven and sometimes sub-standard competition from imports, especially from Asia. It is a common refrain, but it is all the more significant because there are regular investigations that demonstrate just how low quality some of the imported products are.
Others point to domestic production that has grown 3.9% per annum over the last decade (slightly ahead of the pace of consumption growth). The argument goes that investing to reduce the impact of imports is the starting point, and not the end
“Whichever option you prefer, the data suggests that there are opportunities for plywood production in Australia.”
of the process. For the challenges of imports to dissipate, the domestic industry must have capacity to supply the market that is capable of winning market share.
This is not just a question of product standards and specifications, though it certainly is that, it is also a question of sheer capacity and investment to deliver it.
Whichever option you prefer, the data suggests that there are opportunities for plywood production in Australia. What is most significant is that they may be better options than exist for traditional sawnwood products.
Tim Woods is Managing Director of IndustryEdge, Australia’s leading market analysis firm in the forestry and wood products sector. The firm is publisher of the monthly Wood Market Edge and the biannual Forest & Wood Strategic Review. The 2015 edition of the Strategic Review has just been released. Go to www.IndustryEdge.com.au or call +61 3 5229 2470.