Building Connection Summer 2016

BUILDING CONNECTION

SUMMER 2016 49

Ted Riddle has 47 years’ experience in the timber industry

as a merchant, importer, producer and marketer.

redwood, very limited but very sought after, and similarly

Port Orford-cedar, which have been severely affected by

resource closures, in an attempt to maintain habitat areas

and improve forest recovery, normally take some of the

high end demand timber market but with little or no timber

available, the demand from these alternate species crosses

back to WRC.

To understand the bigger picture you need to go back

almost a decade and reflect on the consequence of the

Global Financial Crisis and the ensuing US sub-prime

mortgage fiasco which resulted in the American housing

market collapse; the timber industry in the Pacific

Northwest went into freefall with the WRC loggers and

producers getting caught up in the fallout.

I was told that before the housing collapse, 80% of all

WRC went into the US building market with new housing the

peak demand customer. Within a year of the collapse, many

sawmills in the north west had gone out of business, a lot of

the logging and haulage contractors had gone broke and the

red cedar industry was in disarray.

From what I can see now, the strong got stronger and the

smaller producers fell by the wayside;

the forestry owners and managers

(some state government owned)

also suffered. Resource inventory

improves as the trees continue

to grow but the income needed to

manage the forests and to maintain

access and regrowth stops and the

grower suffers the same fate as the

producers.

During this time those foresters,

producers and marketers who

survived the crash rebuilt their

industry, rationalising the resources,

sawmills, etc. and taking the

opportunity to future proof their

timber sustainability. They are looking forward to supply

driven marketing rather than a more traditional demand

approach, limiting the availability of timber below that of the

pre-crash market but to a level that is sustainable for long

term availability; a very environmentally sensible approach.

During this almost decade long crash and rebuilding

process, the price of WRC slumped dramatically which was

another reason some of the producers and sawmillers went

out of business. For some suppliers it dropped by 80%,

they wouldn’t have even recovered log costs let alone than

sawing, processing and shipping, so the inevitable occurred.

Prices that have gone through enormous troughs and

peaks are beginning to stabilise now and most of us forget

what the relativity of pre-crash prices (after a decade)

would have been. I am not sure that in the trade end of the

market, particularly here in Australia at the builder and

consumer level, that we experienced the full effect of the

collapsed prices. There is a long chain from mill to market

and I believe the rock bottom prices may have dissipated

along the chain, leaving only slightly discounted effects here

or a long term price stability that didn’t reflect the effects

felt at the consumer level in the US/Canada markets.

I understand that major manufacturing consumers such

as window and door makers, blind and shutter producers

and the like, did see the price reductions and in gearing

up at the lower costs, may now suffer when passing on

the new price structures. It could have an impact on the

commodity timber window manufacturing industry although

demand has continually declined over the last few decades

and the Australian manufacturers do have strong buying

arrangements through the US with the Canadian producers

so the ongoing effect may only be price competitiveness

with comparable aluminium joinery.

The red cedar producers also talk about the Australian

market as something of an anachronism in their marketing

program; they are geared for the US market and still see

80% of their new production level going there. They have

strong demands from other various

niche markets in Asia but as the

timber merchandising industry in

Australia has rationalised, since the

end of the 20th century, our demand

has gone from a range of grades, sizes

and lengths to that of a select grade

only consumer, something that a

sawmilling industry has a great deal of

problem supplying.

Where to from here is anyone’s

guess. My guess is that the Canadians

will talk tough and price hard while

the US producers don’t export any

WRC so nothing will change there. I

don’t see much of a change in pre-

crash volumes,;the resource has just been divided by fewer

players, making it easier to manage the price. The US market

is at a five year high so all the pressure will be on price, but

the Canadians have spent many years and lots of money to

develop a market for WRC here in Australia and I don’t think

they will just walk away.

They will sell all their lower, knotty and factory grades in

the US and Asia and demand a higher price here for what we

want; I don’t think there will be any real shortage so long as

you the builder/consumer pay the price.

THE RED CEDAR

PRODUCERS ALSO

TALK ABOUT THE

AUSTRALIAN MARKET

AS SOMETHING OF

AN ANACHRONISM

IN THEIR MARKETING

PROGRAM