Bust Their What?

There are some burning questions and phrases that have been around for some time that are worth dusting off and having a good close look at.

With the current uncertainty, now is the time to re-examine and understand their truths. One question of note is not a criticism but a catalyst for some basic reconsideration.

Why do sawmillers ‘bust their ass’ to produce as much long length MGP as possible to supply a market that systematically cuts the overwhelming majority into short pieces for applications that don’t need anything like that grade?

Historically, like decades ago, there was not too much issue with this. Sawmillers didn’t really have to ‘bust their ass’ too much as the resource yielded volumes reasonably commensurate with demand. Fabricators generally fighting the ongoing battle for skilled staff and controlling inventory streamlined their cutting process through a long length ‘one grade suits all’ approach.

Over time the question became just a little more pertinent. The shortfall in locally produced long MGP against demand continued to broaden but was able to be supplemented with increased imported material. Fortunately, as the fabricator labour and inventory issues remained the same, if not more so.

Fast forward to 2021. The question is now very pertinent. There has not been enough MGP to satisfy the current market. Is the problem the MGP supply or the market demand? Doesn’t matter – the problem is the problem.

In time will the problem go away? Maybe. Well, maybe not so critically but the underlying factors won’t change. Underlying global demands on land use (forestry v other uses) will increase. Underlying global demand for wood fibre will increase. Underlying global demand for timber/lumber (as distinct from wood fibre) per capita will increase. Underlying skills shortages will increase. Underlying demand on capital (including working) will increase.

If we sit on our hands and wait, demand will come off, some additional supply could come our way and pretty well all could be normal again. Happy days – but it is probably not going to turn out that way. Anyhow, the current situation opens up some really good long term opportunities.

What are the individual parameters (or chess pieces) that are influential to the reshaping of our future direction?

• Available softwood fibre volume in Australia is not significantly increasing in the short and mid terms.
• Sawmilling and wood fibre assessment technologies have improved.
• Log attribute is quite varied around many factors but ultimately there is a line drawn between sawlog and pulplog.
• Quantities of both sawlog and pulplog as well as some processed timber is exported.
• Australia’s offshore markets for wood fibre are increasingly unreliable.
• The ongoing market in Australia will be at least as strong as anywhere else globally.
• Domestic timber rates have not kept up with global averages.
• Domestic merchants and fabricators prefer long length MGP graded timber as their supply staple.
• Builders and fabricators cut most of their timber into shorter lengths than they purchase (i.e. docking one piece into 2, 3, 4 or more pieces).
• Domestic MGP timber grading is centred around bending stiffness – most timber components in application aren’t bending stiffness ‘maxed out’.
• Very many timber components used in a frame carry very little load.
• Considerable volume of timber cut in a mill does not meet the grading requirements for long length MGP.
• Structure design/specification is carried out using software and span tables.
• Many different timber component shapes (no. of cuts, angles & lengths) are required to make a frame.
• Timber house frame construction has a price point that needs recognition.
• There are skill shortages in most sections of the supply chain.
• Capital is not endless.

In brief there is a lot of leakage of wood fibre along the path from the forest to making a timber frame. There is also an extremely high level of oversupply of grade in a structure.

By addressing these issues in combination, a more meaningful and long term supply chain improvement can be made.

The first step is to make it worthwhile to plug the leaks. Australian timber rates must be internationally competitive – but maybe not as volatile. This will provide a better local market for Australian timber and logs than offshore markets. As offshore customers are becoming less reliable in their commitment to Australian product, a domestic market offers more security. Australia needs to be the best market for Australian resource.

Only when Australian demand is met, the offshore option comes into play. If international rates come off, so would domestic rates otherwise imports are price preferred. Considering the (increasing) shipping costs, domestic return for the resource will still be better than offshore (like for like).

The demarcation between sawlog and pulplog in terms of fibre quality drifts towards sawlog when domestic timber rates increase. Value must be realised in the lower end of the timber spectrum to make this happen. The current oversupply of grade opens up the opportunity for better utilisation of lower attribute fibre for use in suitable applications. Less leakage to pulpwood.

The utilisation of what transitions from pulp to saw is able to produce a far more reliable product than previously through the better scanning and sawmilling processes that have been implemented in most modern mills. Programmed Timber Supplies’ installation of scanning technology is clear evidence that completely fit for purpose components can be recovered from fibre not previously considered.

A significant market opportunity opens for the producing mills and henceforth supply to fabricators when a better aligned timber grade to application emerges. Rather than a ‘too good’ MGP grade in long lengths being the mainstay of supply, a ‘one length in – one length out’ or shorter length product graded for compression rather than bending stiffness is eminently suitable. The long MGP is then reserved for the typical long chord application. We are now using timber completely legitimately that would otherwise have leaked away from structural application while adding the necessary better return all the way up the supply chain.

Most fabricators use DTL studs. This is a very simple example of utilising shorter length product and reducing fabricator need for staff and saw time to expand production. Programmed Timber Supplies takes this solution and expands it even more within the current timber grades. Pre-cut truss webs, jack & creeper chords, nogs, trimmers, junction blocks, jack studs and now valley truss sets allows the use of otherwise underutilised resource and enables customers a path to increased production without increased staffing and capital.

Improvements in frame & truss detailing to increase commonality of component shape (e.g. creeper & jack lengths) across all jobs in a plant allows better pre-manufactured component supply through consolidation of component shape. The more bought in pre-manufactured component supply, the less demand to underutilise the long MGP material.

It is unlikely large mills would need to go to this detail but the concept of aligning fibre attributes to final application in appropriate length is a solution for adding value and increasing product availability. Not just in a tight supply situation but one for a long term competitive advantage. Keeping mill production up reduces unit cost and diverting leakage into returning product helps underpin the value/supply chain.