Limited supply continues to create real challenges for all participants in the market. Pressure on resource owners to increase available supply. Pressure on producers to allocate limited product and pressure on users of timber as shortfalls impact price and availability.
Australia is a net importer of timber and will continue to be until the softwood planation is rebuilt so the marginal cost of imported supply will guide the price. Current conditions are unprecedented and global demand for timber is limiting the available import supply, forcing all domestic producers to ration.
Most domestic production is distributed on long term contractual arrangements for stability. The recent shortfall in supply is increasingly impacting price. Participants along the value chain are all beginning to reset their perception of the true value of the product. Ultimately, this is necessary to attract investment where it is needed most – in the development of the plantation.
Wespine is one of several producers grappling with how to manage through current market conditions. A small player outside of its core market in Western Australia, it is employing a number of strategies to do this:
- The first is to preference supply to long standing customers. Wespine is manufacturing at record levels and supplying its long-term customers at record levels.
- The second is to do everything possible to access additional log supply. In Western Australia, the State Government determines how the resource is administered.
- The third is to allow equal access to uncontracted volumes of product at mill direct pricing via auctions.
Wespine continues to honour all contractual commitments to its long-term customers.
Auctions have been used by Wespine for many years to find a clearance price for downgrade product. A recent auction of structural timber cleared at prices well above contract levels to timber merchants, obviously confident that they have access to a market at that price. Wespine appreciates the significant feedback from the market including FTMA members on this auction.
Wespine anticipates that auctions will continue to be used into the future to provide equal opportunity for the whole market to have access to uncontracted product as they have for many years for downgraded products. Wespine continues to work on innovative solutions to supply customers in key structural grades.