Planning for growth in a weather-beaten world

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Building Today columnist Ross Middleton.

Building Today columnist Ross Middleton says the Government wants houses, and lots of them — the irony being that the world is currently strangling itself in a supply chain noose of its own making . . .

Housing has been flirting around the top of the media hit parade for some time now, and finally succumbed to the number one position as the yachting foiled itself, and the bloody Covid got too scared to stick its head outside the quarantine facility least jolly old Long John Ash hoists it up the nearest yardarm.

Frankly, I’d rather be in the garden. Truth be told, I spend more on compost than on beer these days. I’m happy with that. Cementing the value of my number one asset seems like common sense.

I am undertaking renovations, and one factor I hadn’t anticipated having serious problems with is that of supply.

My purely anecdotal investigations confirm that these supply issues are across all transactional encounters that involve product, particularly that of the imported variety. Some things are in short supply and getting more so.

In housing, construction and infrastructure, that short supply issue seemed pretty much done and dusted as the PM and her acolytes enacted a government housing package to put the good ship Aotearoa back on course.

Unfortunately, no sooner did these powers get their collective umbrellas up than the weather changed and it started blowing in from the side.

Doubly unfortunate was that there was very little in the announcement and the $3.8 billion fund about supply chain maintenance, let alone growth.

The broadside hit the timber supply sector where, apparently, one of the major timber processors decided to turn off the tap to selected customers and, at the same time, the global distribution sector, where a canoe stuck in the Suez Creek threatened a shabby chain already rusting at the links.

The canoe in question is 400m long and weighs 200,000 tonnes. It was carrying 18,300 containers when it became wedged in the creek, blocking all shipping traffic.

The blockage held up an estimated $9.6 billion worth of cargo on nearly 400 ships operating between Asia and Europe, and precipitated several costly detours.

The inevitable knock-on cost effect for consumers around the world is still to be fully felt, but the supply chain was already rusting, proving the old adage that a lowering tide sinks all container ships.

As one maritime expert noted: “When choke points are blocked, trade doesn’t necessarily come to a standstill. Under normal circumstances, it is extremely cheap to transport all types of cargo over long distances on ships.

“Freight rates are barely noticeable in the price of most goods, so higher freight rates are unlikely to be a significant issue for economies as a whole.

“Nevertheless, the implications of a blockage, as we’ve seen in the Suez Canal, will have been felt in many sectors.” 

Although it has undergone a few refinements, the Suez Canal is more than 150 years old and, along with its younger cousin Panama, is a susceptible turnpike for the giant ‘Panamax’ container haulers servicing the globe.

And, of course, some of those turnpikes are being traversed by ships carrying Kiwi pine to the world.

That self-same tree was also causing local issues as Carter Holt Harvey pulled the plug on the supply of building timber to selected merchants, including Mitre 10, Bunnings and ITM, while still supplying Carters as well as the other big local corporate, PlaceMakers.

Bluster and pontification

This supply chain cynicism was picked up on by keen-nosed journalists at BusinessDesk and ended up in most major media, along with the usual bluster and pontification.

The problem lay with the fact that many of these outlets are wont to major hysteria in the never-ending search for the click bait that has replaced ratings as the gold standard.

“Builders are at risk of going under”, said one in its introductory sentence. “Could redefine how houses are built in New Zealand”, led another.

A mere redistribution of supply networks may be the inevitable outcome. Local merchants were quietly celebrating the extra profile their sector was receiving, and the whole thing blew over like the gentle breeze it was.

Yet this little squabble over who supplies what to whom may well end up being at the pointy end and the least of worries in the supply of local pinus radiata; the panacea to all for some.

One forestry consultancy has done some homework, and established that the closure of some 55 New Zealand sawmills between 2003 and early 2020 has amounted to a potential processing loss of more than five and a half million cubic metres of annual capacity.

That’s a lot of pre-nail in anyone’s book.

As is usual in the modern world, vested interests and lobbyists come out of the woodwork, so to speak, to ensure their viewpoints are hammered home.

As usual with humankind, those ignored are the ones with coherent ideas and a rational vision for the future.

The Government says it’s just been made aware of this issue, and said disruptions to supply chains aren’t unique to construction. It’s expecting the participants to find a satisfactory outcome, and is keeping a close eye on the issue.

Some are calling for more direct Government intervention, even suggesting a tariff on logs.

The Commerce Commission has apparently said it will make enquiries into the Carter Holt Harvey supply decision.

A spokesperson for the competition regulator told media it had been monitoring the situation, and “was aware of supply issues in the building sector”.

You can bet it is all going into that quickly filling little black folder titled “Pending Regulatory Action”.

Pan-industry group, the New Zealand Timber Industry Federation, says the kerfuffle has been no surprise.

It says in recent months all New Zealand sawmills have been under pressure to supply a booming domestic timber market for all end uses but, based on other available timber milling production capacity and previous cyclical shortages, it doesn’t expect the current timber shortage to be overly prolonged.

Self-serving vested interests

“Efforts are being made to supply the demand, and in some cases mills are diverting export timber back into the New Zealand market.”

Self-serving vested interests wash around this issue like the muddy water on the Ever Given bows.

And, as usual, the cash-on-the-nail contract holders get much of the blame: “The biggest challenge to lifting production for mills is getting enough logs and, in turn, competing on supply and price with the Chinese buyers and the export demand for NZ logs,” says one release. 

Solutions are platitudes while nobody wants to lose their cash cow.

The Forest Owners Association wants to save the country and the environment by planting pine at every conceivable commercial opportunity.

In a gobbledegook-ridden media release from February, the Association denies a “takeover” by an introduced species in one breath, suggesting natives are crap in the next: “The carbon sequestration rate of native trees is not ‘superior’ as the EDS is saying. Pines and eucalypts lock up carbon much quicker. That is a well-established fact.

“There will be very little carbon locked up in these slow growing indigenous trees, even by the New Zealand zero-carbon deadline of 2050.”

Apparently, they say, nikau, pukatea and ribbonwood are going to be killed off by climate change anyway; plenty about the bioeconomy, not a dickybird about biodiversity or about the slash on Tolaga Bay beach.

Genuine farm foresters are now getting into the peak years of harvesting trees planted last century, and are quietly panicking at the potential control and tariffs suggested by some.

The Farm Foresters Association, unlike some of its contemporaries, seems to operate from a rational viewpoint:

“The heavy reliance on radiata pine to do many roles in the forestry sector is a major risk in terms of biosecurity. But species diversification needs to be addressed by the Government because it is a national risk that individuals don’t address.

“Knowledge of alternative species options and management practices is well developed in farm forestry, but the significant risk around processing and markets remains.

“While we cannot de-risk the future, we can reduce the upfront costs when establishing these alternative species — that is, the Government needs to mitigate that risk through larger grants.”

If we desire a large climate-positive industry based on wood, we need a long-term plan, and investment, to create a world-class wood supply chain.

As with most commodities this will be key to the successful delivery of reasonably-priced bio-based products to the world market.

This is a political football to be kicked down the road for some time yet.