Fletcher Building chief executive Ross Taylor expects the plasterboard market to return to ‘equilibrium’ by October. (file photo)
Fletcher Building expects the plasterboard market to return to ‘equilibrium’ by October as supply picks up and demand slows.
The construction market is heating up, which has put pressure on the availability of construction materials and labour, which are already in short supply due to disruptions caused by the COVID-19 pandemic. Construction consents peak at an annual rate of 50,000, well ahead of the country’s capacity to build between 35,000 and 40,000 homes a year.
Fletcher Chief Executive Officer Ross Taylor told an Investor Day in Auckland on Wednesday that shortages were experienced in structural lumber, insulation and then plasterboard, some of which were due to stockpiling as customers placed buy orders to ensure that they have stock.
The company’s Winston Wallboards unit holds 94% of the plasterboard market with its Gibb product and has come under fire for failing to keep up with the growth in demand, creating a construction bottleneck for builders and the wider industry. And tension has arisen.
* Competitive problems of GIB and plasterboard
* Shortage causes builders to buy gib boards on Trade Me at six times retail price
* Fletcher Building’s first half profit up 41%; Outlook ‘very strong’
Taylor said order volumes for plasterboard more than doubled from November 2021 to February 2022, nearly doubling the industry’s manufacturing capacity. The company met some of the excess demand by drawing on its inventory and importing from Australia, although imports were halted in November due to high demand in that country.
He said Fletcher has reconfigured his plasterboard factory which will pick up production from July, and expects to resume imports from August as international capacity eases.
“These moves will increase our supply in the NZ market by about 10%,” Taylor said.
Building and Construction Minister Megan Woods on Tuesday announced a ministerial task force of industry experts to seek solutions to the plasterboard supply crisis, marking the possibility of legislative or regulatory changes.
Taylor said Fletcher had not spoken to Woods.
He said, ‘We are not participating in it. “We are happy to help the government through this but our focus is around this demand growth.”
Taylor said the company has granted 10 trademark royalty-free licenses to allow others to import boards into their color palettes. He said it was prone to confusion because its colors were related to specific board types.
Fletcher’s Placemakers Building Supply Chain and the company’s other merchant customers will run an emergency allocation fund to ease smaller customer hardship issues, he said.
Fletcher Building has apologized after a Canterbury builder captured video evidence of Gibb stockpiling at the Fletcher Living construction site in Lincoln.
Building Products Chief Executive Hamish McBeeth said the company is “deeply focused” on working through plasterboard supply demands.
Macbeth said Gibb had won every building supply award since 2004, but he expected some short-term reputation damage.
“We are in very close dialogue with our customers and the customers of our customers,” Macbeith said. “We think we will take a hit as soon as we get through this, but we support our service offering and I am confident we will get back to it very quickly.
“Our offerings that we have in the market no one has ever been able to replicate, and the way we serve the industry is to reduce their overall cost.”
He said the company’s wholesale plasterboard was about 15% more expensive than Australia’s, but Fletcher’s plasterboard required less plaster for installation and offered a better delivery service, meaning that overall installation was cheaper.
Taylor said Fletcher has raised the price of its plasterboards by about 10% over the past two years, and another increase is likely in the future as costs increase.
“We haven’t overpriced our cost increases — margins haven’t changed,” Tayer said. “We’re covering inflation, but we’re not getting on the way.”
He added that the price of Fletcher’s construction product could be “very busy” and “significantly different” from the prices of trades and builders who lack capacity.
Fletcher is building a new plasterboard plant in Torico that will add an additional 30% capacity. The construction has been delayed by about 12 months due to the COVID-19 lockdown and border closures, but is expected to start production in May 2023.