Building materials - Suppliers talk about “raising the bar”

By Jess Brunette November 21, 2016 Building Materials

Players in building materials are still doing well out of a continued construction boom, but there is still concern around material costs and product assurance (aka ease of entry into the market). Is this concern warranted? Jess Brunette reports.

To view a PDF of the complete feature as it appeared in NZ Hardware Journal magazine, click the download button at the bottom of this page.

Taking care of business firstly, everyone spoken to for this feature reports that construction continues to be steady and strong for New Zealand in 2016.

As Christchurch has continued its shift into commercial projects, some more residentially focused players have seen drop-offs there but this has mostly been mitigated by booms in Central Otago with Wanaka, Queenstown and Cromwell all “going gangbusters” while Nelson is now picking up with gusto.

Moving north the “golden triangle” of Auckland, Waikato and the Bay of Plenty continues to provide rewards to anyone involved in construction.

That said, there are still concerns in the media in recent months about the cost of building in New Zealand.

Just Googling “building costs NZ” brings up reports of record high costs in some pockets of the country and dramatic increases over short periods curtailing the development of new apartment projects.

A number of reasons are suggested for the rises including a lacked of skilled labour, tighter rules around construction and, of course, the increasing cost of building materials.

Fair enough or not? I spoke to some major players in building materials category to get their thoughts on the validity of these concerns.

 

TOO MANY ONE-OFFS

When I ask Paul Dalzell, Sales and Marketing Manager for Nelson Pine Industries, what he thinks of the media reporting it’s the suppliers who are increasing the cost of building supplies he is sceptical.

“I’m not sure they really have an understanding of what’s happening. Most people have been flat on price for the last decade that I’m aware of. Unless it’s specifically imported and therefore prone to the vagaries of exchange rate movement, domestic movement has been flat or downward probably for the last decade in regards to building materials,” he says.

So what does Paul Dalzell suggest could be behind the continued complaints in the media and from certain sectors of government about the cost to build here in New Zealand?

“I think it’s probably more down to the lack of efficiency in building – in that every house here is bespoke whereas in Australia you get five or six options as to where the door, the window or kitchen counter might be.”

Some would argue that the lack of standardised (and subsequently more efficient) housing projects is because they don’t appeal to the strongly individualistic bent in many New Zealanders. Does Dalzell buy into the suggestions that Kiwis are so averse to a “cookie cutter” housing model?

“I’m not sure about that. I think most people are driven by cost to be honest, so if they can get a cost effective home with three bedrooms and a study, they are going to be pretty happy with it. So I think it’s probably more on the supply side rather than demand and they just haven’t geared themselves up to do it,” he says.

If lack of efficiency is a major culprit here, does the supply end need to take a good look at itself then?

Paul Dalzell argues that with only 15-18% of Nelson Pine Industries’ products used here and the rest being exported, the company isn’t just taking advantage of the local market’s increased demand. 

“Unless it’s specifically imported… domestic movement has been flat or downward probably for the last decade in regards to building materials”

“Unless we are a streamlined manufacturer we aren’t going to be in business and I think any exporter is going to be in that same situation. So people are getting pretty high quality building materials here and I think it’s up to those in the supply chain to make sure that where there is a link it is performing a function and adding value along the way. And if it’s not, then perhaps it shouldn’t be in the link.”

 

THE COST OF DOING BUSINESS

Another timber supplier with a refreshingly honest outlook is Doran Irion, South Island Sales Manager of Southern Pine Products (SPP). Irion has noted that less work and more competition in the last year in Christchurch has affected the pricing of projects with more quotes going out per job than a year or two ago.

Irion is also keen to stress that, at least from the supply perspective, the perceived high cost of materials in many cases can’t be helped.

“If you look at what it costs to build a building now compared to pre-earthquake, the structures themselves and the way they are put together needs to be far more robust than what they were and all of that comes at a cost so nowadays you have so much more money going into stuff you can’t see.”

Irion qualifies this estimating that whereas previously the foundation slab of a build used to be budgeted at roughly 6% of the building cost, that has now risen to somewhere between 15% and 18% to meet current requirements.

Recently updated health & safety requirements around working from height have also added cost to projects, with safety nets and fall arresters now required on even one story builds.

The upside is that none of this comes as a surprise to the trade: “It’s probably not so hard for those within the industry,” says Doran Irion. “They know how heavily regulated it’s becoming and all the potential pitfalls if you don’t dot those ‘Is’ and cross those ‘Ts’.

From a consumer perspective however, he admits, “It just looks like costs are getting out of control where a house is 10 or 20% more expensive now than what it was five or six years ago.”

On top of all of this, Irion admits that New Zealand by its very nature isn’t a particularly cheap place to be a manufacturer.

“We are fairly isolated and particularly if you are manufacturing, our costs are relatively high compared to say an Asian market where they can mass produce product and sell a small amount to New Zealand and that’s not just in the building supplies sector.”

Which leads us back to the subject of last year’s feature where the Government had just “opened the floodgates” as it were to overseas importers in order to lower building costs?

I asked Irion if he thought this solution may have come back to haunt those who welcomed an “open door” policy.

“Well just look at the steel debacle of a few months ago where it wasn’t up to spec – that’s your answer right there in a nutshell,” Irion says.

“The lowest price isn’t always the best value and at least if you know it’s made in New Zealand there are some fairly stringent controls on what’s acceptable and what’s not.”

 

TIMBER “UNDER CONTROL”?

For a broader view, I spoke to Jeff Parker, Technical Manager of The Wood Processors & Manufacturers Association of New Zealand (WPMA) for his take on the state of the market from a timber perspective.

“It’s pretty healthy at the moment obviously with the building boom and we are now in a pretty good position with the recent 3604 standard with everybody complying with the relevant treatment and grading and the like so that is all pretty much well under control,” Parker says.

With most of his members seeming to have plenty of business on their hands I asked Jeff Parker if he had heard any concerns amongst the rush of activity.

Although he was keen to avoid raising any red flags he did report that some engineers were lamenting the inability to specify steel connectors like nails and screws with known properties, particularly ductility.

“The lowest price isn’t always the best value and at least if you know it’s made in New Zealand there are some fairly stringent controls on what’s acceptable and what’s not”

“For example, an engineer may specify 14 gauge screws to do something and they may have no idea what the actual properties of the metal in those connecters are and this makes a big difference to how a connector behaves in an earthquake.

“They may be strong enough and they may hold in the timber but, when they get to a certain point, some will bend and some will break. And this is information they used to be able to find out, especially with nails which used to be pretty much all made in New Zealand.”

Jeff Parker points out that while many engineers may know of reputable suppliers that can supply the relevant information on these types of connectors it’s difficult to ensure what is actually being used on-site.

“With stuff coming from offshore, there’s no accountability and no certification,” he says.

 

MAKING CONNECTIONS

With Parker’s concerns in mind, what is the perspective of Robert Turner, Key Account Manager at Pryda?

“There are definitely a few dodgy products floating around coming in with no certification or anything and people don’t recognise them as being a copy. And some of them are direct copies of our products but, because we haven’t got a patent, there is nothing we can do,” he says, somewhat despondently.

Going back to the price issue, I asked for his thoughts on whether New Zealand’s building materials were overpriced?

“Well we for one haven’t had a price rise since 2010. And in theory steel hasn’t gone up since then but people float around steel pricing and there are some people creaming it which they really shouldn’t be.”

“That’s why we are seeing apartment projects failing because the actual cost of developing them now compared to when they first started the idea is too much. So that’s either bad QS or the price is just going through the roof,” he says.

So does Robert Turner have any suggestions to keep prices in line?

“I would hate to see regulations come in where the Government can say you have to justify your prices but in some areas there just needs to be a little bit more competition, I reckon.”

 

PUTTING SOME STEEL INTO FRAMING

Moving now to steel framing, Gordon Barratt, General Manager of the National Association of Steel-framed Housing (NASH) is happy to confirm that the steel material sourced by his members is both well maintained and fully certified.

And, with new codes being released around steel framing and the building envelope, Barratt is hoping to make it “easier than ever for builders and designers to use steel framing and get more people on board doing it”.

In terms of business Barratt confirms that his members are experiencing much of the same growth as their contemporaries in timber in the major areas of development.

For NASH members however, the chief concern is finding the right people to get the work done – as with timber, qualified builders with the relevant experience in steel framing are at a premium right now.

With the general expectation that we will see some further Government intervention in respect of product assurance and testing later this year and the knowledge that the Kiwi construction market will become nothing if not more competitive – which should be keeping prices keen after all – where does all this leave us?

One of the most interesting outtakes from my research is that a range of players on the supply side of building materials are actually calling for more competition and to make it harder to sell products into the New Zealand market, not easier.

It’s all about raising the bar.

 



Government strengthens steel mesh testing rules

The Government has just made some more changes to steel mesh testing requirements to ensure all product being sold in New Zealand is up to standard, Building & Housing Minister Dr Nick Smith says.

According to the Minister this will involve increasing the number of testing samples, clarifying testing methods and ensuring testing is carried out by internationally accredited testing laboratories.

The updated Verification Method and Acceptable Solution will apply to all steel mesh of Grade 500E being sold in New Zealand, whether made locally or imported.

The changes, which will be implemented by 30 May 2017, follow public consultation and were prompted by issues with the quality of a small amount of steel mesh, which the Commerce Commission is investigating.

Minister Smith goes on to say that the key concerns around steel mesh for housing are its ductility properties, basically the ability of steel to keep its strength when stretched or bent.

Following the Christchurch earthquake, the steel mesh in all new homes is now required to have 10% ductility to help the resilience of the floor slab after a quake.

www.mbie.govt.nz

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