Com Com to look into Carter Holt Harvey halting supply to major retailers

Monday, 29 March 2021

The Commerce Commission says it will look into Carter Holt Harvey’s decision to halt timber supply to some retailers, while continuing to supply large customers.

The competition watchdog said it wants to understand why the timber company, partly owned by New Zealand’s richest person Graeme Hart, has stopped supplying to Mitre 10, Bunnings and ITM, while continuing to supply large customers including Fletcher Building-owned PlaceMakers and its own subsidiary, Carters.

Carter Holt Harvey was previously pinged by the Commission in 2014 for price fixing and was ordered to pay $1.85 million in penalties.

A Commerce Commission spokeswoman said it had been monitoring a number of sectors and was aware of supply issues in the building sector, but Carter Holt had not specifically advised it of intentions to cease supply to the relevant parties.

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“It is our intention to make some inquiries to understand the nature of the issue. At this time, the commission has not been in touch with parties in respect of this issue,” the spokeswoman said.

Carter Holt Harvey’s decision has led to stockpiling of timber and added greater pressure on the building industry.

Auckland builder Nick Farrelly says companies are having to write clauses in contracts protecting them from delays caused by materials shortages.

Auckland builder Blake Cooper said although his main timber supplier was PlaceMakers, the business was seeking new suppliers because of the uncertainty.

“So far we have only been mildly affected for certain products but it is longer lead times more than not getting it at all. Up to three weeks in some cases which is outrageous,” Cooper said.

“It is nerve-racking as we are starting a development in Sandringham and it is all timber framing.”

Another builder, Nick Farrelly, said builders had been stockpiling timber for some weeks.

Master Builders Association chief executive David Kelly says small building businesses have been hit the hardest and they are the majority in the construction industry.

After reading reports of the supply issues in the media, Farrelly’s company, Edgecity Builders, bought four packets of timber from various suppliers over the weekend to ensure it could secure work. Packets include 200m to 400m of timber.

He said the business was having to write clauses into contracts protecting it from delays caused by materials shortages.

“This is a new area for us. We have never, ever had this. We have had delays of concrete but never this sort of shortage of timber,” Farrelly said.

Master Builders Association chief executive David Kelly said small building businesses would be hit the hardest.

Mitre 10 and Bunnings have confirmed to Stuff that Carter Holt Harvey has stopped supplying them with wood products.

“The larger builders typically have arrangements in place and supply agreements, and are likely to be less impacted than the standalone builder. Merchants will be searching around for materials and it is likely there will be delays in supply which will have a flow-on effect,” Kelly said.

Kelly said the association had not heard from Carter Holt Harvey but hoped the company would not increase its prices.

“We have already got issues with price escalations in the construction industry, and I hope the merchants behave responsibly and do not take advantage of this to start pushing up prices.

Builders are concerned the shortage of timber will cause major construction delays.

“It is critical to the industry that we are able to communicate so builders know how to plan.”

He said post-Covid this would add greater stress to builders and was the most serious issue for builders.

New Zealand Institute of Forestry president James Treadwell said that while local demand was increasing for timber, it had not been enough to impact supply.

Treadwell said that as he understood it, the issue was more a “power move” to fight low prices dictated by Bunnings, Mitre 10 and ITM.

He said for years forest owners had complained of low prices and they had been able to earn more overseas.

He said a number of 10-year contracts with suppliers had also come to an end and Carter Holt Harvey had decided not to renew them.

Farrelly said Carter Holt Harvey’s move to stop supplying to retailers was another blow to the industry that was under immense pressure amid the housing shortage crisis and facing large price hikes because of Covid-19.

“I have heard stories it is because we have got rid of all the mills and can’t get volume through quick enough; I have heard the logs get better money overseas that is why we are exporting them. But who knows, you just hear so many things.”

Last year, Carter Holt Harvey shut its Whangarei sawmill making more than 100 people redundant.

Carter Holt Harvey has been approached for comment.