Fletcher Building says plasterboard market will return to 'equilibrium' by October

Wednesday, 22 June 2022

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 increases and demand slows.

The construction market has been running hot, which has put pressure on the availability of building materials and labour, already in short supply due to disruptions caused by the Covid-19 pandemic. Building consents peaked at an annual rate of 50,000, which is ahead of the country’s capacity to build between 35,000 to 40,000 homes a year.

Fletcher chief executive Ross Taylor told an investor day in Auckland on Wednesday that shortages had been experienced in structural timber, insulation and then plasterboard, some of which was due to stockpiling as customers bought orders forward to ensure they had stock.

The company’s Winstone Wallboards unit holds a 94% share of the plasterboard market with its Gib product and it has come under fire for failing to keep up with the surge in demand, causing a construction bottleneck and stress for builders and the wider industry.

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Taylor said order volumes for plasterboard more than doubled from November 2021 through to February 2022, which was about twice the industry’s capacity to build. The company met some extra demand by drawing on its inventory and importing from Australia, although imports were paused in November due to high demand in that country.

Fletcher has reconfigured its plasterboard factory which would lift production from July, and it expects to resume imports from August as international capacity eases, he said.

“These moves will increase our supply into the NZ market by around 10%,” Taylor said.

Fletcher Building has apologised after a Canterbury builder captured video evidence of Gib stockpiling at a Fletcher Living construction site in Lincoln.

Building and Construction Minister Megan Woods on Tuesday announced a ministerial taskforce of industry experts to look for solutions to the plasterboard supply crisis, flagging the potential for legislative or regulatory change.

Fletcher hadn’t spoken to Woods, Taylor said.

“We are not participating in that,” he said. “We are happy to help the Government through this but our focus is all around just getting through this demand surge.”

Taylor said the company has granted 10 trademark royalty-free licences to allow others to import boards in its colour palette. He noted there was a risk of confusion as its colours related to specific board types.

Fletcher’s Placemakers building supplies chain and the company’s other merchant customers would run an emergency allocation fund to alleviate smaller customer hardship issues, he said.

Building products chief executive Hamish McBeath said the company is “deeply focused” on working through the plasterboard supply demands.

McBeath said Gib had won every building supplies award since 2004, but he expected to suffer some short-term reputational damage.

“We are in very close conversation with our customers, and our customers’ customers,” McBeath said. “We think we will take a hit as we come through this, but we back our service offer and I am pretty confident we will get that back fairly quickly.

“Our offer that we have in the market, no-one has ever been able to replicate, and the way we service the industry is to reduce their overall cost.”

He said the company’s wholesale plasterboard was about 15% more expensive than in Australia, but Fletcher’s plasterboard required less plaster for installation and offered a superior delivery service, meaning overall installation was cheaper.

Fletcher has lifted its plasterboard price about 10% over the past two years, and another increase was likely in the future as costs increased, Taylor said.

“We have taken no more price than what our cost increases are – margins haven’t moved,” Tayor said. “We are covering inflation, but we are not gouging on the way through.”

He said Fletcher’s building product pricing could be “quite different” to prices from “very busy” and capacity constrained trades and builders.

Fletcher is building a new plasterboard plant at Tauriko which will add 30% extra capacity. Construction has been delayed by about 12 months due to Covid-19 lockdowns and border closures, but it is expected to start production in May 2023.