Recession, what recession? While Australia’s economy certainly slowed, it was the only industrialised country in the world to avert two quarters of negative growth, following the onset of the global financial and economic crisis. Why? Was it good economic management, or is it just a lucky country? The short answer is both.
While the Australian government countered the financial crisis with a well timed and massive stimulus programme, Australia’s Mandarin-speaking prime minister made a point of travelling to Beijing when the crisis hit. By no coincidence, China also rolled out a well-timed, massive stimulus programme, managing to maintain economic growth in 2009 at historically high levels. Other countries, including Indonesia, Malaysia and Japan all followed with similar programmes, maintaining strong economic activity. Strong growth in Asia was as crucial to preventing recession in Australia as was the stimulus programme. With good economic management, and the luck of geography, Australia has had more than 15 years of economic growth without a recession.
Australasia is by history and by culture linked to Europe and North America. By geography it is inextricably linked to Asia. China is now Australia’s largest trading partner, having over the past decade replaced Japan, Europe and the US. What an impact it has had on Australasia – and the wood panels industry!
Shaping the future
The increasing linkage of the Australasian economy and culture to the developing powerhouses of Asia is the dynamic shaping the future of this region. The Asian region itself is increasingly being integrated, as is Australasia with Asia. Trade and investment flows with Asia are powering Australasia’s economic growth, and vice versa.
The power of Asia has had a profound effect on the MDF industry. In the mid-1990s, North American and European companies were investing in MDF production facilities as if there were no tomorrow. Japan was the key producer and consumer of MDF in Asia, followed closely by South Korea and Chinese Taipei (Taiwan). I had just visited China, a country that at that time produced virtually no MDF or particleboard. At an industry conference in North America, I made a rather bold statement at the time that China would one day lead the world in the production and consumption of MDF.
This notion came from a visit to Chinese Taipei [Taiwan], where furniture producers advised they were rapidly shifting production facilities to mainland China. This meant China would either need to import MDF and particleboard, or produce it to service the rapidly expanding furniture industry. For a decade, China imported huge volumes of MDF and particleboard. At the same time, production facilities in China expanded rapidly. Eventually imports were replaced with domestic production. Today China is the undisputed world leader, with an amazing array of MDF and particleboard producers and consumers, dwarfing North America, Europe and Australasia. It is also a net exporter. In many ways China is an opportunity missed by North American producers, who could have seized the day to invest in production facilities in China, or to export to China, as many European and Australasian producers did.
MDF industry
In Australasia, the MDF industry has been completely transformed to one dominated by investors from Asia, and focused on exports to Asia. It is a prelude to how the industry and other industries in Australasia will be shaped in the future. It will be Asia centric. The region has six MDF production facilities. Of these, four are now owned by Asian companies, three in New Zealand, and one in Australia. In 2009, the region produced an estimated 1.2 million m³ of MDF, of which 44% was exported.
Of the three facilities in Australia, the 145,000m³ capacity plant at Wangaratta, New South Wales, is owned by Sumitomo (Japan), the 260,000m³ plant at Oberon, New South Wales, is owned by Carter Holt Harvey (New Zealand), and a 230,000m³ plant at Gympie, Queensland, is owned by (Laminex) Fletcher Wood Panels (New Zealand). Production in 2009 in Australia was 600,000m³ of which 30% was exported, mainly to China, South Korea and Japan.
Of the three facilities in New Zealand, the 220,000m³ capacity plant in Rangiora is owned by Daiken and Itochu (Japan), the 170,000m³ capacity plant in Mataura is owned by Dongwha (South Korea), and the 350,000m³ capacity plant in Nelson is owned by Sumitomo (Japan). Production in 2009 was 645,000m³, of which 78% was exported, mainly to Japan, China and the US.
Particleboard industry
While the particleboard industry remains predominantly owned and operated by domestic interests, this is in part a result of lower demand for this product in China, and strong demand from the building industry in Australasia. Australasia has 14 small particleboard production facilities, one in New Zealand and 13 in Australia. Only four plants have a capacity exceeding 100,000m³. In 2009, production was 900,000m³, of which only 2% was exported. A transition to ownership by Asian companies, and exports to Asia is possible, but less likely in this sector, as domestic consumption is strong, and particleboard is less tradeable.
But the wood panels industry, other timber industries, and other sectors in Australasia will in future be driven by the luck of geography as well as good economic management.