Import duty change may hit Fletcher Building

CATHERINE HARRIS
Last updated 10:58 16/05/2014

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Fletcher Building may be hurt by a Budget decision to remove tariffs on imported plasterboard and duties on other building products, analysts say.

Fletcher, which holds a 94 per cent share of the New Zealand plasterboard market, saw its shares fall 11c to $9.21 yesterday.

The Government said it hoped to reduce the cost of a standard new home by $3500, by temporarily dropping duties on 90 per cent of the building materials used. The cost of building materials is said to be 30 per cent higher than Australia's.

"On the face of it, the broad takeaway from that is that it's a negative for Fletcher Building," Craigs Investment Partners' head of private wealth research, Mark Lister, said.

Building products provided about 20 per cent of Fletcher's earnings.

"Obviously as a building products manufacturer and supplier, if some of that imported building products are about to get cheaper, they become less competitive," he said.

Fletcher Building would not comment yesterday and referred the media to the Building Industry Federation, which said the country could be swamped with imported products.

Federation chief executive Bruce Kohn doubted the Government's claim that the move would save new-home builders $3500, and said similar moves in Australia saw that market "flooded" with low-quality building materials.

Increased competition was tentatively welcomed by the Registered Master Builders Federation.

Chief executive Warwick Quinn said the Government signalled late last year that it would drop tariffs and anti-dumping provisions on many building products, "and we agreed with that because we need as much competition as we can possibly get".

"That needs to be tempered with anti-dumping, so what we don't want is huge amounts of spare products from China or whatever coming in and flooding our markets," he said.

"That might be good temporarily, but what it does is undermines long-term viability of our industry."

A rival of Fletchers, Knauf Plasterboard, said foreign entrants to the New Zealand market at last had an "even playing field".

Knauf's national sales manager, John Russ, said the tariff cuts would have no direct financial impact on his company's products, which were brought in from Australia.

Knauf's entry had been delayed because New Zealand builders were cautious and would not use its products unless they had approval from the Building Research Association, in addition to the building code.

"Leaky homes and the earthquake in Christchurch have made a lot of people very risk-averse, and appraisals are something we don't experience anywhere else in the 60 countries that we are in," Russ said.

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Finance Minister Bill English said reducing the tariffs would build on the Government's previous reforms to deliver more competition to the building materials industry.

But Labour leader David Cunliffe panned the move, saying that removing tariffs on wallboard to offset building costs "will not even make a dent in the price of a house in Auckland".

"Average prices in Auckland rose by $6208 last month. The Government's levy changes will save just two to three weeks of Auckland house-price inflation."

The Budget announced that anti-dumping tariffs on plasterboard, reinforcing steel bar and wire nails would be immediately suspended for three years, and tariffs on other materials such as roofing, cladding, insulation and paint would be dropped from July 1, to be reviewed in five years.

- Stuff

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