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Annual woodchip exports totalled 5.719 Mbdmt year-ended May 2022

 

The following update has been supplied by IndustryEdge from its online platform, Wood Market Edge online. All the data used and referred to here is available for download by IndustryEdge subscribers and is part of the most timely and comprehensive data and information service available in Australia.

Learn more about Wood Market Edge online here.

Picture21

 

Australia’s combined annual exports of hardwood and softwood woodchips totalled 5.719 million bdmt year-ended May 2022. Hardwood chips totalled 4.684 million bdmt, 22.1% higher than a year earlier and the highest annual volume recorded in twenty-three months. Total exports of softwood woodchips totalled 1.035 million bdmt. The chart displays total woodchip exports on a monthly basis.

Australian Woodchip Exports: Jan ’18 – May ’22 (kbdmt &AUDFob/bdmt)

Picture22

Source: ABS, GTIS & IndustryEdge estimates

Note: March 2016 to May 2017 softwood chips are estimates

Australia’s average hardwood chip export price was AUDFob226/bdmt in May 2022, up 6.7% on the prior month. Average softwood chip export prices rose 0.5% to AUDFob187/bdmt.

 

Woodchip Export Prices by Species: Jan ’18 – May ‘22 (AUDFob/bdmt)

Picture23

Source: ABS, derived and IndustryEdge

*From January to June 2017 and in January 2019, softwood chip export data prices were officially unavailable

Australian Woodchip Export Market Update

 

Current

% Change

Month

May ‘22

MoM

QoQ

YoY

Total exports (kbdmt)

543.7

24.3%

5.6%

26.3%

Hardwood (kbdmt)

480.6

32.1%

6.6%

22.1%

Softwood (kbdmt)

63.1

-14.4%

0.7%

49.4%

Hardwood (AUDFob/bdmt)

226.46

6.7%

-0.2%

4.3%

Softwood (AUDFob/bdmt)

210.18

9.7%

2.2%

-0.8%

Based on month-end exchange rates, the table below shows the average price of Australia’s woodchip exports in US dollars for the last three months.

Australian Woodchip Export Prices: Mar ’22 – May ‘22 (USDFob/bdmt)

Species

Mar ‘22

Apr ‘22

May ‘22

Hardwood

159.98

153.56

155.11

Softwood

138.65

133.18

134.62

Source: ABS, derived, RBA and IndustryEdge

The trade and the associated transactions of woodchips occur in a context of modern pulp and paper markets.

Continuing concern about the disconnection between pulp prices and paper prices is heading toward fever pitch. As demand for printing and communication grade papers returns to trend decline – after short-lived rises from crushing lows during the pandemic – prices are being continually eroded over the world.

There are exceptions: for instance, Newsprint demand is greater than supply capacity for the first time in almost two decades and producers are taking full advantage of that situation and opportunity.

However, beyond the surprising, declining demand has been exacerbated in China by a continuation of aggressive lockdowns associated with the pandemic response. Demand remains stagnant at best and the summer hiatus also has to be contended with.

More worrying is the broad economic conditions that see demand weakening in Europe and North America as input costs continue to rise. The main pressure point in European paper markets is obvious: energy costs. That is pushing some prices higher but dragging margins down for others.

Non-integrated European paper producers are likely to press for lower pulp prices, and though Europe is not the main market, the global pulp price will respond, especially as new South American hardwood pulp capacity is due to commence operation in 4Q22.

We are observing continuing interest (machinery tenders, EOIs for consulting work etc) in converting printing and communication paper machines to manufacture packaging grades. Note that this is not an Asian trend, rather one taken up in mature markets like Europe and North America. The strategic difference is the cost of capital (and the quality of assets in many cases) in Asia is radically different to that in the rest of the world.

If Chinese production curtailment comes about, it will not typically involve converting machines from one grade of paper to another. Instead it will involve closures, tear downs and new builds – a very different approach and one that can easily take market participants by surprise.

China isn’t there yet, but its manufacturing is under pressure.

What that means for Australian supply of woodchips is that the balances in the market are likely to shift again over the next cycle. Right now, every tonne produced can be sold. That will continue, especially for the increasingly scarce Australian plantation eucalypts, but we expect there will be more points of demand (China, Japan and emerging producers) chasing declining supply, not just a steady diet of Chinese and Japanese demand.

 

Posted Date: July 29, 2022

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