The March quarter 2019 softwood product sales forecasts show a market retreating from its previous peaks, while the December quarter actual declines were more aggressively than the forecasts indicated was likely. Of greatest relevance, the forecast for aggregate Treated Structural sales shows a decline to 159,972 m3, which, if it eventuates, would represent a 0.5% fall on the December quarter actual result.
That may seem a modest decline, but at 160,806 m3, December quarter actual sales were 22.5% lower than the forecast. This places the March quarter forecast into stark relief, implying that the decline in sales may be steeper than the presently expected.
The chart below shows the aggregated Treated Structural forecast and demonstrates that over the last year, the December quarter was the only quarter in which the actual result was outside the confidence intervals for the forecasts.
In its commentary on the forecasts, ABARES advises:
… the updated forecasts for the March 2019 quarter onwards have been revised downwards with sales forecast to fall in the March 2019 quarter by 0.5 per cent to 159,972 m3, in line with the seasonal construction cycle. Sales are expected to increase in the June 2019 quarter by 4.5 per cent and again in the September 2019 quarter by 5.2 per cent before falling 3.2 per cent in the December 2019 quarter. Sales are expected to be around 170,308 m3 (5.9 per cent higher than current sales) in December 2019.
The other significant volume grade for which quarterly forecasts are produced is the Untreated Structural <120 mm grade. This is traditionally the largest volume sales grade. In the December quarter, actual sales were 12.7% lower than the forecast, at 153,073 m3. As the chart shows, this outcome was at the very bottom of the forecast confidence intervals.
For the March quarter therefore, the forecast is a lower 145,530 m3, but as ABARES notes:
… the updated forecasts for the March 2019 quarter onwards have been revised downwards with sales forecast to fall in the March 2019 quarter by 4.9 per cent to 145,530 m3, in line with the seasonal construction cycle. Sales are expected to increase in the June 2019 quarter by 6.5 per cent and again in the September 2019 quarter by 5.8 per cent before falling 11.3 per cent in the December 2019 quarter. Sales are expected to be around 145,474 m3 (5.0 per cent lower than current sales) in December 2019.
The downturn theme continues through the products for which ABARES supplies forecasts of local sales.
Actual sales of structural pine greater than 120mm in the December 2018 quarter (13,495 m3) were weaker than expected, falling short of the December 2018 forecast (15,215 m3) by 11.3 per cent or 1,720 m3.
As ABARES advises for Untreated Structural >120mm:
… the updated forecasts for the March 2019 quarter onwards have been revised downwards with sales forecast to fall in the March 2018 quarter by 5.9 per cent to 12,698 m3, in line with the seasonal construction cycle. Sales are expected to increase in the June 2019 quarter by 6.3 per cent and again in the September 2019 quarter by 5.6 per cent before falling 11.4 per cent in the December 2019 quarter. Sales are expected to be around 12,617 m3 (6.5 per cent lower than current sales) in December 2019.
Finally, the trend continues into Landscaping product sales. Actual sales in the December 2018 quarter (36,234 m3) were weaker than expected, falling below the November 2018 forecasts (43,333 m3) by 16.4 per cent, or 7,099 m3. Actual sales volumes for December 2018 were inside the 95 per cent prediction interval for the previous forecast but outside of the 95 per cent confidence interval for earlier forecasts.
Looking forward, the updated forecasts for the March 2019 quarter onwards have been revised downwards with sales expected to fall 11.3 per cent in the December 2018 quarter, in line with the historic seasonal cycle. Sales are expected to increase in the June 2019 quarter by 6.0 per cent before increasing further in the September and December 2019 quarters by 21.6 per cent and 6.5 per cent, respectively. Sales are expected to be around 44,091 m3 (21.7 per cent higher than current sales) in December 2019.
* The quarterly forecasts are prepared by ABARES, for FWPA, using standard econometric forecasting methods
