Local sawn softwood sales hit new record

Monthly sales of locally produced sawn softwood products were above 300,000 m3 for just the third month ever and the second time in three months. At 305,706 m3, sales indicate a local production volume that is more or less at capacity. As ever, imports supplemented local supply, with sawn softwood imports reaching 46,857 m3 in August.

On an annualised basis, local sales totalled 3.181 Million m3 year-ended August, up 12.9% on the prior year. It is not immediately clear from the red line in the chart below, but annualised sales reached a new record in August. All the signs are that sales are still growing, albeit that production is stretched right now.

None of us would have thought, six long, long, months ago, that this is where we would be. The result is little short of remarkable.

Rather than drill into the specific volumes being sold right now, this month, we will examine the weighted average price data. We will do this in two charts, first showing structural grades and then displaying other grades.

At its simplest, and the table below will assist this, structural grades saw prices in the June quarter record a mixed result. MGP Grades recorded a modest decline for <120mm Structural and a modest increase for >120mm Structural in the June quarter, compared with the March quarter. The Treated grades were both up over the same period, with the largest increase (+4.5%) recorded for the Treated Structural <120mm grade.

While prices shifted up, none were higher than for the June quarter in 2019.

Solid price performance was not as clearly recorded for the non-structural grades, as the second chart shows.

Treated External H3 and Green Packaging grades were lower priced, while Dry Packaging prices lifted a ‘chart topping’ 4.7%, continuing a long run of volume and price strength for this grade of growing importance.

Support for record local sales continues to be provided by imports.

After falling since the end of 2018, the pandemic has seen imports lift decisively and hold their ground for the last three months, at something close to 48,000 m3 per month. As we can see below, annualised imports have ticked up marginally, reaching 469,758 m3 year-ended August.

While local sales are up, it is instructive that imports are, year-on-year, down almost 32%, regardless of the recently monthly rises. It is true that imports are coming off massive highs, but the comparison with rising local sales requires consideration.

Market expectations were the opposite for local producers and importers alike, who believed the market would turn down, possibly sharply. Some reduced production and softer imports resulted, with warehouse inventories cut right to the bone.

So much so that in October, there were some difficulties accessing supply, as the supply chain hauled to replenish supply and meet demand.

The interesting – and very important – question is whether the import volume is going to continue playing its supporting role, or if it will come under pressure as a result of international conditions. Some international data suggests that 2021 will be a strong year in the North American market, but not as strong as 2020. Housing starts in the US are likely to grow, but the growth will be more manageable and less choppy.

Imports to the US will fill the gap left by ‘holes’ in local production. Unlike Australia, the US faced reasonably severe lockdowns that impacted internal production. That saw prices lift sharply in the US market, supporting increased imports.

Like most of the world, market disruptions are impacting the US market, the international trade and of course, the still strong local markets here in Australia.

With consumption and sales up and imports also lifting and playing a solid role in the ‘support act’, one thing is clear: demand for wood, especially for housing, is at all-time record highs.