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Local softwood sales down 2.3% as imports rise 12.6%

Local sales of sawn softwood products declined 2.3% or 73,531 m3, in the year-ended February 2018, while over the same period, sawn softwood imports rose 12.6% or 72,555 m3. The almost exact volume swap between local production and imports underscores the extent to which both components of supply are required to meet the demands of the local market. The other factor this demonstrates – or at least goes toward – is that the sawn softwood market appears to have stepped sideways over the last year, rather than declining as may have been anticipated a year ago.

The first chart here shows local sales of sawn softwood, reported by producers to FWPA, coupled with the far smaller monthly imports of sawn softwood products.


To go straight to the dashboard and take a closer look at the data, click here.

Although the chart does show a rise in imports – in blue – and a drop-off in local sales – in red – as the headline analysis indicates, the one appears to have replaced the other over the last few months, presumably as a result in the main of the closure of the Morwell sawmill.

To consider this another way, the data demonstrates that for the year-ended February, imports accounted for 17.4% of the combined total, up from the 15.4% a year earlier. Imports are certainly on the rlse, but their influence is not growing particularly dramatically, just yet.

One way to analyse the current situation is to look simply at Australia’s sawn softwood sales, as reported to FWPA, by processors. The data below shows sales by grade, and it indicates there is decline – albeit modest – in recent months.


To go straight to the dashboard and take a closer look at the data, click here.

For the year-ended February 2018, one grade experienced a sharp decline compared with the prior month – Structural <120 mm. Sales declined 3.3% compared with the prior month, totaling 722,409 m3 for the year. This occurred even as their sibling Treated Structural <120 mm experienced a very modest sales decline of 0.1% Moreover, after years of chasing its venerable cousin, the treated structural grade has finally realised its potential and for the first time is the largest single grade of sales.

The steep decline in sales of the untreated structural grade has been coming for some months, with sales having peaked in the current cycle in August 2017. Annualised sales were gradually declining and finally fell more sharply in February, as the cumulative effect of lower monthly sales took their inevitable tool on the annual sales number. 

Turning to imports of sawn softwood, the chart below shows all imports by grade, over the same period as the original chart. It can be observed that that two grades that have contributed most of the growth are in orange (Dressed Sawn Softwood, other than Radiata) and in the bright blue (Dressed Sawn Softwood of Fir or Spruce). The latter was a new code in 2017 and imports would previously have been included with the ‘orange’ imports.


To go straight to the dashboard and take a closer look at the data, click here.

The clear point is that combined, these imports of dressed sawn softwood products delivered all of the import growth. For the year-ended February 2018, combined they totalled 293,127 m3, up 64.6% on the prior year. Most recently, these two grades combined, accounted for 45.3% of imports over the year, up from 31.0% a year earlier.

Although it may be a little soon to say so just yet, the data suggests that rising imports of what amounts to the main structural softwood products are filling a gap left by a local production profile that remains under pressure.

One way that we can examine the sector’s pressures is to look at prices, and do so from an index perspective which represents the movement in prices from the base which is set at 100. As we can see from the chart below that over the past decade softwood log export prices have grown more than 50% (the blue line), while local log prices, measured by the Australian Pine Log Price Index (APLPI) and shown in orange, are on average lower than in the June quarter of 2009. Meanwhile, coincidentally, in the December quarter of 2017, the indexed average price movement for dressed softwood imports (the red line) was almost exactly the same as for MGP10 (the black line) as reflected in the TMS survey.


Source: ABS Trade Data, Indufor TMS, KPMG APLPI

Assuming these price trends are correct the limited correlation between these prices highlights some of the structural constraints in the Australia market. In theory if all logs could be sold to local or export markets (ie growers had the capacity to service many customers in either the domestic or export market) then the movement in export prices would flow through to the movement in the domestic log prices. Similarly if the import supply chain was as responsive as the local supply chain then the prices and volumes would be strongly correlated. 

However at the end of the day economics 101 says that price is the signal that drives markets. So not surprisingly the strength of export log prices has been associated with record levels of log exports. Likewise import volumes is recent times have tracked closely movements in local prices for structural timber. For further discussion on this situation, see the item Structural softwood market structure changing, earlier in this edition of Statistics Count.


Posted Date: April 27, 2018

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