Local softwood sales hover at peak capacity

Sales of locally produced sawn softwood totalled 3.134 million m³ year-ended March 2022, very close to the theoretical capacity of around 3.2 million m³ per annum. In March, monthly sales lifted to 265,967 m³, a four-month high. Meantime, a ‘mystery’ in the local information has been resolved, helping to explain the sawn softwood market more precisely.

As the first chart shows, sales of local sawn softwood products have been operating largely on trend and cyclical expectations through the recent period, albeit monthly sales have been a little softer than a year earlier. As an example, the solid 267,967 m³ sold in March 2022 was 5.9% less than in March 2021.

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For all that there has been a moderation in local sales, the Year-End line demonstrate total sales remain toward the upper end of capacity.

While aggregate sales have been softening, at the grade-by-grade level, the last year has seen sales continuing to adjust, at least for one pairing of products. As the second chart shows, sales of Treated Structural <120mm now eclipse sales of their untreated cousin Structural <120mm.

Year-ended March, the Treated Structural <120mm grade saw sales lift a sound 10.9% to a record 759,353 m3, while Structural <120mm fell 8.1% to 666,074 m3. The switch between the two grades is evident and the gap between them is widening as time passes.

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Stability in the other significant grade – Packaging – saw it record <0.1% annual sales growth, reporting 660,951 m³. The prospect is that by mid-year, it will overtake Structural <120mm as the second largest grade. Combined, these three grades accounted for 66.6% of all domestic sawn softwood sales year-ended March 2022, up from 64.7% for the prior year.

Now, to the magical mystery van and the solution to a lingering puzzle…

For some time, the data was displaying monthly sales of sawn softwood lower than the peak in the previous housing cycle in June 2018, when sales reached around 3.2 million m³. This did not seem logical during the current housing boom, in which sawmills were working their operations to capacity to supply every stick of timber possible to customers.

A possible anecdotal explanation was that the availability of sawlogs had been affected by the bushfires as the additional resource from salvage operations wound down. However, it transpires there was an error in some data being provided into the FWPA data portal which has now been rectified. This now shows sawmillers continuing to supply volumes at an annualised rate around – and seemingly capped at – 3.2 million m³ per annum.

Like most mysteries, this one is a bit of an onion. The more you peel back, the more you find to water the eyes.

Given the bushfire log recovery program is now largely complete, and the current yield from the softwood plantation has been impacted in some areas by a reduction of about 15%, the new question is where have the additional logs come from?

The answer may be linked to the downturn in the log trade to China. The FWPA data aggregation program has established a growers data series to track local log sales which would provide some insight into the current log supply situation. Unfortunately, this data series is not complete at this stage, but it could well be this likely source represents a win/win for the Australian industry. Just goes to show how deadly it can be to tamper with trade arrangements.

In any event, the FWPA sawn softwood data series has been updated, amending data entry errors identified back to December 2020. The revision table at an aggregate level is displayed below.

Updated Softwood Monthly Sales Data Series