Driven by strong demand and the lower Australian Dollar, exports of both logs and woodchips have exploded over the last year or more, with growth in hardwood exports very strong. For the year-ended January 2016, total log exports were 3,279,870 m3, up 31.5% on the prior year. Total woodchip exports rose a relatively modest 12.2% over the same period, reaching 5,872,698 bone dry metric tonnes (bdmt).
Growth in the export of logs is detailed in the first chart below and exports of woodchips are set out in the second chart.
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Log exports grew for both softwood (up 21.7%) and hardwood (394.8%) logs, with the latter coming off a low base and leaping into prominence.
The driver for hardwood log exports is far more varied than might be imagined. This is not just another version of pulpwood exports, though some hardwood resource may make its way through to be pulpwood. Solid wood production, especially for the purpose of peeling for veneers and the manufacture of plywood, is a major driver of hardwood log exports.
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Woodchip exports remain dominated by hardwood chips, which rose 13.5% to 5,225,402 bdmt for the year-ended January 2016. This accounted for the vast bulk of woodchip exports, with softwood growing just 2.4% to 646,800.
The softwood chip export volume is directly constrained by sawnwood production. Its limits are the production capacity of the domestic sawn softwood industry.
All of the data points to growth in raw wood exports and the drivers are clear and stable, but more accentuated than ever before.
That is because there is one other driver of substance in this market. The value of the Australian Dollar is a key element in the growth of exports. The correlation between the exchange rate and the growth or contraction of exports is close to absolute.
With an Australian Dollar being chased upwards by the weakness in the US economy, there may be some pressure on export volumes in the next few months. There are plenty of interests in Australia that will be hoping the US economy recovers its mojo, pushes the Australian Dollar down and leads to sustained high exports of logs and woodchips.
