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Sawn softwood imports continue to plunge

Imports of sawn softwood products fell 16.0% to 687,824 m3 over the year-ended August 2019, continuing to decline from the historic peaks reached less than one year ago. Monthly imports fell to 36,247 m3 in August, the second lowest monthly volume of the last year.

It was, as the chart below shows, that annual imports peaked at 918,627 m3 in December 2018. Since then, aggregated annual imports have plunged 25.1%, underscoring the declines recorded thus far over 2019.

 

Fig. 12

Fig12

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

Examined on a grade basis, at even a cursory level, the influence of one specific import product or grade is evident. The orange band that dominates the import market in the chart below shows Dressed Untreated Softwood (other than Radiata) [4407.11.10.40]. This is, as many know, the main structural import grade.

 

Fig.13

Fig13

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

Over the year-ended August, imports of Dressed Untreated Softwood products totalled 270,351 m3. This was significantly lower than their peak of 354,026 m3 recorded for the year-ended January 2019. However, most recently, this one grade accounted for 39.6% of total imports (by volume) over the year-ended August, up from 34.8% a year earlier. On face, it seems that these imports are more resilient than those of some of the other grades that have experienced falls in this declining market.

Why might this be so?

First, the apparent softness in Australia’s housing market has largely been in formats other than free-standing housing and the other main uses of structural softwood products, as the data analysed elsewhere in this edition of Stats Count demonstrates.

Second, as the chart below demonstrates, in general, the suppliers of this grade are adept (generally) at adjusting their import prices as the market alters its demand. We can see this below, in a chart that provides a clear indication of the relationship between annual import volumes and prices.

Fig.14

Fig14

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

What the chart shows is that previously, around the end of 2015 until mid 2017, import prices were moved progressively lower as volumes came off what were then peaks. More recently,  imports rose sharply and prices appear to have followed them up to the peaks at the end of 2018. As might be expected in a falling market, prices also came off quickly but there has been a symmetry to the declines that only over the period May to July appears to have seen prices fall faster than annualised import volumes.

Appearing to recognise that the average price decline was a little too steep compared with the market demand, average import prices ticked back up (around 3%) in August 2019.

Although only time will tell, it may be that an average floor price has been identified for imports of the main sawn softwood import grade, at somewhere in the vicinity of AUDFob370/m3.

Time will tell on that, but it is instructive in this analysis to look back to the uncertain period of 2014-15, when imports were rising but only perhaps because importers kept their prices at the ‘around tolerable’ level approaching AUDFob360/m3.

Overall (and without considering inventory levels or currency movements), more careful management of inventory appears to be maintaining imports of the main structural softwood import grade in a way that was perhaps not evident in the market previously.

 

 

Posted Date: November 4, 2019

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