Australia’s imports of sawn softwood rose an astounding 62.2% year-ended May 2022, lifting to 895,314 m3 for the full year. While weighted average import prices may have peaked in January, there is very real prospect that annualised imports will continue to grow in coming months.
One factor that could sway the continued growth in imports is Russia’s war on Ukraine. The evident tightening in global wood fibre markets is likely to begin having an impact for supply delivered around August and after. To date, the extent of that tightening on Australian markets has been unclear and we expect will remain that way for some months.
Meantime, importers have responded magnificently to the rapid growth in demand, delivering a huge volume of imports and ramping up their supply in very short order, as the chart below shows.
The only factor that grew faster than import volumes were weighted average import prices, which lifted sharply through 2021 to peak at AUDFob827/m3 in January 2022, before declining more recently to AUDFob739/m3 in May 2022.
As the chart above shows, the latest pricing is just a moderation of prices that are massively higher than they were over most of the recent past.
A large number of countries provide softwood products to Australia. As we can see below, seven of them experienced very large increases over the last year, and in fact, over the course of the pandemic. Whether all this is sustainable remains to be seen, especially as the big increase from Germany is understood to be related to salvage harvesting.
Looking beyond Germany, supplies from Estonia, Lithuania and Sweden all stand out. Though all are elevated on the prior year, those supplies are linked to major and ongoing supply lines and appear broadly sustainable, should demand in the market support them.
Overall, it is five specific grades that provide the vast bulk of the growth in imports:
Grade |
YE May 21 |
YE May 22 |
% Change |
4407.11.10.34 – Treated: Other (with non-waterborne Preservative, excl. Weatherboards) |
43,972 |
96,376 |
119.2% |
4407.11.10.39 – Untreated: Other (excl. Weatherboards and Radiata) |
128,519 |
170,049 |
32.3% |
4407.11.99.08 – Untreated: Roughsawn Other (pine, not Radiata, <120 cm) |
75,446 |
87,165 |
15.5% |
4407.11.99.15 – Untreated: Roughsawn (excl. Radiata, >120 – <450 cm2) |
1,138 |
42,976 |
3,676.1% |
4407.12.10.16 – Fir or Spruce: Dressed |
185,556 |
357,778 |
92.8% |
The big increase in larger dimension roughsawn timber (4407.11.99.15) to 42,976 m3 appears to reflect a significant supply from Czech Republic and Poland, as the chart below shows.
While that is of interest, the really significant volume increase has been for Dressed Fir or Spruce (4407.12.10.16), imports of which lifted almost 93% to 357,778 m3 year-ended May 2022, as the chart and table show. Finland, German and Sweden are the big movers for this grade, supported by solid growth from Estonia.
There is little doubt the import supply to Australia has made all the difference over the last two years. The reality is import prices have become necessarily more expensive, both for the goods and on a delivered basis. While shipping and freight costs are gradually beginning to unwind, we should not operate under any illusions about freight costs coming down dramatically.
As Tom Burton addressed in the AFR on 18th July, the expectation is the cost of shipping containers will subside over the next year, but there is no appetite or expectation for the USD3,000 container price to return. The question of the timing of lower sea freight costs is also a matter for continued conjecture because of continued congestion, labour shortages and supply chains that are struggling to find equilibrium. According to RaboResearch, no real softening in freight costs should be expected until 2024.
How does that all play together? It seems import volumes and prices will remain high for some time to come.