Imports of sawn softwood lifted 4.5% over the year-ended May 2021, to total 551,994 m3, as importers do all they can to bridge the current demand-supply gap. Despite a monthly increase of 34% in May, compared with April, that saw imports total 57,808 m3, as a destination, Australia is struggling to be attractive in the context of the global market.
Though it is always uncertain what the exact demand-supply gap is, there are some certainties in the current trade environment.
First, it seems apparent that local sawn structural production is at capacity.
Second, that means any demand above that level simply must be met by imports.
Third, as we can see below, unlike other markets in the world, the average Australian import price fell 1.0% in May 2021, totalling AUDFob555.01/m3. This fall might reflect timing issues with as it is counterintuitive to feedback from the market.
To go straight to the dashboard and take a closer look at the data, click here.
While the US market has come off its absolute record pricing in recent weeks, all the reports – both published and industry anecdotal – are that like-for-like prices in the US are still DOUBLE the price for MGP10 in Australia. Even if that was a spot price, comparative pricing alone makes the US market dramatically more attractive than the distant Australian market.
Fourth, demand in the US has barely moderated, and in fact, the recent reduction in timber prices appears to have stimulated some building activity, even as the growth in the US new housing market slows. Forest2Market report privately owned new housing starts lifted 6.3% in June to an annualised 1.643 million units. Multi-residential starts were up 6.2% to 483,000 units. In short – there is plenty of momentum left in the US housing market!
The fifth certainty is that Australia is currently suffering the tyrannies of distance. Disruptions to shipping schedules, delays, trans-shipments and all the other aggravations that can grind a pearl to dust are probably at their grittiest in living memory.
What is indisputable is that freight rates are at all time highs, show no signs of abating and every chance of increasing. Couple that with the Australian emphasis on containerised shipments versus shipments from Europe that travel break-bulk and the shortage of containers adds to the perception that Australia is a difficult market, with only limited rewards, right now.
Sixth, most of the supply to Australia is from Europe – virtually all, other than from New Zealand, in fact. Europe is not somehow massively over-supplied by sawn timber. It is going through its own significant upcycle. Why export if you don’t have to?
All-in-all, Australia could argue it is lucky right now to have imports at anything like historic average levels.
Meantime of course there is constant concern that steel framing is gaining market share against timber. One industry participant advised the European and US situation sees authorities and carbon pricing systems absolutely favour timber over steel, to the point of subsidising timber. Moreover, steel is in short supply – like every other building material, including concrete, bricks, glass and so on.
In short, it may not be timber or nothing, but it is timber ahead of all else!
Returning to the details of imports, this month we will examine two products. The first is dressed structural pine, other than Radiata (non-New Zealand supply therefore). As the chart below demonstrates, the year-ending May import volume was just 2.0% higher than a year earlier, coming in at 128,517 m3, with the average import price rising to just AUDFob398.30/m3 in May, having been as low as AUDFob338/m3 one year ago.
To go straight to the dashboard and take a closer look at the data, click here.
Second, we look here at the other significant grade of European dressed supply, essentially the main structural non-pine product. As we can also see in this chart, (note this data was separately reported only from January 2017) the year-end May volume shown on the red line, has lifted continuously as importers have attempted to supply the market. At 185,555 m3 over the year, imports are up more than 8%. Relevantly, the average import price, shown in green, is also higher, lifting to a new peak of AUDFob435.59/m3, up from about AUDFob330/m3 a year ago.
That is better, and something of a lift in prices, but compared with the massive and in some cases quadrupling of prices in the US – for significant volumes – the price increases are really not even keeping pace.
To go straight to the dashboard and take a closer look at the data, click here.
Here, we can see the countries supplying the non-pine product and can note that the only country to drop its supply to Australia was Canada – right next door to the USA.
To go straight to the dashboard and take a closer look at the data, click here.
Using just these two grades as examples, we think it reasonable to say that at these prices, it really is little wonder that there are times in a demand super cycle when import supply is difficult to come by in Australia.
