Imports volumes of sawn softwood rose 21.9% for the year-ended September 2015, totalling 728,206 m3. Although there were substantial lifts in imports of most grades and products, the biggest change was the Dressed Coniferous Other grade, which increased by a very large 96.1% to 271,895 m3 for the year, accounting for 37.4% of total imports. The strength in import growth is not entirely surprising. Demand is strong after all. What is surprising is that the growth comes as the Australian Dollar has depreciated, making imports significantly more expensive.
Other grades also experienced strong import growth, including Builders’ Joinery, which saw imports rise 29.7% on $ value basis for the year-ended September 2015. The chart below shows the comparison of imports of major grades for the years-ended September 2014 and 2015.
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While there is evident strength in imports over the last year, the most recent monthly data suggests that the rate of growth has softened. Monthly imports of sawn coniferous softwood in September 2015 for example, were valued at AUD27.2 million, just 2.3% higher than for September 2014. Indeed, as the chart below shows, since April 2015, the value of monthly imports has declined suggesting some impact from the depreciating Australian Dollar.
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Drilling into the import data by grade, Other Coniferous Sawnwood – has also experienced declines in recent months after peaking in February 2015. The value of imports reached AUD11.0 million in February, since which it has fallen more than 50% to AUD5.2 million in September 2015.
This is displayed in the chart below.
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Interesting though the decline is – because it seemingly confirms the competitive pressures applied by the depreciation of the Australian Dollar – what may be just as interesting to readers is the rapid rise in imports since Q1’14. Although the Australian Dollar was markedly higher against the US Dollar, it was well into its depreciation.
Examination of the countries of origin provides some clues as to how the importers were able to participate in the rapidly changing competitive landscape of the Australian sawnwood market. As the chart below shows, those transacting in US Dollars (the US in particular), experienced declining imports, while those trading in Euro grew their positions strongly over the year-ended September 2015.
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The simple reality of this trade is that the Australian Dollar and Euro were on similar trajectories over much of the last year. The Australian Dollar depreciated against the Euro, but by no means as much as against the US Dollar. The result is that the value of imports from the USA declined 49.2%, while those from Sweden for example, rose by more than 450%.
That country-by-country attribution goes some way to understanding what has occurred, but there is one other factor that has to be taken into account. Rapid and potentially short-lived imports such as these often arise where there are global market imbalances. What seems likely is that despite the depreciation of the Australian Dollar, the Australian market has been a relatively high value market, making it continually attractive to importers.
Given the value of the Australian Dollar, the value of imports of sawn softwood may well have peaked.
