Woodchips

• Australian woodchip exports totalled 486 kbdmt in February 2023, up 59% on the prior month
• Annual exports declined for the second successive month, falling to 5.741 million bdmt year-ended February 2023. However, they are up 4.3% higher than a year earlier
• Month-on-month, hardwood chip exports rose 52% to 367 kbdmt, while softwood exports lifted 85% to 119 kbdmt
• The average hardwood chip export price was AUDFob230/bdmt or a calculated USDFob155/bdmt, while the softwood chip export price rocketed to AUDFob231/bdmt or a calculated USDFob156/bdmt

OUTLOOK

The 2022-23 outlook for Australian woodchip exports remains STRONG. This applies to hardwood chips and softwood chips. The prognosis for softwood chip exports could change rapidly if Australian log exports are allowed to re-enter China.

Recent dramatic price increases for softwood chip underscore the opportunities for softwood chip throughout the global supply chain.

In March, the Bleached Eucalypt Kraft (BEK) pulp price fell around 14% to USD625/t in China, crashing for the third consecutive month. The Bleached Softwood Kraft (BSK) price fell 7.3% to USD830/t, seeing the spread push out to USD205/t, a level at which substitution normally occurs.

The BSK price is now 13% lower than one year ago and after a roller-coaster 12 months the BEK price is just 0.7% lower than a year earlier. Buyers in China stepped aside from the market, according to Hawkins Wright, vindicated by record inventory levels along the supply chain. It is reasonable to anticipate a continuation of the price pain, especially for BEK pulp.

China Pulp Prices: Jan ’13 – Feb ‘23 (USD/t)

More recently, there is evidence of significant hardwood pulp price retreats in Europe, that are expected to contribute to some downwards pressure on global market prices.

GLOBAL MARKET UPDATE

For most of 2022, the delivered price of softwood chips into the main buyer – Japan – has been rising. Those rises may be set for a further spike, after the Australian FOB price for exports in February shot up 28% on solid volumes.

As the chart here shows, deliveries from all countries into both Japan and China have lifted significantly over the last two years. From 1.7 million bdmt year-ended January 2021 to 2.6 million bdmt year-ended January 2023, the aggregate increase in supply has been significant.

Softwood Chip Imports to China and Japan: YE Jan ’21 to YE Jan ’23 (bdmt)

Source: GTIS & IndustryEdge estimates

Although it has seen a steep rise, supplies into China remain a little sketchy and occasional. Some months there are no shipments. As a result, its average prices move around reasonably significantly. Those who download the monthly Asian Pacific Woodchip Deliveries file from the IndustryEdge website will be familiar with this situation.

As a result, the chart below shows the prices for delivery of softwood chips to Japan, from the main countries over the last three years.

Softwood Chip Imports to China from Main Countries: Jan ’20 – Jan ’23 (USDCif/bdmt)

Weighted average prices have definitely been rising and in January 2023, were at USDCif226/bdmt. That was below the peak of USDCif/bdmt set in November 2022, but if the Australian export prices hold and freight costs are relatively stable, a new price benchmark may be just a month or so away. How that is feasible when pulp prices are under pressure is another matter altogether.

AUSTRALIAN EXPORTS

Annual woodchip exports totalled 5.741 Mbdmt year-ended February 2023

Australia’s combined annual exports of hardwood and softwood woodchips totalled 5.741 million bdmt year-ended February 2023. Hardwood chips totalled 4.594 million bdmt, 2.4% higher than a year earlier. Exports of softwood woodchips totalled 1.147 million bdmt. The chart displays total woodchip exports on a monthly and annual basis.

Australian Woodchip Exports by Species: Jan ’19 – Feb ‘23 (‘000 bdmt)

Export prices

Australia’s average hardwood chip export price was AUDFob230/bdmt in February 2023, down 7.4% on the prior month. Average softwood chip export prices climbed 28% to AUDFob231/bdmt.

Woodchip Export Prices by Species: Jan ’19 – Feb ‘23 (AUDFob/bdmt)

Source: ABS, derived and IndustryEdge

The following chart shows the same prices, calculated in US dollars, using RBA end of month exchange rates.

Woodchip Export Prices by Species: Jan ’19 – Feb ‘23 (USDFob/bdmt)

Source: ABS, derived, RBA and IndustryEdge

Australian Woodchip Export Market Update

Australian Woodchip Export Market Update

Based on month-end exchange rates, the table below shows the average price of Australia’s woodchip exports in US dollars for the last three months.

Australian Woodchip Export Prices: Dec ’22 – Feb ’23 (USDFob/bdmt)

Source: ABS, derived, RBA and IndustryEdge