Sawn Softwood Imports Continue To Grow As Average Price Rises

Imports of sawn softwood rose to a new peak over the year-ended June 2018, totalling 747,645 m3, up a massive 32.7% on the prior year, despite strong rises in average import prices. In June itself, imports totalled 72,001 m3, below the monthly peak but still a whopping 47.2% higher than in June 2017.

The rise in imports, shown in the chart below, over the longer term, has come about because domestic capacity is constrained, while demand is very strong. In particular, the closure of the Morwell sawmill has fuelled the sharp lift in imports of the first half of 2018.

The chart demonstrates there is cyclicality on both an annual and an inter-annual basis in the import market for sawn softwood. However, the most significant point here is that the current rise in imports is obvious, at very high levels, and has a cyclical element to it.

Below, we can observe the same data over a shorter time period, but with the average price of sawn softwood recorded with it. It shows that average price of aggregated sawn softwood products has risen over the last few months, but not to levels experienced earlier in the last two years.

We will examine imports of specific major import grades shortly, but at this point, it is relevant to keep in mind the exchange rate. As the chart below shows, compared with two years ago, the Australian dollar is in almost exactly the same position against the US dollar, from June 2016 to June 2018. However, it also shows the Australian dollar has declined against the Euro, but only by around 2%.

Isolate the data to the first half of 2018 and we can observe the Australian dollar has depreciated 8.0% since January and 2.4% against the Euro.

The simple observation is that imports rose despite becoming more expensive over the first half of 2018. We think that makes sense with capacity constrained and reduced, and demand, as this edition of Stats Count shows, remaining high.

Rather than drill into every import grade, the next chart shows just the grade that accounts for the largest volume. This is Dressed Sawn Softwood, other than Radiata (so largely excluding the local trade from New Zealand). It shows imports rose (by 47.9%) to a record 242,665 m3 over the year-ended June. It also shows that the average import price in Australian dollar terms rose 19.0% over the same period, to AUDFob391.95/m3 in June 2018.

Without overdoing the analysis, it is also useful to see where these imports come from, as part of assessing the impact of rising prices on import growth.

This data shows that all the major countries involved in the trade are from Europe, with most transactions conducted in Euro. Imports from the largest supplier – Estonia – were up 34.3% over the year, however, other countries actually saw larger proportional volume increases.

Imports from Austria were up 118%, from Sweden 50.8% and from Finland 47.3%.

It does seem, on balance, that imports have risen because demand has expanded or perhaps stayed the same while local supply has reduced. However, unlike in many other situations, price has not been a victim, with higher prices supported by a depreciated Australian dollar being evident.

It is likely they are continuing to move domestic prices higher also.

This article was written by Jim Houghton for FWPA’s latest StatisticsCount.