Export logs exploded in June
Australia’s exports of softwood logs exploded to a new monthly record in June, as a combination of factors delivered a result that was not unexpected, but was nonetheless very significant. Log exports drove the value of monthly wood product exports up significantly in June, flattening out what was becoming a fast-declining situation, due to falling hardwood chip exports.
Australia’s total log exports in June reached an historic high of 673,714 m3, which fed into total exports that reached 4.331 million m3 for the year-ended June. This is shown in the first chart.
Fig 36
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The absolutely stellar month for the value of log exports in total was driven, as this chart shows, by softwood log exports, which were 590,689 m3, a mind-boggling lift of more than 83% on the prior month. As the chart demonstrates, there was little impact on the average export price, which remained in the normal range.
Fig 37
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It is important to note that a variety of factors have fed into this remarkable month for softwood log exports. Deep concern among buyers (nearly all in China) at the prospect of being shorted on supply later in the year have seen them pursue volumes despite reportedly holding inventories. They were spooked by the closure of New Zealand, the near closures in Brazil and the risks that continue to mount in the US. Securing Australian softwood logs is a hedge position, as much as anything else.
At the same time, some slow-down in the domestic log supply sector may have provided an opportunity, but there is no doubt that the availability of fire damaged logs was significant. We note that the supply of smaller dimension (<15cm diameter) logs – in the main shown in the red bars above – were particularly strong. Exports of these logs rose 61% on the prior month and reached a new record, noting that this breakdown of logs by dimension only commenced in January 2017.
Fig 38
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At just under 250,000 m3, the smaller dimension pine logs may well have had their day in June 2020. But what of the larger dimension (>15 cm diameter) softwood logs? We can see below that while exports rose by a huge 106% on May, at 299,290 m3, they have been higher. We need to discount the period prior to the beginning of 2017, because until then, all pine logs were exported under the same code.
However, we can see that these larger dimension logs experienced higher monthly exports in October 2018, for instance.
Fig 39
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It is relevant to consider the role of these exports in Australia’s total export value.
The chart here shows the total value of Australia’s exports of wood products, emphasising the role that softwood logs played in June and the extent to which they held up what were otherwise rapidly declining exports. At AUD198.3M, the value of Australia’s wood products exports in June was up a large 28.5% on May, reaching its highest level since August 2019.
Fig 40
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What is different to the last time the value of exports was higher than June 2020 is the make-up of those exports. Australia’s hardwood chip exports have all but stalled – and in some cases have ceased from some facilities for the time being.
It is understood Asian pulp producers have been seeking chip price discounts that are deeply unattractive to most producers. The consequence is that less exports are being shipped and the role of chip exports in the total value of Australia’s exports is therefore diminished.
Completed though the month is, we look forward to the July log export data to see whether the remarkable June becomes a new normal in July.
