Sawnwood import declines fit the global picture
(Please note due to issues with the data dashboard we are not able to provide a direct link to the graphs used in this article. However most of these graphs can be accessed through the FWPA data dashboard).
Imports of sawn softwood appear to have bottomed out in the last few months, falling to 437,000 m3 for the year-ended May and rising just marginally to 459,124 m3 year-ended July. A year earlier, imports were 39% higher, having peaked in early 2019 at a little over 900,000 m3.
At the same time, the import pricing data shows that average sawn softwood prices have been stable for three months, and are operating within normal boundaries.
In July 2020, imports totalled 49,687 m3, at an average price of AUDFob508/m3.
We want to examine this data in a little more detail than just the averages, so here, over a shorter time period, are the import volumes by grade. It can be observed in orange that 4407.11.10.40 (Structural, Dressed, Untreated, Not Radiata) dominated the market over most of the period, but it is equally clear that in the last few months, 4407.12.10.13 (Structural, Roughsawn, Not Radiata) has moved to prominence.
Both of these structural import ‘lines’ are dominated by European suppliers and relevantly, as the first chart shows, their interplay does not appear to have altered the average import price significantly.
It is important to note that import lines or grades vary over time and a lift for a few months may not be continued into the future.
The next two charts show these grades separately, to provide some pointers to their interaction with the average price of sawn softwood imports.
It is important to note that the chart below commences in January 2017 because this import code was introduced then. Although it has spent some time with imports languishing, it is notable that at 17,952 m3 in July, the monthly import volume is below its peak of 19,331 m3 achieved in August 2018. The average price in July 2020 was AUDFob332.95/m3. That is comparable with the other grade under examination above, which in July recorded an average price of AUDFob345.28/m3.
Broadly speaking , the market for these two grades appears to be shared between them, with volumes moving from one grade to the other and prices operating on generally similar patterns.
Overall, there is no evidence that despite being at an apparent bottom, that imports of sawn softwood will commence an immediate or significant upwards climb. With domestic conditions for the housing sector stronger than expected, but still muted, the domestic drivers for increases do not seem to be particularly strong right now.
Local production appears to have capacity to fill immediate market demand growth. That is just as well, in some respects, because the North American new home market - and therefore sawn timber or lumber demand – is outstripping even the most imaginative forecasts.
We might consider that declining and then stable, but low imports of sawn softwood to Australia are performing their exact market function right now – providing the market flexibility and a capacity to reflex that without imports, it would struggle to meet.