Australia’s hardwood chip exports linked directly to China’s success

In September 5, 2017

As with so much in the modern mercantile world, China is all things in the hardwood chip export trade, at least from Australia’s perspective. IndustryEdge’s latest analysis shows that China’s demand has driven Australia’s export growth over the last four years.

The first chart shows China’s imports of hardwood chips over the last decade. With imports totaling 11.6 million bdmt in 2017, they have risen an average 27.7% per annum over the last decade, after totaling just 1 million bdmt in 2007.

As the chart shows, the main supplier has long been Vietnam, but since 2013, Australia has been the second largest supplier.

As the pie-chart below shows, after the lean years of the GFC and until the depreciation of the Australian Dollar from its parity with the US Dollar, by 2017, Australian hardwood chip producers had grown their position to account for almost one-third of all of China’s imports.

Vietnamese producers hold the strongest position, which they have obtained and maintained by the traditional method of providing the most competitive prices, as the chart below shows.

It can be observed that over all periods, Australia has been a high-priced supplier of hardwood chips to China. There are several reasons this has proven sustainable – under the right currency conditions – including the fibre quality of Australian eucalypt species, the low sovereign risks and the considerable capital invested in a highly efficient supply chain.

There is little doubt that increasing global demand and supply constraints are also playing into pricing that makes Australian supplies more attractive.

That demand looks set to continue into the future, with China’s strength leading the way.

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