Softwood log exports rise, rise and rise again

In November 15, 2017

Over the year-ended September 2017, Softwood log exports totalled 4,497,493 m3, or to put it another way, almost reached 4.5 million m3 on an annualized basis. The result was 35.6% higher than for the year-ended September 2016. It should be worthy of note that it was just five months ago – in May 2017 – that annualised exports topped 4 million m3 for the first time.

On a monthly basis, Australia’s softwood log exports totalled 363,439 m3 in September 2017. While this was lower than each of the two prior months, it was just 11,000 m3 lower than the average of the last year.

Looking forward – including a quick check of apparent vessel movements and wharf loads in October – we anticipate the 4.5 million m3 mark will be breached before year’s end.

The chart shows total softwood log exports by country and also shows the moving annual export volume. China continues to be the primary destination for Australia’s softwood log exports.

Australian Softwood Log Exports by Country: Jan ‘10 – Aug ‘17 (‘000 m3 and ‘000 m3 pa)

Source: ABS

Strategically, the questions are mounting about whether all of the exports are sustainable and appropriate. They are occurring, after all, at the same time as the industry is actively pursuing new plantation investments for domestic processing. These are not directly linked situations, including in the context of what is currently a massive harvest. Some of the exports are clearly arisings from that harvest that are – currently at least – sub-optimal for processing in Australia.

That is why the data recording Softwood log exports on the basis of their diameter is particularly useful. Logs are recorded on the <15 cm diameter and >15 cm diameter basis.

As can be observed below, through to the end of September, logs of <15 cm diameter accounted for 31.5% of total exports (1,063,892 m3), while the larger diameter logs accounted for 68.5% (2,312,521 m3).

Australian Softwood Log Exports by Size: Jan ’17 – Sep ’17 (‘000 m3)

Source: ABS

As the chart shows, the proportion of smaller diameter softwood logs is relatively consistent to date, on a month-by-month basis, at around one-third of the total. This volume is of interest in Australia as potential pulpwood if nothing else.

It is the larger dimension logs that are genuinely contentious for those who are seeking more logs to process, to supply what is still strong domestic demand.

Differentiation of Softwood log exports based on their diameter also allows for some form of pricing analysis, which at the most rudimentary level is displayed in the chart below.

Australian Softwood Log Exports by Size: Jan ’17 – Sep ’17 (AUDFob/m3)

Source: ABS

In September 2017, the average price of Softwood Logs <15 cm diameter was AUDFob110.70/m3, while for the >15 cm product, the average price was higher at AUDFob135.14/m3. The chart shows that prices diverged as the market became more familiar with the new arrangements and the opportunity to segment shipments by log size.

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