Onwards and upwards for wood product imports
Imports of wood and wood products to Australia were valued at a record AUD1.981 billion for the year ended March 2018, having risen 11.3% compared with the prior year. “After a short dip in mid 2017, the value of imports has continued to rise, with little prospect of a decline, any time soon,” said John Halkett, General Manager, Australian Timber Importers Federation. The chart demonstrates the magnitude of the rise in wood product imports over the last five years. From AUD1.170 billion for the yearended March 2013, five years later, imports are valued at close to AUD2 billion. Mr Halkett said that, although the value of imports was up in total, different grades have had different growth experiences over the five years. “Over the course of the year to the end of March 2018, only two major product groupings saw a decline in the value of their imports: Roundwood and Hardwood Sawnwood. All other grades experienced growth. Over the longer term of five years, just one grade, Tropical Sawnwood, experienced a decline in the value of imports,” he said. The value of imports of Coniferous Sawnwood grew solidly over the course of the last year. “This has caused considerable comment in industry, but examination shows that there are other grades and products for which the value of imports rose more, and from a larger base. This growth is closely associated with framing and structural applications and are linked to dwelling approvals and new building activity,” said Mr Halkett.
Cause for concern
However, Mr Halkett also issued a note of warning ... “Higher softwood timber product demand from all enduse sectors in the United States in the coming years, and the probability that this demand will in part be satisfied by regions currently supplying into the bullish Australian market, may have serious implications for ongoing softwood supply certainty. “With the Australian building and construction industry needing to become more reliant on imported softwood timber products, climbing US demand for timber potentially spells bad news for future imported softwood supply,” he said. According to a just released report: Future Suppliers of Softwood Lumber to the US Market – Supply and Demand Outlook 2017-2030, higher timber product demand in the US will result in continued expansion of sawmill capacity in the US South and increased imports from overseas, while Western Canada will reduce its shipments into the US market. Mr Halkett said the joint ForestEdge and Wood Resources International report indicates that US consumption of softwood timber products is likely to reach record-highs by 2030, resulting in export opportunities for sawmills in Europe and Latin America The report forecasts that US softwood timber demand will grow at an annual rate of 2.3 per cent through 2030, which will be higher than the reports projection of real GDP. The study suggests that US timber consumption will reach an all-time high by 2030. A detailed analysis of the future consumption of softwood lumber in each of five US end-use categories (residential housing, renovations, non-residential construction, material handling and other) reveals that the non-residential construction category will grow at the fastest rate and will increase its share of the total softwood timber usage from just over 11 per cent in 2016 to almost 14 per cent by 2030. Timber consumed by the residential housing sector, including renovations, will continue to account for the almost 70 per cent of the end-use market.
Expansion of capacity of sawmills
At an estimated softwood timber production cost of less than US$200 per cubic metre in 2016, the US South is one of the lowest cost suppliers of softwood lumber to the US market. This, combined with a significant ‘overhang’ supply of softwood sawtimber as a result of the Global Financial Crisis in 2008-09 and a mature plantation resource, is expected to continue to facilitate a major expansion of sawmill capacity in the region. The market share of Canadian timber producers in the US is expected to decline in the coming years, with the biggest reduction occurring between 2017 and 2025. The outlook for available log supply to the sawmilling sector will be different in the two major timber producing regions in Canada, with harvest levels falling substantially in British Columbia over the next ten years. Overseas supply of timber products to the US is forecasted to increase both in volume and market share by 2025, followed by a decline until 2030. Based on the study’s timber supply curve analysis, major supplying regions are likely to include Brazil, Chile, Germany and the Nordic countries. The study projects a very strong rebound in housing starts, renovations and non-residential construction, so overseas supply will be crucial and reach a market share of over 10 per cent by 2030. After nearly two decades of real price declines of sawlogs in North America and elsewhere, the combination of a rebounding US softwood timber demand, constraints on log supply and reduced export production in Western Canada, and continued strong demand for softwood timber products from markets in Europe, Asia and the Middle East/North Africa region, is expected to push softwood log prices higher. So for Australia a combination of factors such as climbing US timber demand, offset to some degree by improved sawmilling capacity, but impacted by declining Canadian supply and expanded imports from Nordic countries, Chile and Brazil should be a serious cause for concern in Australia. Plus these exports currently supplying the Australian market are likely to favour US markets when supply capacity shortens, rather that more distant and less commercially attractive markets in Australia. This should assist in crystallising thinking about Australia moving much more decisively to be able to supply its own softwood timber demand from domestic sources.
“The value of imports of Coniferous Sawnwood grew solidly over the course of the last year”