Sawn softwood imports down 13.7% FY’16

Sawn softwood imports down 13.7% FY’16

Imports of sawn softwood continued to decline in June 2016, with the full financial year seeing imports decline to 626,008 m3, down 13.7% on the previous year. In encouraging signs for the domestic processors, it was the higher-value Dressed Sawn Softwood that saw the most significant declines, falling 17.0% compared with the prior year and totaling 213,501 m3.

As the chart below shows, total imports of Sawn Softwood were down continuously and solidly for the year-ended June 2016, compared with the previous year. Total imports have trended down every month of the last year, except for a small rise for the year-ended May 2016.

fig9

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As outlined above, imports of Dressed Sawn Softwood (other than of Radiata Pine and Douglas Fir) fell by a sharp 17.0% in volume terms compared with the year-ended June 2015. The Radiata Pine qualification is significant because it largely excludes imports from New Zealand.

Because this grade is the major grade of Sawn Softwood import (it accounted for 34.1% of the total volume in the year-ended June 2016), the chart below displays it separately and shows it following a similar trajectory to the total import chart above.

fig10

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While the trajectory of imports of Dressed Sawn Softwood (other than Radiata Pine and Douglas Fir) may be similar to the overall trajectory, its changes in direction are more pronounced, especially across the period since mid-2014.

There are at least two underlying drivers for the more pronounced movements. 

First, the majority of imports are from European countries and are thus, largely impacted by the Australian Dollar’s exchange rate with the Euro. For a time the exchange rate made Australia a suitable destination for the exporting nations, especially compared with domestic European sales. As the Australian Dollar weakened, either the price the exporters received in Euro had to give, or the volumes declined. The latter appears to have prevailed.

The second and related reason for significant movements in imports is that there is strong domestic competition for what is a commodity product, with demand being highly price sensitive in Australia. The buy-side has moved away from the imported product, as much as the sell-side appears to have withdrawn.

As the chart below indicates, the two drivers described above are generally, but not universally true, with some country’s imports to Australia growing over the last year, while others, most in fact, declined.

fig11

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As the chart demonstrates, imports from Estonia rose 13.3% year-on-year to 66,792 m3, and those from Sweden were up 22.5% to 60,994. All other countries experienced declines, with Austria (-60.5%) and Finland (-50.0%) faring the worst, in import terms. We say in import terms because it may well be – indeed we feel certain it’s the case – that they have diverted volumes to stronger European markets.

It is reasonable to assume that to some extent, imports of Dressed Sawn Softwood are declining as the long-heated housing market starts to cool and demand for sawnwood softens as a result.