Timber Market Survey2 TIMBER MARKET SURVEY JUNE QUARTER 2012 Following a reduction in the offi cial...

Timber Market SurveyJUNE QUARTER 2012

ContentsEconomic & Construction Update . . . . . . . . . 1

Imports and exports . . . . . . . . . . . . . . . . . . . 6

Softwood price changes — June quarter 2012 . . . . . . . . . . . . . . . . . . . . . 8

Long term softwood price indexes . . . . . . . . . 9

Hardwood price changes — six months to June 2012 . . . . . . . . . . . . . . . 10

Long term hardwood price indexes . . . . . . . . 11

References . . . . . . . . . . . . . . . . . . . . . . . . . 12

About the Timber Market SurveyThe quarterly Timber Market Survey (TMS)

report presents quantitative and qualitative

information on timber price movements

and market trends in Australia. It contains

national price indexes for a range of

timber products, as well as an update on

economic conditions that infl uence wood

product markets and the latest trade

data. Price data presented in the report

are collected through quarterly surveys of

a representative sample of timber market

participants in eastern Australia. All TMS

reports contain pricing information for

softwood timber, panel and engineered

wood products. In addition, the June and

December quarter reports contain pricing

information for hardwood timber products.

Key Messages

■ The number of approvals for the construction of private sector detached

houses fell by 5.6% over the June quarter 2012, which indicates soft

demand for structural timber products. Construction activity in the

housing market remains subdued with the latest available data on the

number of new dwelling commencements showing a decline of around

12.6% over the March quarter 2012;

■ Import volumes of softwood and hardwood sawn timber fell by around

4% and 16%, respectively, over the June quarter 2012, despite a strong

Australian dollar and low international freight costs. Meanwhile, imports

of wood-based panels and engineered wood products increased by

around 11% over the quarter, to be around 7% higher over the year to

June 2012;

■ Prices for major softwood structural MGP10 and MGP12 products

softened over the June quarter, with price falls ranging from around

1% to 2%. This continues a downward trend for MGP products over the

18 months leading up to June 2012, which has coincided with the

downturn in housing construction activity; and

■ Price movements for kiln dried structural hardwood products F17 and

F27 showed moderate increases of around 1% and 2%, respectively,

over the six months to June 2012. Hardwood fl ooring products, including

Spotted Gum, Blackbutt, and Victorian Ash species, experienced price

increases of around 3% to 5% over the same period.

Economic & Construction Update

The Australian economy expanded by around 1.3% over the March quarter 2012 according to

the latest release of gross domestic product (GDP) by the Australian Bureau of Statistics (ABS).

This follows a revised increase of 0.6% during the December quarter 2011. The March quarter

2012 GDP result was largely driven by an increase in household consumption and strong growth

in the mining industry. The Reserve Bank of Australia (RBA) expects the rate of expansion to have

slowed down over the June quarter, which could be a refl ection of moderating resource commodity

prices1.

Despite an improvement in reported business conditions over the March quarter 2012, the latest

release of the National Australia Bank (NAB) Business Survey2 indicates business conditions

softened over the June quarter due to a decline in forward orders and lower demand. This

1 RBA, Statement on Monetary Policy, August 2012

2 NAB, Quarterly Business Survey, June quarter 2012

1

2

TIMBER MARKET SURVEY JUNE QUARTER 2012

Following a reduction in the offi cial cash rate (OCR) by 50 basis points

to 3.75% in May, the RBA Board lowered the OCR by a further 25 basis

points in June amidst heightened concerns about economic and fi nancial

problems in Europe. At its July and August meetings, the RBA Board left

the OCR unchanged at 3.5%, citing that interest rates for most borrowers

are below medium term averages and infl ationary forecasts are within the

target range of 2% to 3%. Westpac Economics expect monetary policy to

remain unchanged until further easing in the December quarter 2012.

The August release of the monthly Westpac-Melbourne Institute Index

of Consumer Sentiment6 (CSI) showed subdued results as consumers

appear to be uncertain of economic conditions over the near and medium

term. The CSI fell by 2.5% in August to remain at low levels, which offset

much of the positive response following the OCR reductions in May and

June.

Australian Housing Market

Table 1 shows the latest activity across leading ABS dwelling construction

market indicators up to the June quarter 2012. The number and value

of fi nance approvals for the construction of new dwellings rose for the

second consecutive quarter, which indicates some potential for an

increase in housing construction activity over the second half of 2012.

The number of approvals for the construction of new dwellings rose from

low levels to be around 8.4% higher over the June quarter 2012. This

result was driven by an increase in the number of non-house dwelling

approvals, which includes apartments, town-houses and semi-detached

dwellings, as the number of approvals for private sector houses fell by

around 5.6% over the quarter.

Table 1: Summary of leading dwelling construction indicators, June 2012

Housing market indicators12 months to

June 20123 months to June 2012

Number of fi nance approvals for dwelling

constructionh 0.02% h 2.37%

Number of new dwelling construction approvals i 11.98% h 8.44%

Number of private sector housing construction

approvals i 9.77% i 5.57%

Value of fi nance approvals for dwelling

construction i 0.91% h 3.79%

Value of private sector residential construction

approvalsi 10.25% h 8.30%

Value of alterations and additions approvals i 4.29% i 0.60%

Source: Australian Bureau of Statistics

NB: The above data are seasonally adjusted

6 Westpac-Melbourne Institute, Survey of Consumer Sentiment, August 2012

Economic & Construction Update continued

suggests the strong expansion experienced in the domestic economy

over the March quarter, as recorded by the 1.3% increase in GDP, may

have slowed over the June quarter. Similarly, the NAB survey of business

confi dence showed a decline over the June quarter, as concerns about

the fi nancial stability of the Euro-zone appeared to be a common driver

of uncertainty.

The high Australian dollar (AUD) and weak conditions in the housing

market continue to constrain non-mining parts of the economy. Even so,

the outlook for the domestic economy remains strong relative to other

developed countries such as Japan and the United States. Following

the strong GDP result over the March quarter, the RBA and Westpac

Economics3 revised growth forecasts upwards to expect a 3.5% increase

in GDP over 2012. RBA forecasts also show an expectation for economic

growth to moderate to 3% in 2013 and 2014. A key driver of these

growth predictions is the level of investment in the mining sector, which

is expected to be substantial over the next two years.

The International Monetary Fund (IMF) outlook for global economic

growth over 2012 is forecast at around 3.5% GDP, which is largely driven

by faster-growing Asian economies. The IMF outlook for 2013 shows

accelerated global economic growth of 4% in GDP. The major downside

risk is worsening fi nancial and economic problems in the Euro-zone.

Economic conditions in Europe remain weak, with Westpac Economics

predicting a recession of -1% in GDP over 2012 and -0.2% over 2013.

Another risk, particularly for economic growth in Australia, is the

performance of China’s economy where GDP growth has moderated since

mid-2011. Recent economic growth rates in China have been largely

driven by domestic policy decisions, such as the economic stimulus over

2008 and 2009 and the more recent implementation of stricter controls

on the credit and property markets. The People’s Bank of China eased its

monetary policy over June and July, which could have an upside effect on

China’s economic activity over the second half of 2012.

The strong AUD continues to infl uence parts of the manufacturing and

export related sectors. Following a brief period below parity during reports

of fi nancial instability in Europe, the AUD recovered by the end of the

June quarter 2012 to remain strong against the US dollar at a quarterly

average of around US$1.01. Contrary to the expectations of some market

commentators, the AUD rose to around US$1.05 over the month of July

2012 amidst a fall in resource commodity prices. Westapc Economics

forecast the AUD to remain above parity with the US dollar through the

second half of 2012.

Reported weakening in the manufacturing sector are refl ected in the

results of the Australian Performance of Manufacturing Index4 (PMI) over

the June quarter 2012. The PMI showed contractions in manufacturing

activity, particularly in the sub-sectors of textiles, construction materials

and wood products and furniture. As well as the high AUD, PMI survey

respondents cited softer demand, import competition, increasing wages

and input costs as being key inhibitors of manufacturing activity.

The ABS Consumer Price Index5 (CPI) increased by 0.5% over the June

quarter 2012, following a 0.1% increase over the March quarter 2012

and no change over the December quarter 2011. Overall, CPI rose by

1.2% during the year to June 2012, which was partly driven by earlier

price falls in fruit and vegetable prices following the recovery of fl ood-

affected areas in the eastern states. The introduction of the carbon price

from July 2012 is expected to have an upside impact on CPI, due to

increases in household energy prices and other indirect price effects on

goods and services. This impact is expected to become apparent over

the next 12 months, with Treasury modelling showing an expected carbon

price-related increase in CPI of 0.7% by June 2013.

3 Westpac Economics, Market Insights, August 2012

4 PWC/AIG, Performance of Manufacturing Index, June 2012

5 ABS, Consumer Price Index, Australia (6401.0) July 2012

3



Figure 2: Dwelling construction approvals by category (quarterly rolling average)

Source: Australian Bureau of Statistics, Reserve Bank of AustraliaNB: The above data are seasonally adjusted

Figure 1 shows how national dwelling construction approvals tend to

increase as the OCR decreases and vice versa. Prior to the improvements

in dwelling approvals over the March and June quarters 2012, new

dwelling construction approvals had been in a general decline since

a peak in early 2010. The RBA suggests the recent improvements in

dwelling approval results are partly driven by lower interest rates, rising

rental yields and population growth.

Figure 1: Monthly movement in total dwelling construction approvals and Offi cial Cash Rate


Private sector housing approvals, which comprise the largest proportion

of total dwelling approvals, have followed a general downward trend since

early 2010 (Figure 2). The proportion of private sector houses within total

dwelling commencements fell from 64% to 56% over the June quarter

2012. Meanwhile, the number of approvals for non-house buildings

as a proportion of total dwelling approvals rose from 35% to 44%. A

trend towards a higher preference for multi-residential building presents

challenges for the timber industry, as non-house dwellings are traditionally

constructed using less timber products than detached housing. However,

there are some current examples of entire apartment buildings being

constructed from timber products in Australia, with construction of the

world’s tallest timber apartment building underway in Melbourne7.

7 The Age 26th May 2012 — http://www.theage.com.au/business/lend-lease-going-up-in-timber-

20120525-1zab9.html

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Dwelling construction approvals (3 monthly moving average)

RBA Official Cash Rate (RHS)

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Total dwelling approvals

Private housing approvals

Private non-house dwelling approvals

Public dwelling approvals

The number of approvals for

private sector houses fell by

around 5.6% over the quarter.

4



Figure 4 shows the quarterly value of residential building approvals

with a breakdown into its components of the value of new residential

building and the value of residential alterations and additions. For the

second consecutive quarter, the value of approvals for new residential

building increased, which indicates potential for an improvement in

dwelling commencements over the second half of 2012. The value of

alterations and additions, which gives an indication of the performance

of the home renovation market, generally comprises around 14% of the

total value of residential building approvals. Over the June quarter, the

value of alterations and additions remained relatively fl at, declining by

around 0.6%. This continues a subdued period of spending on alterations

and additions, as the value of alterations and additions approvals fell by

around 4.3% over the 12 months leading up to June 2012.

Figure 4: Quarterly value of residential building approvals

Source: Australian Bureau of StatisticsNB: The above fi gures are seasonally adjusted

Figure 3 shows a breakdown of quarterly dwelling construction approvals

by state since 1985. Dwelling approvals at the state level tend to be

volatile over time, which is largely due to broader economic conditions

and government policy. The June quarter results show Victoria continuing

to be the most signifi cant contributor to total dwelling approvals, with a

contribution of around 36% of national approvals. The improvement in

the total number of dwelling approvals over the June quarter was derived

from increases in Victoria (21%), New South Wales (6%) and Queensland

(7%) being partially offset by declines in Western Australia (-24%), South

Australia (-16%) and Tasmania (-1%). The strong result for Victoria may

have been infl uenced by fi rst home buyers taking advantage of the fi rst

home buyer bonus prior to its expiry at the end of June 2012. The New

South Wales government has established a First Home Owner Grant

Scheme, which is available from 1st October 2012, as an initiative to

stimulate the state’s housing market8.

Figure 3: Quarterly dwelling construction approvals by state

Source: Australian Bureau of StatisticsNB: The above fi gures are seasonally adjusted

8 First Home Owner Grant Scheme, New South Wales — http://www.osr.nsw.gov.au/benefi ts/fi rst_

home/general/fhogs/

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billion$AU

Total residential building

New residential building

Residential alterations and additions

While the dwelling approval indicators show potential for a degree of future

recovery in the housing market, this recovery is not yet being realised in

the construction sector. Total dwelling commencements showed a further

decline of around 12.6% over the March quarter 2012 (latest available

data), following a fall of 4.5% over the December quarter 2011. The

March quarter total of around 30,600 dwelling commencements is the

lowest quarterly total since the June quarter 2001 (Figure 5).

Figure 5: Quarterly dwelling commencements by category


The Housing Industry Association (HIA) July forecasts9 for total dwelling

commencements over 2012 have been reduced by approximately 4.3%

from the March 2012 forecasts, to around 133,400 commencements.

The HIA forecasts show an improvement in dwelling commencements

by around 7.6% over 2013, with signifi cant increases forecast for New

South Wales (17%), Queensland (19%) and Western Australia (23%). The

ABS house price index for the eight capital cities steadied over the June

quarter 2012, indicating some stabilisation in the housing market. The

house price index rose by 0.5% over the quarter, which was the fi rst

recorded increase since the December quarter 201010.

9 HIA Housing Forecasts, July 2012

10 ABS, house price index (6416.0), June 2012

5



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Housing commencements

Other residential commencements

Total dwelling commencements

showed a further decline

of around 12.6% over the

March quarter 2012.

6


Imports and exportsFigure 7 shows the latest available data on the volume of Australian

imports and exports of softwood sawn timber, as recorded by Global Trade

Atlas. Despite a strong AUD over the June quarter, imports of softwood

sawn timber fell by around 4.1% to under 115,000 cubic metres. The

volume of softwood sawn timber exported from Australia over the second

half of 2011 was around 50,000 to 60,000 cubic metres per quarter.

Figure 8 shows a breakdown of quarterly softwood sawn timber imports

by source, with an overlay of total dwelling commencements. The ongoing

decline in imports refl ects the decline in dwelling commencements, which

is a key market driver for imported softwood timber. The exchange rate is

unlikely to have impacted the level of imports as the AUD has remained

strong over the recent downturn in import volumes.

New Zealand remained the most signifi cant source of softwood sawn

timber imports with a 47% share of total imports over the June quarter.

Imports from Europe fell for the third consecutive quarter to around

27,700 cubic metres, or a share of around 24%. This is a signifi cant

change from a peak in the June quarter 2010, when imports from Europe

reached 91,400 cubic metres and a share of 53%.

Figure 8: Quarterly softwood timber imports by source11

Source: Australian Bureau of Statistics, Global Trade Atlas

11 Harmonised System code 440710 – Lumber, Coniferous (Softwood) of a thickness exceeding 6 mm

Figure 6 shows movement in the Baltic Dry Index (BDI), a measure of

global shipping costs for transporting raw materials. The index comprises

costs for the major vessel types, such as Capesize, Panamax, Supramax

and Handysize vessels, which are utilised for global trade. The BDI

remained at low levels over the June quarter 2012, a trend which refl ects

a slowdown in global trade and an oversupply of ships (that were ordered

in the lead up to the GFC).

Figure 6: Baltic Dry Index

Source: Pulp Watch

Figure 7: Quarterly softwood timber imports and exports

Source: Global Trade Atlas, Reserve Bank of Australia, ABARES

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ExchangerateAUD/USD

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Imports (LHS) Exports (LHS) AUD/USD exchange rate (RHS)

7


Imports and exports continued

Figure 10: Quarterly hardwood timber imports and exports

Source: Global Trade Atlas, ABARES, Reserve Bank of Australia

Figure 11: Quarterly hardwood timber imports by source13

Source: Global Trade Atlas, Reserve Bank of Australia

13 Harmonised System code 4407 — All hardwood sawn timber in this group

Figure 9 shows the latest available data on the volume and source

of Australian imports of wood panels and engineered wood products.

These import volumes include plywood and laminated veneer lumber

(LVL) products which, according to TMS respondents, have been placing

downward pressure on the price of domestically produced products due

to the strong AUD. The volume of imported panels and engineered wood

products remained relatively high over the June quarter 2012 at around

77,500 cubic metres, which equates to an 11.4% increase from the

March quarter. Imports were sourced from a range of countries including

New Zealand (21%), Chile (18%) and China (17%).

Figure 9: Quarterly imports of wood panels and engineered wood products by source12

Source: Global Trade Atlas, Reserve Bank of Australia

Figure 10 shows imports and exports of hardwood sawn timber. The

level of imported hardwood timber has followed a general downward

trend since a peak in 2004. Despite favourable conditions for importers

over the fi rst half of 2012, the slowdown in the housing construction

and home renovations markets appears to be affecting the demand for

hardwood timber imports. Over the June quarter, the volume of imported

hardwood sawn timber fell by around 16% to 17,700 cubic metres, which

is the lowest quarterly volume since the June quarter 2009. The latest

available data on the export of hardwood sawn timber (ABARES) shows

exports remaining at relatively low volumes over the second half of 2011.

Figure 11 shows quarterly imports of hardwood sawn timber by source

country. Import volumes from Indonesia and Malaysia fell by around 35%

and 17%, respectively, over the June quarter. Even so, Indonesia and

Malaysia continue to be the major sources for imported hardwood timber,

comprising around 62% of total imports.

12 Harmonised System code 4412 – Plywood, Veneered Panels and similar Laminated Wood

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8


Table 4 shows price movements for plywood, particleboard and Medium

Density Fibreboard (MDF) panel products. June quarter 2012 price

movements showed mixed results for panel products, with plywood prices

increasing by around 1.5% to 1.7% and prices for particleboard tongue

and groove and MDF showing moderate movements. The improvement in

plywood product prices over the June quarter resulted in prices being fl at

over the year to June 2012, despite high volumes of imported products

entering the market over the period.

Table 4: Panel products — nominal price changes to June quarter 2012

ProductDimensions

(mm)12 months to

Jun-123 months to

Jun-12

Plywood C/D Grade 2400 x 1200 x 12 i 0.08% h 1.50%

Plywood C/D Grade 2400 x 1200 x 17 h 0.01% h 1.73%

Particleboard T&G 3600 x 900 x 19 h 2.13% i 0.29%

Particleboard T&G 3600 x 900 x 22 h 1.01% h 0.79%

MDF 2400 x 1200 x 16 h 1.63% i 0.29%

MDF 2400 x 1200 x 18 h 2.76% i 0.56%

Source: Timber Market Survey

Table 5 shows price movements for engineered wood products. June

quarter price movements showed prices for laminated I-beam engineered

wood products falling by 0.7% to 1.3% and prices for LVL continuing to

fall by around 1.6%. Over the year to June 2012, prices for LVL products

fell by around 5.4%, which coincided with increasing levels of imported

wood-based panel and engineered wood products.

Table 5: Engineered wood products — nominal price changes to June quarter 2012

ProductDimensions

(mm)12 months to

Jun-123 months to

Jun-12

I-joist/I-beam 240 x 47 i 1.28% i 1.29%

I-joist/I-beam 300 x 63 i 0.16% i 0.70%

LVL 200 x 36 i 5.49% i 1.63%

LVL 300 x 45 i 5.37% i 1.65%


Softwood price changes — June quarter 2012The latest price trends for the major structural softwood timber products

are shown in Table 2. June quarter 2012 results show prices for major

MGP10 and MGP12 structural timber products falling by around 0.6%

to 1.7%. Prices for treated F7 products also declined over the quarter.

Softening structural timber prices have coincided with the downturn in

housing construction activity, which is a major driver of demand for timber.

Some comments from TMS participants described trading conditions in

the timber market as slow and diffi cult. Many respondents mentioned that

trading has been affected by slow sales, aggressive price competition

and uncertainty about the housing market and broader economy in the

near-term.

Table 2: Structural softwood timber — nominal price changes to the June quarter 2012

ProductDimensions

(mm)12 months to

Jun-123 months to

Jun-12

MGP 10 70 x 35 x 4800 i 3.43% i 0.60%

MGP 10 90 x 35 x 4800 i 4.43% i 1.36%

MGP 12 70 x 35 x 4800 i 6.49% i 1.27%

MGP 12 90 x 35 x 4800 i 3.89% i 1.70%

F7 - H3 treated 70 x 35 x 4800 i 3.55% i 0.76%

F7 - H3 treated 90 x 45 x 4800 i 3.81% i 1.31%


Table 3 shows the latest price movements in outdoor softwood timber

products. Prices for treated decking and sleepers remained mostly fl at

over the June quarter, with small price increases of around 0.3%. Despite

a decline in the value of residential alterations and additions over the year

to June 2012, outdoor timber prices for decking and sleepers improved

by 0.5% and 3.8%, respectively. Some TMS respondents made comment

of relative stability in the home renovations markets compared to new

home building.

Table 3: Outdoor softwood timber — nominal price changes to June quarter 2012

ProductDimensions

(mm)12 months to

Jun-123 months to

Jun-12

Treated decking 90 x 20 h 0.47% h 0.29%

Treated sleepers 200 x 75 x 2400 h 3.78% h 0.33%


9


Figure 13: Quarterly nominal price index14 of key wood based panel products


The historic price trend of selected engineered wood products is shown

in Figure 14. The I-joist and LVL price indexes have diverged over the

last three years, with I-joist prices remaining relatively stable and LVL

prices declining substantially. As with structural softwood and plywood

C/D products, it appears that a major driver of decreasing LVL prices has

been the competitiveness of imported products.

Figure 14: Quarterly nominal price index15 of engineered wood products

Long term softwood price indexes

The historic nominal price trends for key TMS softwood products

are shown in Figure 12. The MGP10, MGP12 and treated F7 indexes

presented in Figure 12 are calculated using product weightings of 40%

for 70 x 35 mm and 60% for 90 x 35 mm.

Price trends for structural and outdoor softwood products have diverged

over the last two years, with outdoor product prices remaining steady and

structural prices falling during the downturn in the housing construction

market. Price indexes for MGP10 and MGP12 structural timber have

followed a general downward trend over the last 18 to 24 months, with

MGP10 falling to a lesser extent than MGP12 over this period. As of the

June quarter 2012 results, the MGP10 and MGP12 price indexes have

fallen beneath GFC levels, to be at the lowest points since September

2007.

Figure 12: Quarterly nominal price index14 of key softwood timber products


Figure 13 shows historic price movements for wood based panel products.

The price index for Plywood C/D has stabilised over the last 12 months

following a general downward trend since the March quarter 2009. This

overall decline appears to be related to the downturn in the housing

market and competition from cheaper imports. Following a long term

upward trend, price indexes for major particleboard tongue and groove

and MDF products have mostly remained stable over recent quarters.

14 The reported price changes are based on weighted average price changes across New South Wales,

Victoria and Queensland using weightings of 50%, 25% and 25% respectively to represent the

approximate size of softwood markets in each state.

80

90

100

110

120

Ma

r-0

4

Ju

n-0

4S

ep

-04

De

c-0

4

Ma

r-0

5Ju

n-0

5

Se

p-0

5

De

c-0

5M

ar-

06

Ju

n-0

6

Se

p-0

6D

ec-0

6

Ma

r-0

7

Ju

n-0

7S

ep

-07

De

c-0

7

Ma

r-0

8

Ju

n-0

8S

ep

-08

De

c-0

8

Ma

r-0

9Ju

n-0

9

Se

p-0

9

De

c-0

9M

ar-

10

Ju

n-1

0

Se

p-1

0D

ec-1

0

Ma

r-11

Ju

n-1

1S

ep

-11

De

c-1

1

Ma

r-1

2

Ju

n-1

2

Index

(Mar-

04

=100)

MGP 10 MGP 12 Treated F7 (H3)

Treated Decking Treated Sleepers

80

90

100

110

120

130

Ma

r-0

4Ju

n-0

4S

ep

-04

De

c-0

4

Ma

r-0

5Ju

n-0

5S

ep

-05

De

c-0

5

Ma

r-0

6Ju

n-0

6S

ep

-06

De

c-0

6

Ma

r-0

7Ju

n-0

7S

ep

-07

De

c-0

7

Ma

r-0

8Ju

n-0

8S

ep

-08

De

c-0

8

Ma

r-0

9Ju

n-0

9S

ep

-09

De

c-0

9

Ma

r-1

0Ju

n-1

0S

ep

-10

De

c-1

0

Ma

r-11

Ju

n-1

1S

ep

-11

De

c-1

1

Ma

r-1

2Ju

n-1

2

Index

(Mar-

04

=100)

Plywood C/D Grade 2400 x 1200 x 12

Particleboard T&G 3600 x 900 x 19

MDF 2400 x 1200 x 16

80

90

100

110

120

Mar-

04

Jun-0

4

Sep-0

4

Dec-0

4

Mar-

05

Jun-0

5

Sep-0

5

Dec-0

5

Mar-

06

Jun-0

6

Sep-0

6

Dec-0

6

Mar-

07

Jun-0

7

Sep-0

7

Dec-0

7

Mar-

08

Jun-0

8

Sep-0

8

Dec-0

8

Mar-

09

Jun-0

9

Sep-0

9

Dec-0

9

Mar-

10

Jun-1

0

Sep-1

0

Dec-1

0

Mar-

11

Jun-1

1

Sep-1

1

Dec-1

1

Mar-

12

Jun-1

2

Index

(Mar-

04

=100)

Wood I-joist/beam LVL

15 The reported price changes are based on weighted average price changes across New South

Wales, Victoria and Queensland using weightings of 50%, 25% and 25% respectively to represent

the approximate size of softwood markets in each state. The indexes are calculated using a

simple average of the two product dimensions. Source: Timber Market Survey

10


Hardwood price changes — six months to June 2012Price movements for hardwood fl ooring and joinery appearance grade

products are presented in Table 7. Results showed consistent price

increases of around 2.8% to 4.8% for hardwood fl ooring products over

the six months to June 2012. Following a decline over the second half

of 2011, prices for Victorian Ash sawn and dressed boards (joinery)

products recovered by around 2.4% to 2.8% to be around 0.5% to 1.9%

higher over the 12 months to June 2012. Some comments from TMS

respondents mentioned relatively steady sales in the home renovations

market compared to new house construction.

Table 7: Hardwood appearance products — nominal price changes to June 2012

ProductDimensions

(mm)12 months to Jun-12

6 months to Jun-12

Flooring products

Vic Ash – Select grade (Victoria) 100 x 25 h 4.96% h 4.85%

Vic Ash – Standard grade (Victoria) 100 x 25 h 4.48% h 3.94%

Tasmanian Oak – Select grade 100 x 25 h 5.80% h 3.35%

Tasmanian Oak – Standard grade 100 x 25 h 3.12% h 3.47%

Blackbutt – Select grade 100 x 25 h 2.39% h 3.51%

Blackbutt – Standard grade 100 x 25 h 6.60% h 4.51%

Spotted gum – Select grade 100 x 25 h 3.18% h 2.85%

Spotted gum – Standard grade 100 x 25 h 1.41% h 3.21%

Sawn & dressed boards (joinery products)

Vic ash – Select grade 125 x 50 h 1.86% h 2.83%

Vic ash – Select grade 125 x 38 h 0.45% h 2.44%

Vic ash – Standard grade (Victoria) 125 x 38 h 7.08% h 5.44%

S ource: Timber Market Survey

Table 6 presents price movements for a selection of structural hardwood

timber products for the six month period to June 2012. Results showed

moderate price increases of around 1.2% and 2.0% for kiln dried structural

products F17 and F27, respectively, over the six months to June 2012.

Over the 12 months to June 2012, F17 and F27 prices rose by 2.0%

and 3.2%, respectively. This is in contrast to softwood structural product

prices, which declined over the year to June 2012.

At the state level, green hardwood timber product prices remained steady

over the six months to June 2012. Results for F8 in Victoria showed a

moderate increase of around 0.4%, to be around 0.7% higher over the

year. F11 prices in New South Wales increased by around 1.2% over the

six months to June, while F14 in Queensland remained unchanged.

Table 6: Structural hardwood timber products — nominal price changes to June 201216

ProductDimensions

(mm)12 months to

Jun-126 months to

Jun-12

Kiln dried (KD) structural timber

F17 90 x 45 x 4.8 h 1.97% h 1.24%

F27 90 x 35 x 4.8 h 3.17% h 1.99%

Green timber

F8 (Victoria) 100 x 50 x 4.8 h 0.73% h 0.36%

F11 (NSW) 100 x 50 x 4.8 h 2.75% h 1.20%

F14 (Queensland) 100 x 50 x 4.8 h 1.18% h 0.00%


Results showed moderate price

increases of around 1.2% and

2.0% for kiln dried structural

products F17 and F27.

16 Unless stated otherwise, the hardwood price changes reported in Tables 6-7 are based on weighted

average price changes across New South Wales, Victoria and Queensland using weightings of 40%,

35% and 25% respectively to represent the approximate size of hardwood markets in each state.

11


Figure 16: Historic six monthly nominal price index of select grade fl ooring products — New South Wales

market


Figure 17 shows the historic nominal price trends for Victorian Ash and

Tasmanian Oak fl ooring products in the Victorian market. Price indexes

have generally experienced gradual increases since around June 2009,

with the price index for Tasmanian Oak low feature increasing at a

relatively higher rate than other products.

Figure 17: Historic six monthly nominal price index of select and standard grade fl ooring products —

Victorian market


Long term hardwood price indexesFigure 15 shows the long term nominal price trends for F17 and F27

kiln-dried hardwood structural products. These products have generally

followed an increasing price trend since 2006. Since 2008, price trends

for F17 and F27 have diverged to some extent with F17 prices increasing

at a relatively slower pace than F27.

Figure 15: Historic six monthly nominal price index17 of selected hardwood structural products


Figure 16 shows the long term nominal price trend of major select grade

fl ooring products purchased by timber wholesalers and other merchants

in New South Wales. The price indexes for Spotted Gum, Sydney Blue Gum

and Blackbutt select grade fl ooring have generally followed an upward

trend since around 2007. However, price growth for Sydney Blue Gum and

Blackbutt select grade fl ooring products has slowed since 2009.

80

85

90

95

100

105

110

115

120

125

130

Dec-0

3

Jun-0

4

Dec-0

4

Jun-0

5

Dec-0

5

Jun-0

6

Dec-0

6

Jun-0

7

Dec-0

7

Jun-0

8

Dec-0

8

Jun-0

9

Dec-0

9

Jun-1

0

Dec-1

0

Jun-1

1

Dec-1

1

Jun-1

2

Index

(Dec-0

3=

100)

F17 (KD) F27 (KD)

80

90

100

110

120

130

140

150

160

170

180

Jun-9

8

Dec-9

8

Jun-9

9

Dec-9

9

Jun-0

0

Dec-0

0

Jun-0

1

Dec-0

1

Jun-0

2

Dec-0

2

Jun-0

3

Dec-0

3

Jun-0

4

Dec-0

4

Jun-0

5

Dec-0

5

Jun-0

6

Dec-0

6

Jun-0

7

Dec-0

7

Jun-0

8

Dec-0

8

Jun-0

9

Dec-0

9

Jun-1

0

Dec-1

0

Jun-1

1

Dec-1

1

Jun-1

2

Index

(Jun-9

8=

100)

Spotted Gum Sydney Blue Gum Blackbutt

80

90

100

110

120

130

140

Dec-0

7

Jun-0

8

Dec-0

8

Jun-0

9

Dec-0

9

Jun-1

0

Dec-1

0

Jun-1

1

Dec-1

1

Jun-1

2

Index

(Dec-0

7=

100)

Vic Ash low feature Tas Oak low feature

Vic Ash medium feature Tas Oak medium feature17 The reported price changes are based on weighted average price changes across New South Wales,

Victoria and Queensland surveys using weightings of 40%, 35% and 25% respectively to represent

the approximate size of hardwood markets in each state.

12


ABARES (2012) Australian Forest and Wood Products Statistics — September & December quarters 2011. Published by the Australian Bureau of Agricultural and

Resource Economics, Canberra.

ABS (2012) 8750.0 — Dwelling Unit Commencements, Preliminary, March 2012. Quarterly series published by the Australian Bureau of Statistics, Canberra.

ABS (2012) 6416.0 — House Price Indexes: Eight Capital Cities, Australia, June 2012. Quarterly series published by the Australian Bureau of Statistics, Canberra.

ABS (2012) 5609.0 — Housing Finance, Australia, June 2012. Monthly series published by the Australian Bureau of Statistics, Canberra.

ABS (2012) 8731.0 — Building Approvals, Australia, June 2012. Monthly series published by the Australian Bureau of Statistics, Canberra.

GTIS (2012) Global Trade Atlas. Online database provided by Global Trade Information Service. Available at: http://www.gtis.com/gta/default.cfm?msg=1

HIA (2012) Housing Forecasts, July 2012. Monthly series published by the Housing Industry Association Economics Group.

Available at: http://economics.hia.com.au/factsForecasts.aspx.

IMF (2012) World Economic Outlook: April 2012. A survey by the staff of the International Monetary Fund, Washington D.C.

NAB (2012) Quarterly business survey. Monthly and quarterly series published by National Australia Bank.

PWC/AIG (2012) Performance of Manufacturing Index, June 2012. Monthly report produced by PWC.

RBA (2012) Statement on Monetary Policy, August 2012. Published by the Reserve Bank of Australia, Sydney.

Westpac Economics (2012) Westpac Market Insights — Australia, G3 and New Zealand, August 2012. Monthly report produced by Westpac Economics.

Westpac-Melbourne Institute (2012) Index of consumer sentiment. Available at: http://melbourneinstitute.com/miaesr/publications/indicators/csi.

References

Next Quarter...The September quarter 2012 TMS report will be available around the middle of November 2012. It will include the latest quarterly price change data for softwood timber products.

The Timber Market Survey is prepared by URS. As one of the largest and longest established forest sector consultancies in Australia, New Zealand

and Asia, URS has an extensive understanding of the forest sector in our region. URS provides professional services to the forest sector for all

components of the forest product chain including forest management and technical forestry skills, due diligence, economics, policy, community

and regional development, business management and market intelligence.

For more information about the Timber Market Survey or URS please contact:

Duncan MacLeod Alex Tolan

Senior Consultant Consultant

[email protected] [email protected]

www.urs.com.au

Funding provided by:

The Timber Market Survey (TMS) was prepared with funding from Forest and Wood Products Australia, Forests NSW, Timber Queensland, VicForests, HVP Plantations, HQPlantations, Forestry

Tasmania, ForestrySA, DAFF Queensland Government and Green Triangle Forest Products (‘the funding bodies’).

URS Australia Pty Ltd (URS) has prepared this report in accordance with the usual care and thoroughness of the consulting profession for the use of the funding bodies. It is based on generally

accepted practices and standards at the time it was prepared. No other warranty, expressed or implied, is made as to the professional advice included in this report. It is prepared in accordance

with the scope of work and for the purpose outlined in the Agreement for Provision of Consulting Services dated 1 March 2009. The methodology adopted and sources of information used by URS

are outlined in this report. URS has made no independent verifi cation of this information beyond the agreed scope of works and URS assumes no responsibility for any inaccuracies or omissions.

No indications were found during our investigations that information contained in this report as provided to URS was false.

This report was prepared between 1 July 2012 and 31 August 2012 and is based on the conditions encountered and information reviewed at the time of preparation. URS disclaims responsibility

for any changes that may have occurred after this time. This report should be read in full. No responsibility is accepted for use of any part of this report in any other context or for any other purpose

or by third parties.

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Timber Market Survey2 TIMBER MARKET SURVEY JUNE QUARTER 2012 Following a reduction in the offi cial...

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