Margules Groome’s Australian Softwood Residual Log Price Index measures domestic softwood plantation residual log prices (excluding exports). The index is a measure of the residual log value to the forest owner once harvest and haulage costs are subtracted from mill door log prices. It is a measure of the forest owners’ log margins, or the spread between log prices and logistics (delivery) costs. It should be noted that there is no time lag between the indexes as shown.
The latest edition of the index indicates margins have stablilised somewhat from the fall from mid-2020. This is due to significant increase in log prices following on the back of record high timber prices. This in turn is driven by the massive demand for timber caused by record housing commencements which has led to a timber supply deficit pushing up prices. Unfortunately, the increase in timber prices has been roughly matched by the increase in logistics costs driven by sharp increases in fuel prices. With the Russia-Ukraine war threatening to send oil prices soaring in 2022 it is likely that margins will erode further despite the high log prices.
For further information and analysis contact Margules Groome.