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.
The latest edition of the index indicates margins have decreased from mid-2020. This was initially due to decreases in log prices in the first half of 2020 and later as fuel prices have recovered pushing harvest and haulage costs back towards pre-pandemic levels. This followed an increase in the stumpage price spread in early 2020 reported in the previous index published in June 2020.
In mid-2020 the outlook was uncertain with the consensus being pessimistic. The success of the HomeBuilder Grants scheme stimulus package to support new housing construction has rapidly turned things around. The industry is now reporting a strong pipeline of orders, shortages of timber, anticipated price increases and generally positive fundamentals. As timber prices rise, log prices should follow suit. If they increase faster than logistics costs the spread will increase. In any case, even if margins do not increase, forest owners should still see revenues and profits rise on the back of increased volumes sold.
For further information and analysis contact Margules Groome.