Sources: ABS, AIP, Margules Groome
Margules Groome’s Australian Softwood Residual Log Price Index measures domestic softwood plantation residual log prices (excluding exports). The index measures 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 decreased sharply as logistics cost increases have outpaced log price increases. The previously reported significant increase in log prices following on the back of record high timber prices has recently received a lot of attention and is a welcome positive. On the flip side logistics costs have increased even more rapidly with the spread declining by 15% in the 6 months to March 2022. The causes of the increase in logistics costs are well known: fuel price rises, CPI, and wage increases. Consequently, log margins have been eroded. In many cases, log prices rise only follow 3-6 months after logistics cost increases are borne (there is a time lag between the indexes). Hence, the actual erosion of log margins is likely to be much worse than shown.
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