Margules Groome’s measure of the Australian softwood plantation residual log prices.
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 costs. As you can see, when harvest and haulage costs decrease (Dec-2009 and Mar-2016) the spread increases (margins increase) and vice-versa.
Interestingly, it seems the key driver for harvest and haulage costs decreases and log margin price increases is fuel prices.
The spread was at its lowest from late during 2012-13, a particularly bad period for the forest industry generally. It peaked in 2016 during the most recent construction boom when fuel prices were at recent historic lows, but now looks to be heading down as costs increase faster than log prices. Yet another indication of a cyclic downturn?
For further information and analysis contact Margules Groome.