Imported timber prices have moderated in recent months, as global demand has deteriorated, local supply and inventory returns toward equilibrium and importantly, as the cost of sea freight retreats like a bully running from a fair fight. Source: Industry Edge
Coming fresh from some analysis on this topic, there are a couple of thoughts that have stuck in IndustryEdge’s hive mind, one of which is this question of timber pricing.
During the pandemic, like most other materials and supplies, timber prices rose and those reliant on fractured international supply lines really felt the pinch. Imported structural timber makes up at least 20% of total Australian supply and was as high as 40% in 2022, so the local market saw a significant lift in prices, due in part to shipping and freight costs.
To say that the cost of sea freight increased because of the disruptions and the bottlenecks and delays is an understatement.
Shipping container costs increased from around $1,000/TEU to top out at around $22,000/TEU (spot pricing, not contract). The consequence was that the cost of getting anything to Australia exploded, compounding shortages and rubbing insult into price increases.
Over the last year, timber prices have peaked, and then fallen, and freight costs have played a substantial part in that. But how much, exactly?
We took the opportunity to examine this and report on it for the Frame & Truss Manufacturer’s Association in their delightfully named Frame & Truss Sector Outlook (FATSO).
The chart here shows the rapid ramp in sawn softwood freight costs. The red line shows European freight costs, the black line shows the weighted average and the blue line shows shipments from Oceania (New Zealand mostly) for reference.
As the chart shows, though the pandemic commenced in 2020, it took one year – until April 2021 – before the weighted average (black line) cost of sea freight started pushing up the ‘landed’ price of sawn timber. In April 2021, the weighted average freight cost for sawn softwood timber imports was $84/m3. One year later the sea freight cost was 132% higher at $196/m3, adding $112/m3 to the landed price of the timber. Freight costs went from being 12% of total cost to 20% of total cost.
The peak did not come until August 2022, when at 21.1% of total landed cost, the average cost of freight was $235/m3, an eye-watering average of 179% more than when the run on freight costs commenced. Shipments from Europe which dominates import supply and supports the Australia market through thick and thin, saw freight costs rise higher still.
More recently, freight costs have come down, assisting the price of imported timber to moderate fairly significantly over 2023. in July, the average cost of sea freight had fallen to $143/m3, still around 70% higher than the average from 2018 through to April 2021, but lower, nonetheless.
For a country like Australia, with a growing reliance on imported timber, variations in cost are inevitable and will be driven by several global factors. It is probably important to keep in mind those factors include wildly variable international sea freight prices because there is no guarantee future disruptive events will be any less dramatic than over the last couple of years.
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