Known for its rich biodiversity and vast natural landscapes, Australia is a globally significant exporter of hardwood chips, which represent around 80% of its total woodchip exports. Source: Resource Wise
However, the Australian forest products sector faces challenges in both its woodchip export markets and at home, where more working forests are needed to meet rising wood demand.
One of the primary shifts in this market has been the decline in demand for hardwood chips from China, an important consumer of Australian wood products. For the past few years, China has been the top export market for Australian hardwood chips, accounting for more than 60% each year since 2018.
But the tides started to change in 2023 as China’s hardwood chip volumes from Australia dipped to nearly half of what they were five years prior. This comes as China’s domestic paper industry transitions from relying on woodchips to importing wood pulp instead. However, it remains uncertain if this transition will be temporary, as it depends on the cost difference between wood chips and pulp.
Several factors make importing wood pulp more attractive than chips. For China, cost is the primary consideration. Other secondary factors include the greater efficiency wood pulp offers in the production process. Being more refined than woodchips, wood pulp provides a more consistent and higher quality raw material that can be directly used in paper manufacturing, thereby reducing processing time and costs.
China’s logistical considerations are mainly cantered on the delivered cost to their pulp manufacturers. If the cost remains more favourable than that of woodchips, it is likely they will continue to prefer pulp.
Australia’s wood export industry is not exclusively reliant on China. Japan plays a major role, accounting for 35% of Australia’s hardwood chip exports in 2023. In fact, Japan has been consistently importing about one-third of Australia’s export volume since at least 2015.
Looking closer to home, Australia’s forestry market is facing increasing environmental restrictions, even as the demand for wood fibre grows. The focus of conservation efforts is primarily on natural forests, with specific attention to at-risk and older forests. Commercial plantation forestry is being recognized as a much-needed solution.
Industry organizations such as the Australian Forest Products Association (AFPA) argue that farm forestry could be vital to sustainably meeting Australia’s rising demand for timber and wood fiber, which is predicted to quadruple by 2050. The recent lifting of restrictions that limited plantation forestry’s participation in the Australian Carbon Credit Unit (ACCU) Scheme has been lauded as a significant step forward.
As the Australian forestry market continues to evolve, industry players need to keep a close eye on these shifts to navigate through the uncertainties of the market. Having access to up-to-date insights and strategic market analysis can provide a crucial competitive advantage.
For comprehensive insights into the shifting currents of the global forestry market, including those unique to Australia, download our Market Insight report on Australia’s hardwood chip exports in 1H 2024. This report provides an in-depth look at the evolving trends, challenges, and opportunities that are shaping the global forestry market today.
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