Required Report - public distribution

**Date:** 1/25/2005

**GAIN Report Number:** AS4044

AS4044

**Australia**

**Solid Wood Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Andrew C. Burst, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Mike Darby, Agricultural Specialist

**Report Highlights:**

Softwood log and softwood lumber production are forecast to increase by
five percent in 2004/05. These increases are roughly in-line with growth
trends in recent years. Historically high levels of building activity
driven by strong economic growth and historically low interest rates are
driving these increases.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Canberra \[AS1\]

\[AS\]

Table of Contents

[SECTION ONE: SITUATION AND OUTLOOK
3](#section-one-situation-and-outlook)

[Production 3](#production)

[Softwood Log Production 4](#softwood-log-production)

[Trade 4](#trade)

[Consumption 4](#consumption)

[Softwood Lumber Production 5](#softwood-lumber-production)

[Trade 5](#trade-1)

[Consumption 5](#consumption-1)

[Market Segment Analysis 6](#market-segment-analysis)

[Construction 6](#construction)

[Policy 7](#policy)

[Tariffs 7](#tariffs)

[Free Trade Agreements 7](#free-trade-agreements)

[Quarantine 8](#quarantine)

[Bans on Old Growth logging 8](#bans-on-old-growth-logging)

[SECTION TWO: STATISTICAL TABLES 9](#section-two-statistical-tables)

# SECTION ONE: SITUATION AND OUTLOOK

## Production

**Forest Area**

Australia has a total forest and woodland area of 162.7 million
hectares, made up of around 102.5 million hectares of woodland, 50.2
million hectares of native forest, and about 1.6 million hectares of
forest plantations. An estimated 9.9 million hectares of forest is
classified as "unknown" in terms of specific vegetation cover.
Approximately 23 percent of forest land is privately owned, with the
remaining 77 percent in the public domain.

![](media/image2.wmf)

*Source: ABARE data*

Plantations currently account for around one percent of total Australian
woodland and forest area. However, this area continues to grow with area
on September 30, 2003 estimated at 1,666,000 hectares, up 12 percent
from the 2000 estimate. This comprises 988,220 hectares of softwood and
675,960 hectares of hardwood. Since 1997, new plantations have totaled
318,610 hectares, with a record 137,490 hectares (revised) planted in
2000.

Since 1990, plantings have shifted from primarily softwood to mostly
hardwood. Today, approximately 90 percent of the standing hardwood
plantations has been planted since 1990.

![](media/image3.wmf)

*Source: ABARE data*

Hardwoods are mainly native Eucalypts, with *Pinus radiata* (Radiata or
Monterey Pine) being the most common softwood. Virtually all of the
softwood plantations are planted to Radiata pine. Most of the hardwood
plantations are *Eucalyptus globulos*.

## Softwood Log Production

Softwood log production for 2004/05 is forecast at 16.5 million cubic
meters. This represents an increase of five percent from the revised
estimate for the previous year. This increase is representative of the
long-term trend for growth in softwood log production, which stands at
just over five percent for the past decade according to ABARE's
(Australian Bureau of Agricultural and Resource Economics) historical
data. Despite a recent easing in building activity, growth in the
building sector is expected to remain at historically high levels and is
likely to remain a driving factor in increasing softwood log production.
Furthermore, the commencement of the removal of trees from areas planted
under the Commonwealth Softwood Agreement Act (which commenced in the
1960s) will ensure a continuation of the strong supply that has
underpinned production increases in recent years.

Softwood log production is estimated at 15.75 million cubic meters in
2003/05, up slightly from the figure in the previous report (see GAIN
Report #AS3041). The revised estimate reflects an increase of around
five percent from the previous year, in-line with ABARE estimates and
the long-term growth average for production.

![](media/image4.wmf)

*Source: ABARE data*

## Trade

Softwood log exports are forecast to increase five percent to 1.4
million cubic meters in 2004/05, in-line with increased production and
longer-term industry growth. Estimated exports of softwood logs for
2003/04 has been revised downwards to 1.3 million cubic meters, in-line
with official ABARE figures. Despite consistent growth in the export of
softwood logs, exports continue to account for less than 10 percent of
total production.

Softwood log imports remain at minimal levels, typical fluctuating at
between 1,000 and 2,000 cubic meters per annum.

## Consumption

Consumption of softwood logs in 2004/05 is forecast to increase five
percent to 15.1 million cubic meters. This increase is in-line with the
forecast increase in production. Historically high levels of building
activity, in both commercial and housing sectors, are expected continue
to drive increases is softwood log consumption.

## Softwood Lumber Production

Softwood lumber production for 2004/05 is forecast at 3.16 million cubic
meters, representing an increase of around five percent from the revised
estimate for the previous year. This increase is in-line with the
forecast increased in softwood log removals. Historically high levels of
building activity are likely to continue the expansion of softwood
lumber production in-line with longer-term trends.

Post estimates production of softwood lumber for 2003/04 at 3.01 million
cubic meters. This represents a significant downward revision from the
figure previously reported. This revision brings Post's estimates
in-line with a downward revision in ABARE's historical figures
(2001/02).

![](media/image5.wmf)

*Source: ABARE data*

## Trade

Exports of softwood lumber in 2004/05 are forecast at 90,000 cubic
meters, up sharply from the revised estimate of 71,000 cubic meters for
the previous year. This growth is in-line with official growth estimates
for the previous year and is likely driven by the steady increase in
production. Despite the historically high nature of this forecast,
softwood lumber exports continue to represent less than three percent of
total production.

Exports of softwood lumber in 2003/04 have been revised upwards to
71,000 cubic meters, while the export number for 2002/03 has been
revised downwards to 41,000 cubic meters. These numbers have been
revised to reflect ABARE's current official data series.

Post forecasts imports of softwood lumber for 2004/05 at 764,000 cubic
meters, five percent higher than a year earlier. This figure is in-line
with projected increases in consumption for 2004/05 and is consistent
with the growth experienced for the previous year. Imports of softwood
lumber in 2003/04 is estimated at 729,000 cubic meters, revised upwards
slightly from Post's previous estimated figure. This revision brings
Post's estimate in-line with official ABARE estimates.

## Consumption

Consumption of softwood lumber is forecast to increase around five
percent in 2004/05 to 3.8 million cubic meters, driven by historically
high levels of building activity. Estimates for 2003/04 and 2002/03 have
been lowered and are now in-line with ABARE's historical data.

## Market Segment Analysis 

### Construction 

Economic activity has a large impact on the Australian building
industry, which in turn has a large impact on building activity.
Interest rates and investor confidence have been primary drivers of
economic growth and building activity.

The Australian economy has grown at an average of four percent per annum
since 1996/97, making Australia one of the fastest growing countries in
the OECD. However, economic growth has eased somewhat of late. A recent
government report estimated economic growth for 2004/05 at three
percent. A growth rate of this level would represent a decline from the
3.5 percent recorded for 2003/04 and would put Australia below the
projected average global growth rate of 4.0 percent.

![](media/image6.wmf)

*Source: ABS data*

According to official Australian Bureau of Statistics (ABS) data,
building activity has been increasing steadily over the past decade. The
private housing sector has been one of the fastest growing construction
sectors, driven primarily by low interest rates and high levels of
investor confidence and to a lesser extent government incentives for
"first home builders". A trend towards "investment properties" has also
contributed to growth. More recently, growth in building activity has
declined slightly and has created much attention in terms of building
activity forecasts. Post anticipates that the building sector will
continue to grow in 2004/05, albeit at a slower rate than 2003/04.

![](media/image7.wmf)

*Source: ABS data*

## Policy 

### Tariffs

The general applied import tariff on sawn timber (tariff code
4407.10.10) is five percent, four percent for Canada and four percent
for countries with developing country status. There is no import tariff
on softwood logs.

### Free Trade Agreements

Australia has entered into Free Trade Agreements with New Zealand and
Singapore, and has recently completed FTA negotiations with Thailand and
the United States. Other FTAs are being pursued with ASEAN, China and
other countries in the region.

[Australia-U.S. FTA:]{.underline} Australia completed FTA negotiations
with the United States in early 2004, with the agreement implemented on
January 1, 2005. The Australian Minister for Trade has characterized the
FTA as "the most important bilateral deal that Australia has ever
concluded". Under the FTA, the existing five percent tariff for all
imports of sawn lumber from the United States has been eliminated. The
tariff applied to Australian exports of sawn lumber to the United States
remains unchanged at zero.

In 2003/04, Australia imported minimal amounts of sawn timber from the
United States, accounting for less than two percent of total imports by
volume.

[Australia-Thailand FTA]{.underline}: Australia completed FTA
negotiations with Thailand in October 2003, with the agreement
implemented on January 1, 2005. Thailand received almost seven percent
of Australia's exports of softwood lumber in calendar year 2003, up from
only a 0.2% share in 2002, according to ABS data. The Thai tariff for
imports of sawn wood is currently 5%. Under the FTA, this tariff will be
removed for Australia in 2007. Australian imports of softwood lumber
from Thailand are negligible.

[Australia/New Zealand-ASEAN FTA]{.underline}: In November 2004,
Australia, New Zealand and the Association of Southeast Asian Nations
(ASEAN) announced that negotiations on a FTA would begin in early 2005.
Further it was agreed that the FTA negotiations would be completed
within two years and implemented fully within 10 years. This FTA would
compliment bilateral FTA's with New Zealand, Singapore and Thailand, as
well as a FTA scoping study currently being undertaken with Malaysia.

Australia imports significant amount of lumber from Malaysia. According
to ABARE's historical data, imports of sawn wood from Malaysia currently
account for just over six percent of total sawn wood imports.

[Australia-China FTA]{.underline}: In October 2003, the Australian and
Chinese governments signed a framework agreement for managing the
bilateral trade and economic relationship between the two countries. As
part of this framework, the two governments undertook to conduct a
detailed joint study into the feasibility and benefits of an FTA between
Australia and China. This study is to be completed by October 2005 and
will provide the basis for Australia and China to negotiate an FTA. In
subsequent meetings, the two countries have agreed to "fast track" the
study, although a revised date of completion has not been announced.
While imports of softwood from China are negligible, China received
around three percent of Australia's exports of softwood lumber in
calendar year 2003.

### Quarantine

Biosecurity Australia (BA), the prescribed agency for Australian
quarantine policy setting, is currently conducting a new Import Risk
Assessment (IRA) for the importation of green sawn timber. BA has
undertaken this IRA in response to the detection of new pest, diseases
and plant pathogens. A draft IRA paper is not expected to be released
until late 2005.

BA recently released the "Green Sawn Timber Imports Discussion Paper".
This paper outlines the issues for [interim quarantine
measures]{.underline} prior to the eventual finalization the IRA. These
measures include changes in the requirement for treatment prior to
export, demonstrated area freedom treatments provided in Australia and
affect imports from British Columbia, the Pacific North West and New
Zealand. The coniferous species of timber affected are Douglas fir,
Monterey pine, hemlock, coast redwood and western red cedar.

### Bans on Old Growth logging

The logging of old growth forests remains a politically contentious
issue. Certain areas of Australian old growth forest have been protected
from logging under various conservation initiatives.

Federal elections were held in Australia in October of 2004. During the
election campaign old growth logging and forestry policy became key
issues for debate, particularly in the state of Tasmania. Both the
government and the opposition released forestry policies in the lead up
to the election which promoted increased protection of old growth
forests.

The main point of differentiation was the government promise to not
allow the demise of forestry communities due to logging bans. The
Government was returned to power with an increased parliamentary
majority, and in Tasmania where the issue was most prominent, two
electoral districts that were held by the opposition, and where logging
was a major industry, were lost to the government.

# SECTION TWO: STATISTICAL TABLES

+----------------+-----+------+-----+------+-----+------+--------+
| PSD Table      |     |      |     |      |     |      |        |
|                |     |      |     |      |     |      |        |
| Softwood       |     |      |     |      |     |      |        |
| Lumber         |     |      |     |      |     |      |        |
+----------------+-----+------+-----+------+-----+------+--------+
|                | **  | **R  | **  | **Es | **  | **Fo | *UOM*  |
|                | 200 | evis | 200 | tima | 200 | reca |        |
|                | 3** | ed** | 4** | te** | 5** | st** |        |
+----------------+-----+------+-----+------+-----+------+--------+
|                | **U | **   | **U | **   | **U | **   |        |
|                | SDA | Post | SDA | Post | SDA | Post |        |
|                | Of  | Esti | Of  | Esti | Of  | Esti |        |
|                | fic | mate | fic | mate | fic | mate |        |
|                | ial | \    | ial | \    | ial | \    |        |
|                | \[O | [New | \[O | [New | \[O | [New |        |
|                | ld\ | \]** | ld\ | \]** | ld\ | \]** |        |
|                | ]** |      | ]** |      | ]** |      |        |
+----------------+-----+------+-----+------+-----+------+--------+
| **Market Year  |     | **0  |     | **0  |     | **0  | *MM    |
| Begin**        |     | 7/20 |     | 7/20 |     | 7/20 | /YYYY* |
|                |     | 02** |     | 03** |     | 04** |        |
+----------------+-----+------+-----+------+-----+------+--------+
| **Production** | 3   | 2669 | 3   | 3012 | 0   | 3162 | *1000  |
|                | 268 |      | 431 |      |     |      | CUBIC  |
|                |     |      |     |      |     |      | M      |
|                |     |      |     |      |     |      | ETERS* |
+----------------+-----+------+-----+------+-----+------+--------+
| **Imports**    | 677 | 695  | 711 | 729  | 0   | 764  | *1000  |
|                |     |      |     |      |     |      | CUBIC  |
|                |     |      |     |      |     |      | M      |
|                |     |      |     |      |     |      | ETERS* |
+----------------+-----+------+-----+------+-----+------+--------+
| **TOTAL        | 3   | 3364 | 4   | 3741 | 0   | 3926 | *1000  |
| SUPPLY**       | 945 |      | 142 |      |     |      | CUBIC  |
|                |     |      |     |      |     |      | M      |
|                |     |      |     |      |     |      | ETERS* |
+----------------+-----+------+-----+------+-----+------+--------+
| **Exports**    | 51  | 41   | 54  | 71   | 0   | 90   | *1000  |
|                |     |      |     |      |     |      | CUBIC  |
|                |     |      |     |      |     |      | M      |
|                |     |      |     |      |     |      | ETERS* |
+----------------+-----+------+-----+------+-----+------+--------+
| **Domestic     | 3   | 3323 | 4   | 3670 | 0   | 3836 | *1000  |
| Consumption**  | 894 |      | 088 |      |     |      | CUBIC  |
|                |     |      |     |      |     |      | M      |
|                |     |      |     |      |     |      | ETERS* |
+----------------+-----+------+-----+------+-----+------+--------+
| **TOTAL        | 3   | 3364 | 4   | 3741 | 0   | 3926 | *1000  |
| DISTRIBUTION** | 945 |      | 142 |      |     |      | CUBIC  |
|                |     |      |     |      |     |      | M      |
|                |     |      |     |      |     |      | ETERS* |
+----------------+-----+------+-----+------+-----+------+--------+

+-----------------+-----------------+-----------------+-----------------+
| Import Trade    |                 |                 |                 |
| Matrix          |                 |                 |                 |
|                 |                 |                 |                 |
| Softwood Lumber |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| **Time Period** | **Jan - Dec**   | **Units:**      | **M^3^**        |
+-----------------+-----------------+-----------------+-----------------+
| **Imports       | **2002**        |                 | **2003**        |
| for:**          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| U.S.            | 13700           | U.S.            | 5622            |
+-----------------+-----------------+-----------------+-----------------+
| **Others**      |                 | **Others**      |                 |
+-----------------+-----------------+-----------------+-----------------+
| New Zealand     | 394158          | New Zealand     | 391493          |
+-----------------+-----------------+-----------------+-----------------+
| Canada          | 146733          | Canada          | 141743          |
+-----------------+-----------------+-----------------+-----------------+
| Czech Republic  | 38779           | Czech Republic  | 66457           |
+-----------------+-----------------+-----------------+-----------------+
| Finland         | 14349           | Austria         | 14029           |
+-----------------+-----------------+-----------------+-----------------+
| Sweden          | 5265            | Finland         | 8953            |
+-----------------+-----------------+-----------------+-----------------+
| South Africa    | 4865            | South Africa    | 6735            |
+-----------------+-----------------+-----------------+-----------------+
| Estonia         | 1082            | Sweden          | 4453            |
+-----------------+-----------------+-----------------+-----------------+
| Austria         | 982             | Estonia         | 2422            |
+-----------------+-----------------+-----------------+-----------------+
| Fiji            | 848             | Papua New       | 2024            |
|                 |                 | Guinea          |                 |
+-----------------+-----------------+-----------------+-----------------+
| Malaysia        | 828             | Chile           | 1961            |
+-----------------+-----------------+-----------------+-----------------+
| **Total for     | **607889**      |                 | **640270**      |
| Others**        |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Others not      | 2741            |                 | 6370            |
| Listed          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| **Grand Total** | **624330**      |                 | **652262**      |
+-----------------+-----------------+-----------------+-----------------+

*Source: World Trade Atlas. N.B. Post uses ABARE data for PS&D tables.*

+-----------------+-----------------+-----------------+-----------------+
| Export Trade    |                 |                 |                 |
| Matrix          |                 |                 |                 |
|                 |                 |                 |                 |
| Softwood Lumber |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| **Time Period** | **Jan - Dec**   | **Units:**      | **M^3^**        |
+-----------------+-----------------+-----------------+-----------------+
| **Exports       | **2002**        |                 | **2003**        |
| for:**          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| U.S.            | 49164           | U.S.            | 42428           |
+-----------------+-----------------+-----------------+-----------------+
| **Others**      |                 | **Others**      |                 |
+-----------------+-----------------+-----------------+-----------------+
| Taiwan          | 9354            | Taiwan          | 12517           |
+-----------------+-----------------+-----------------+-----------------+
| Japan           | 8832            | Japan           | 6451            |
+-----------------+-----------------+-----------------+-----------------+
| Philippines     | 3874            | Thailand        | 5086            |
+-----------------+-----------------+-----------------+-----------------+
| Vietnam         | 3409            | China           | 2013            |
+-----------------+-----------------+-----------------+-----------------+
| China           | 2936            | Singapore       | 2001            |
+-----------------+-----------------+-----------------+-----------------+
| Hong Kong       | 1434            | New Zealand     | 908             |
+-----------------+-----------------+-----------------+-----------------+
| New Zealand     | 1415            | Korea South     | 891             |
+-----------------+-----------------+-----------------+-----------------+
| Fiji            | 1282            | Hong Kong       | 749             |
+-----------------+-----------------+-----------------+-----------------+
| Malaysia        | 954             | Malaysia        | 636             |
+-----------------+-----------------+-----------------+-----------------+
| Singapore       | 924             | Fiji            | 338             |
+-----------------+-----------------+-----------------+-----------------+
| **Total for     | **34414**       |                 | **31590**       |
| Others**        |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Others not      | 3473            |                 | 1020            |
| Listed          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| **Grand Total** | **87051**       |                 | **75038**       |
+-----------------+-----------------+-----------------+-----------------+

*Source: World Trade Atlas. N.B. Post uses ABARE data for PS&D tables.*

+----------------+------+-------+------+-------+------+-------+--------+
| PSD Table      |      |       |      |       |      |       |        |
|                |      |       |      |       |      |       |        |
| Softwood Logs  |      |       |      |       |      |       |        |
+----------------+------+-------+------+-------+------+-------+--------+
|                | **20 | *     | **20 | **    | **20 | **    | *UOM*  |
|                | 03** | *Revi | 04** | Estim | 05** | Forec |        |
|                |      | sed** |      | ate** |      | ast** |        |
+----------------+------+-------+------+-------+------+-------+--------+
|                | **   | *     | **   | *     | **   | *     |        |
|                | USDA | *Post | USDA | *Post | USDA | *Post |        |
|                | Offi | Est   | Offi | Est   | Offi | Est   |        |
|                | cial | imate | cial | imate | cial | imate |        |
|                | \    | \[Ne  | \    | \[Ne  | \    | \[Ne  |        |
|                | [Old | w\]** | [Old | w\]** | [Old | w\]** |        |
|                | \]** |       | \]** |       | \]** |       |        |
+----------------+------+-------+------+-------+------+-------+--------+
| **Market Year  |      | *     |      | *     |      | *     | *MM    |
| Begin**        |      | *07/2 |      | *07/2 |      | *07/2 | /YYYY* |
|                |      | 002** |      | 003** |      | 004** |        |
+----------------+------+-------+------+-------+------+-------+--------+
| **Production** | 1    | 15003 | 1    | 15750 | 0    | 16500 | *1000  |
|                | 4935 |       | 5681 |       |      |       | CUBIC  |
|                |      |       |      |       |      |       | M      |
|                |      |       |      |       |      |       | ETERS* |
+----------------+------+-------+------+-------+------+-------+--------+
| **Imports**    | 1    | 2     | 1    | 2     | 0    | 2     | *1000  |
|                |      |       |      |       |      |       | CUBIC  |
|                |      |       |      |       |      |       | M      |
|                |      |       |      |       |      |       | ETERS* |
+----------------+------+-------+------+-------+------+-------+--------+
| **TOTAL        | 1    | 15005 | 1    | 15752 | 0    | 16502 | *1000  |
| SUPPLY**       | 4936 |       | 5682 |       |      |       | CUBIC  |
|                |      |       |      |       |      |       | M      |
|                |      |       |      |       |      |       | ETERS* |
+----------------+------+-------+------+-------+------+-------+--------+
| **Exports**    | 1383 | 1199  | 1453 | 1335  | 0    | 1400  | *1000  |
|                |      |       |      |       |      |       | CUBIC  |
|                |      |       |      |       |      |       | M      |
|                |      |       |      |       |      |       | ETERS* |
+----------------+------+-------+------+-------+------+-------+--------+
| **Domestic     | 1    | 13806 | 1    | 14417 | 0    | 15102 | *1000  |
| Consumption**  | 3553 |       | 4229 |       |      |       | CUBIC  |
|                |      |       |      |       |      |       | M      |
|                |      |       |      |       |      |       | ETERS* |
+----------------+------+-------+------+-------+------+-------+--------+
| **TOTAL        | 1    | 15005 | 1    | 15752 | 0    | 16502 | *1000  |
| DISTRIBUTION** | 4936 |       | 5682 |       |      |       | CUBIC  |
|                |      |       |      |       |      |       | M      |
|                |      |       |      |       |      |       | ETERS* |
+----------------+------+-------+------+-------+------+-------+--------+