Fifty-two people from various parts of New Zealand’s domestic and international forest products supply chains participated in the most recent Scion Business Outlook study. These participants represent a substantial component of the NZ forestry industry. Source: Timberbiz
According to the report the late winter price slump, prices for both pruned and unpruned logs have recovered much more quickly than the last Outlook anticipated, though they remain below pre-June 2019 levels.
Despite the rapid price recovery over the last quarter in both unpruned and pruned log grades, respondents in this Outlook remained more conservative around the rate of further price increases over the coming 12 months, with very moderate increases anticipated from our current prices.
This probably reflects the level of business confidence, which had 60% of respondents anticipating a steady and stable year ahead, and the rest evenly split between positive or negative change.
It appears there remains a degree of nervous uncertainty surrounding the market conditions for the 2020 calendar year.
Ongoing trade disputes and an oversupply of lumber from Europe due to the salvage of beetle infestations are at the forefront of respondents thinking on what will impact log markets for the coming quarter.
The recent price recovery, afforestation levels and forward work pipelines maintain business confidence, although labour markets remain tight, particularly for specialised industry skills.
Business confidence shows the majority (60%) are expecting the coming year to either remain stable or steady, with an even split between the other 40% in anticipating positive change, or worsening conditions.
This indicates a quite diverse opinion in terms of how the industry might fare within a year’s time. Those working in sales and marketing, wood processing, government agencies and research were largely more positive in outlook than forest growers – 27% of forest growers expect a negative change in business over the coming year.
Those involved with shipping, harvesting and transportation were more likely to select steady and stable business conditions.
The US-China trade situation, increasing supplies of European better-quality logs into the key market, current log price downturn and competition for domestic timber, and the weakened Chinese economy are the main factors in the lowered confidence.
Respondents that expected prices to recover also noted that a stabilized market would remain steady at best. There are indications that a few are looking at increasing supply to alternative markets as a diversification strategy, though methyl bromide fumigation will restrict some trade options.
The full outlook with graphs is available at https://www.scionresearch.com/__data/assets/pdf_file/0008/68345/November2019-LogPriceOutlook.pdf
