High logs prices are being driven by the domestic market and Chinese exports. These logs are stacked for export at the Taranaki port. Source: Stuff NZ
Foresters are taking advantage of strong log prices coming from demand for New Zealand logs in China.
Canterbury forestry consultant Allan Laurie said the soil had dried out and foresters were now able to get machinery on to land.
“China is the driver for these strong selling prices. And leading to that are good prices in China for New Zealand logs, good shipping rates and a lower exchange rate.”
He said a key indicator was the price for A-grade logs, which were 30 centimetres or more at the small end.
“The price for them is currently US$140 an export cubic metre. That’s a good price and it is then translated to New Zealand dollars on an ‘at wharf gate’ basis.”
He said domestic consumption was also strong.
“While the main centres of Auckland and Christchurch are off an apparent boil in terms of new house starts, other second tier cities are experiencing significant increases.”
About 85% of the logs volume harvested in New Zealand plantation forests were radiata pine.
Mr Laurie said pine set the price for douglas fir, while other species harvested included cypress and eucalyptus.
He said demand from India was expected to grow to about three million cubic metres by 2020.
“But at the moment, it is only 1.7 million cubic metres a year,” he said. “China is a big market at over 800,000 cubic metres each month.”
Mr Laurie said log supplies to China from New Zealand, Australia, the Pacific Northwest and Russia had been in step with consumption and that had resulted in a stable inventory.
He said the Chinese gross domestic product grew by 6.9% for the second quarter, exceeding earlier forecasts and had added confidence to the market.
“After a period of a gloomier outlook, the financial sector is much more positive with activity expanding on the back of the central government’s spend on infrastructure.”
Mr Laurie said domestic prices for timber in China had made a turnaround and New Zealand log supply was dominant for softwood, mainly pine.
He said that was driving the high log prices in New Zealand. India was, however, undergoing major economic reforms and changes in its domestic economy, and as a result of GST at 18%, and tariffs, the Indian market was subdued, he said.
Mr Laurie said New Zealand logs were held in high regard by India leaders during an address he gave to a conference in New Delhi.
“The feedback regarding New Zealand, was very positive with a very clear indication that most see New Zealand as an important supplier to India in the future,”
“But the high GST and log tariffs, meant buyers had to fund 23% of the value of their cargo before it could be discharged to them,” he said.
The local and Chinese export demand was helping New Zealand’s larger forest owners and farm foresters take advantage of the good log prices to harvest what they could.
“The continuing buoyancy and apparent robustness of markets is making for some wonderful returns for forest owners and long may it continue.”
Mr Laurie said that labour shortages, port congestion and persistent rain in winter and early spring had raised doubts that log production would ramp up.
“This is exactly what we need to ensure we continue to enjoy the current returns and plenty out there to tip the supply scales the wrong way.
“It has never been more important – the only way forward for the climate, country and planet is to get out there and plant more trees.”
