Forty-four people from various parts of New Zealand’s domestic and international forest products supply chains participated in the New Zealand Forestry Business Outlook – February 2020. Source: Timberbiz
These participants represent a substantial component of the NZ forestry industry. In contrast to 2019 outlooks, where issues such as the China-US trade war dominated the commentary, this quarterly outlook was mostly concerned with the recent coronavirus outbreak, and the impacts over the coming year on both the economy in general, and forestry business in particular.
European log supply as well as upcoming elections in both the US and New Zealand also influenced participants expectations for log prices and volumes.
After a buoyant recovery in log prices during Nov 2019, unpruned log prices began to fall at a steady rate of NZ$2/m3 per month, and pruned log prices by NZ$3.5/m3 per month between November 2019 and January 2020.
The major coronavirus outbreak in China coincided with the anticipated slowdown in production due to Chinese New year. This has led to February log prices for both unpruned and pruned logs being at the lowest levels since Q2 2015 (unpruned) and Q4 2009 (pruned).
The sudden price fall and uncertainty around timing for when coronavirus quarantines might ease have led to a very weak business confidence for the sector, with 60% expecting a negative change to business activities over the coming year.
Only five participants stated they had made any change in trading partners, limiting the sector’s resilience to market shocks such as have been recently experienced.
Looking forward, respondents saw further price decreases for both pruned and unpruned logs short term, before a subdued recovery to around NZ$107/m3 for unpruned, and NZ$151/m3 for pruned logs respectively, by February 2021.
Respondents did not anticipate the impact of coronavirus on market conditions to improve much before late April or early May at the earliest. While the price recovery from July 2020 is anticipated to occur at a much faster rate than was being projected following the July-Aug 2019 price fall, it is clear that participants expect the coming quarter to remain particularly challenging across the whole of the forest sector value chain.
The full report is available from Scion at https://www.scionresearch.com/__data/assets/pdf_file/0003/68754/Feb2020-LogPriceOutlook.pdf
