Increase in price of logs offsets lift in shipping costs

By Tina Morrison

House building in Auckland and Christchurch is lifting the price of logs as demand exceeds supply.
House building in Auckland and Christchurch is lifting the price of logs as demand exceeds supply.

New Zealand export log prices advanced this month as a decline in the local currency made the country's shipments more competitive, offsetting a lift in shipping costs.

The average wharf gate price for New Zealand A-grade logs edged up to $120 a tonne this month, from $119 a tonne last month, AgriHQ's monthly survey of exporters, forest owners and saw millers showed.

The in-market price of A-grade logs in China, New Zealand's largest market, advanced to US$113/JAS from US$111/JAS last month as inventory levels on Chinese ports remain moderate, following a relatively low build-up of stock on ports during the Chinese New Year holiday period. Log inventories on Chinese ports are about 3.6 million cubic metres, with a consistent offtake of 50,000 to 55,000 cubic metres a day, although volumes are coming at a faster rate, suggesting inventories are building, AgriHQ said.

"The outlook for the market varies between NZ market participants," AgriHQ analysts Reece Brick and Shaye Lee said in their report.

"Some believe the market will maintain its current trend in the coming months, given the recent stability of the market. Others are more pessimistic, believing current returns are too high to be maintained in the long run."

Chinese log imports lifted 2 per cent to 6.1 million tonnes in the first quarter, with New Zealand and Russia each accounting for about a third of the trade. March imports lifted 53 per cent from February, signalling recovery of market activity after the Chinese New Year, and trade is expected to lift in the second quarter, in line with the seasonal trend, AgriHQ said.

Meanwhile, in the New Zealand domestic market, prices lifted for both pruned and structural logs as demand exceeded supply. In the pruned market, P1 logs rose to $181 a tonne from $180 a tonne last month, supported by house construction.

"The continuation of the housing boom has acted to support structural log markets," AgriHQ said. "Housing construction through both Auckland and Christchurch remains the main driver of demand, but interest in other centres such as Hamilton is also positive, as the high cost of living is leading to some moving away from the Auckland region."

In the structural market, S1 logs firmed to $114 a tonne from $112 a tonne last month. Demand for structural logs is expected to ease heading into winter, which will slow construction activity, AgriHQ said.

Roundwood demand is stronger than expected as demand from the horticulture and viticulture industries offsets a decline in demand from the dairy industry.

Forest products are New Zealand's third-largest commodity export group behind dairy and meat products.

- NZ Herald

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