Port of Tauranga hopeful for export log trade

Mark Cairns

Port of Tauranga hopes the China inventory problems that have recently affected New Zealand's export log trade will prove to be a short-term blip.

"We are expecting the first quarter of the new financial year to taper off a bit," said chief executive Mark Cairns.

He was speaking after the release of the port's results last week, which showed positive earnings and cargo growth for the year to June 2014.

"Price pressure in the Chinese market is expected to impact on the volume of log exports in the short-term. But pricing is coming up again and we're hoping it will just be a quarter blip, then back to normal harvesting."

The first month of the new financial year had shown continued growth in container and log export volumes from the previous year, he said.

Some analysts believe the China log market has bottomed out. A Grade radiata pine in China was at a price level last seen at the bottom of the 2011 market downturn, said forestry management company PF Olsen, in this month's edition of the company's Wood Matters newsletter. But August had seen a reversal in the dramatic four-month slide in export log prices, driven mainly by reduced ocean freight costs and a lower kiwi dollar, said PF Olsen. Despite the high inventories and weak real estate market, China growth remained high and construction activity continued to be driven by government-supported low-cost housing.

"If this is the bottom of the cycle, and if ocean freight rates and foreign exchange don't move unfavourably, most are forecasting a steady improvement in export log prices for the remainder of the year," said PF Olsen.

"However, until log inventory in China falls by 25 per cent or more, there will continue to be nervousness about the robustness of any market recovery."

However, Mr Cairns said, dairy volumes handled by the port were expected to increase, and imported fertiliser and dairy feed supplements to remain strong.

The impact of the 10-year freight alliance with Kotahi was beginning to kick in, in Tauranga and the port's Timaru operations, he said.

"We've become very busy, very quickly, in Timaru, which is pleasing."