The NZ Forest Owners Association has challenged Labour Party forestry spokesman Stuart Nash's charge that foreign companies are buying up forests and selling logs overseas, leaving local sawmills short on supply.

Responding to a call from Mr Nash last week that "foreign forest owners" should be forced to sell logs to local mills, Forest Owners Association chief executive David Rhodes said all owners of forests looked for the best overall returns.

Forest owners were keen to sell their logs to local mills, as long as the terms of sale matched those from export markets, he said.

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But there were cases where local mills had been unwilling to do this.

"It's not just about price. It's also about the payment risk, the length of the contract and the quality of the logs on offer. Many modern mills have tight specifications for log supply. Logs that don't meet those specifications are usually exported. This will always be the case."

Mr Nash said there was no point in shipping logs overseas for processing when there were local sawmills that could do the job: "It is extremely concerning that foreign forestry companies are swooping in and buying up our trees to sell offshore, without considering the local community and businesses."

Marty Verry, group chief executive of Rotorua-based Red Stag Timber, said Mr Nash could have a point in terms of protecting sawmills' access to the big forest estates in the central North Island. But he said there were good reasons why foresters preferred to deal with letters of credit from overseas importers, ahead of some of the smaller regional mills.

"This is because so many smaller mills have closed in the last decade and a large number will close, and invariably when they do close the log suppliers are caught short," he said.

Mr Rhodes said it was likely that foreign owners were predominant in the New Zealand forestry sector. Although singling out overseas owners as the reason for mill failures might appeal to the emotions, it did not advance public understanding.

"Overseas-owned forestry companies are among the leaders of the industry. They make significant investments in jobs, worker safety and the environment," he said.

Forest owners understood the importance of New Zealand having a viable wood processing industry and were partners in the Wood Council, which is committed to adding value domestically.

"We talk regularly with politicians from the various parties about policies that will assist the forest and wood-processing industries to remain vibrant, viable industries providing employment in the regions. Mr Nash's proposed policy is not one of them."

Mr Rhodes said there wasn't enough onshore processing, but observed that new operations were being developed, such as Red Stag Timber's major investment in mill facilities, and Paul Pedersen's new Lumbercube square log processing project, both in Rotorua.

Peter Weblin, chief marketing manager for Rotorua-based PF Olsen, writing in the February Wood Matters newsletter, said domestic log demand and price continued to be strong.

"Pruned and unpruned structural logs are particularly sought after. Some log processors are desperate for logs and prepared to pay top dollar to attract reliable, quality supply," the newsletter reported.

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* About 50 per cent of New Zealand's logs are processed domestically, says the NZ Forest Owners Association.