Log prices up after three months of significant falls

Dennis Neilson

The export market for New Zealand forestry products is stabilising.

It has been helped by the weakening kiwi dollar, reduced inventories in China and increased domestic housing demand in the US, say industry analysts.

Meanwhile, domestic demand was strong, fuelled by buoyant housing markets in Auckland, growth in the Tauranga housing market, and the continuing Canterbury rebuild, they said.

Export log prices rose in June after three months of significant falls, said Peter Weblin, Rotorua-based chief marketing manager for forestry management company PF Olsen.

Most at-wharf-gate dollar June pricing appeared to be based on A-grade at about US$100 ($147), up from a low of US$95 in May, he said. Log stocks in China continued to fall steadily through May, reducing by nearly 200,000cu m to an estimated 3.87 million cubic metres. That was down from the peak of 4.27 million cu m at the start of April.

But Mr Weblin said stocks needed to get under 3 million cu m to bring confidence back, while the main driver of log imports - the Chinese construction market - was still slow.

The dollar was definitely helping, especially for processors meeting strong demand for processed clear boards in the US and Europe.

"The depreciating kiwi really helps the finished product guys because it works on a much bigger value."

Dennis Neilson, director /founder of Rotorua-based forestry consultants DANA, said despite the doom and gloom stories about the Chinese economy beginning to melt down, New Zealand was again the biggest exporter into China, with about 1 million cu m of logs each month. "That is as much as last year," said Mr Neilson. "And while prices have declined for some grades, they've held up for others. Our exchange rate and low shipping costs means the net return to many forest owners - particularly in the Central North Island within reasonable transport distance of Port of Tauranga - remains attractive, so harvesting continues."

Mr Neilson said there were a number of factors including increased US housing starts, which were slowing US exports to China, and attracting imports from Canada.