"Export markets are expected to remain steady for the next few months with any price changes for logs at New Zealand ports a reflection of shipping and exchange rate fluctuations," says PF Olsen business development manager Scott Downs.
PF Olsen noted that inventory at the China ports had risen sharply from the reported 2.2 million cubic m in December 2016 to a current estimated 3.5-4.0m cubic m. But the report attributed the buildup to the Chinese New Year as factories across China closed down in late January, and said it was not a major concern.
While market observers were keeping a watching brief on the increase in inventory, they do not hold major concerns for the state of the market, said Mr Downs.
"Whilst there has been an absence of market information over this holiday time in China, several factors should assist with reducing this inventory," he said.
These include the fact that consumption in China is about to start again with the New Year holidays concluding, and demand expected to ramp up.
There are also early reports of a slowing down in supply of North American logs to South Korea and China. China currently imports approximately 700,000 cubic m per month from North America, so any reduction will have a material effect.
As well, the Indian market has started to take more logs again after several months of lower demand. The market has suffered from the effects of the government's demonetisation last November, aimed at curbing India's enormous black economy.
PF Olsen's report quoted Satinder Singh, New Zealand manager for Indian log exporter Aubade NZ, as saying the impact brought economic and business transactions in many sectors to a virtual standstill from November through to January.
Most New Zealand exporters did not ship to India for a couple of months, creating a gap in supply, which in turn increased demand with prices catching up with China this month.
New Zealand Forest Owners Association spokesman Don Carson described the export log market as stable.
"But we're keeping a weather eye on the possible trade impact of the Trump presidency," said Mr Carson.
There has been concern in the forestry sector for some time that Canada's failure to renew its lapsed softwood lumber trade agreement with the US has the potential to impact New Zealand log exports to China.
If the US imposes a tariff on Canadian imports, squeezing them out of the US market, that could divert production to other markets where New Zealand is active, such as China.
However, said Mr Carson, if Canada cannot export the volumes they used to across the border, then it's likely the cost of timber will go up in the US as a result, which could make it a more competitive market for New Zealand exporters.
[Factbox]
Forestry facts - Year ending December 2015
- Total exports of forestry products from New Zealand for 2015 were $4.8 billion.
- Of total forestry exports, 38% went to China.
