Forestry leads way in export downturn

Forestry exports are now 24 per cent - or $55 million a month - lower than a year ago, after continued low prices that have led several companies to reduce their rate of harvesting.

Statistics New Zealand said yesterday that the decline in forestry returns was the main reason for an $81 million, or 3.4 per cent, drop in the value of the country's merchandise exports in August compared with a year before.

The drop in forestry exports is being driven by a combination of poor commodity prices, a rising kiwi dollar and, as a result, lower export volumes.

The latest figures show that compared with August last year the value of log exports fell by $26 million and the value of sawn timber by $25 million.

This was partly offset by a $6.5 million rise in the value of plywood exports and $1.7 million rise in the value of particle board exports.

The drop in export volumes was emphasised by a 29 per cent fall in the quantity of rough sawn pinus radiata and a 26 per cent fall in the quantity of logs.

The forestry sector, the nation's third-biggest source of exported goods, has been saying all year that times are tough.

Companies such as Carter Holt Harvey and Evergreen Forests are reducing their harvest in the hope that reduced supply will improve prices and also because high freight rates and the high kiwi are reducing returns.

According to Statistics NZ, the dollar appreciated 18 per cent in trade weighted terms between August last year and this year.

So far the impact of the rising dollar has been reduced by foreign exchange cover but that is now starting to run out.

"With the New Zealand dollar having done most of its work on the upside and with commodity prices now stabilising, there will be a delay in it feeding through," said ANZ economist John Bolsover.

The uncertain outlook for forestry companies this year has been underlined by Evergreen Forests in its annual report, just released to shareholders.

Evergreen is among the companies that have cut back harvests while markets are weak.

"The current market conditions are some of the most challenging that the industry has experienced for many years and the potential value gains from a delayed harvest are considerable," said chief executive Mark Bogle.

"Most commentators believe that we are at, or near to, the low point in the commodity cycle. Evergreen Forests shares this view."

Statistics New Zealand said the value of exports totalled $2.31 billion in August, which meant the country had a merchandise trade deficit of $297 million in the month, wider than the $23 million provisional estimate.

As well as the drop in forestry exports there were also significantly lower returns from casein (down $32 million or 35 per cent on a year before), crude oil (down $29 million or 50 per cent), fish (down 24 million or 19 per cent) and aluminium (down $19 million or 21 per cent).

On the positive side, beef exports were up $24 million or 33 per cent, kiwifruit (up $14 million or 22 per cent) plus one-off sales of aircraft ($44 million) and ships ($23 million).


- PAM GRAHAM, NZPA