Report says timber output will slow down

New Zealand's production of softwood logs will drop slightly in 2007 as the Government prioritises forest maturity, according to a US Agriculture Department report.

Exports of softwood logs are expected to drop 4 per cent from the previous year, the attache -- or unofficial departmental -- report said. Consumption was seen as unchanged.

Softwood lumber production was forecast to remain flat in 2007 while exports will increase 1 per cent.

The decline in softwood harvest follows a decline in exports in recent years as many forest owners take a longer-term view, delaying harvest until the age profile of the trees improves (improving wood quality) and returns are more profitable, the report states.

Returns for New Zealand's forestry industry have improved during the past 12 months, but they still remain very low, it said.

The depreciation of New Zealand's dollar during this period and strengthening log prices in international markets have been key factors in improving export returns.

This has been offset to some extent by increases in shipping costs, due to high oil prices and continued Chinese demand for shipping capacity, the report says.

"New Zealand's ongoing reduction in timber supply will be beneficial to its forestry industry as the trees are left to age, improving their construction quality.

"This is due to a change in ownership in recent years from publicly listed companies, who needed to maintain cash flow, to Timber Investment Management Organisations (TIMOs), who take a long-term approach to forests."

Prior to the ownership change, harvests were increasingly characterised by marginally lower overall quality, as younger timber was harvested to satisfy a strong export demand and maintain cash flow and debt servicing of the larger companies, the report said.

"This has changed, with these companies divesting their forestry assets to focus on processing."

Harvesting levels may have been stopped from declining further due to long-term supply contracts that need to be fulfilled and the need to maintain a certain level of production capacity in New Zealand.

The decline in timber production will be temporary. The industry anticipates that forestry owners will return to full harvesting operations once the age profile of forests and export prices improve (after 2010).

Additionally, timber production will respond to the large number of trees planted during the 1980s and early 1990s that will begin reaching harvestable age by 2010.

"New Zealand's 2007 lumber production is forecast to remain similar to 2006."

Exports are forecast to increase 1 per cent while domestic consumption is forecast to decline 1 per cent.

A slowing domestic housing market will decrease local demand, while increases in prices in overseas markets will strengthen exports.

Total production is forecast to remain steady, despite a small decline in total softwood harvest. Plywood is expected to follow a similar pattern with production at a similar level and a 2 per cent decline in domestic consumption.

Exports are forecast to be similar to 2006, while imports decline.

- NZPA