This year started well with increased At Wharf Gate export returns but the underlying demand profile isn’t much different from 2024. Photo / Alex Cairns
This year started well with increased At Wharf Gate export returns but the underlying demand profile isn’t much different from 2024. Photo / Alex Cairns
Domestic log demand is solid, with pruned log prices $70/tonne higher than unpruned.
Another New Year, another hole in the belt, another bunch of “get fit” and “sobriety” resolutions that probably won’t make it past the couch or fridge, and another year of anticipation on what might be around the corner for the commodity trades.
The past few years have certainly been ones to forget with massive inflation-related cost increases, erratic demand thanks to the Chinese construction implosion, and unforeseen weather events.
Hopefully, these will be buried in the past and 2025 will be one out of the box.
We all have hope, but unfortunately, reality generally gives us a quick backhand to shake us out of dreamland.
While 2025 has started well with increased At Wharf Gate (AWG) export returns, the underlying demand profile isn’t much different from last year.
January’s AWG prices are up a few dollars to around $128/m3 in southern North Island and northern South Island ports with $2-3 more in Tauranga and Marsden and up to $20/m3 less in Lyttelton and other southern ports.
These numbers will get the woodlot sector fired back into life, especially during the summer months, but these increases are purely driven by lower shipping and exchange rates, not demand.
The market does not need increased supply and any increase in supply will likely result in lower sales prices.
Chinese New Year holidays (CNY) started on January 29 this year and many sawmills had already closed as their workforce returned to their home provinces.
This shutdown generally lasts four weeks and there is some expectation that this year the break may be slightly longer.
Off-port uplift in early January was around 65,000m3 per day and inventory is sitting at a shade under 2.9 million m3, an increase of approximately 200,000 m3 on the month prior.
It is likely that inventory will get close to 4 million m3 post CNY which is getting into pucker territory for exporters.
There is some sliver of good news with the Chinese construction sector reporting that residential house price declines have slowed with a 5.3% decline in December compared to 5.7% in November.
December marks the 18th consecutive month of price decreases and it is now widely expected that the bottom has been or is close to being found.
There’s still purportedly around $US1 trillion ($1.7 trillion) of stimulus to be thrown at the sector to try and get some traction but with around two years’ unsold housing stock in the system, it may not be until mid-2026 that we see some significant upward momentum.
An interesting development has been the inception of the Chinese log futures market in November last year.
The theory behind this is to use futures as a hedging tool to stabilise price and mitigate risk for buyers.
At present, there are around 3 million m3 under futures contracts with many due for delivery in late June.
This date is important as it coincides with a historic low log demand period in China and the hope is that this may bolster demand in that period.
While still in the early stages, the futures market appears to be trading above spot with positive sentiment.
All eyes will be on Trump for the next few weeks as the inauguration palaver subsides, and the Don gets into asserting his authority on the US situation.
If the tariffs are implemented at the level Trump has threatened, there will be a reduction in demand for Chinese furniture which will flow into log demand.
Back home there are plenty of news reports outlining increased residential building activity as interest rates ease and the population continues to grow.
There is a general view that construction costs have stabilised and many people who have been sitting on approved building consents are now hitting the go button.
Image / Forest360
Domestic sawmills are all back into action and log demand is solid for both pruned and unpruned.
Pricing remains relatively flat from Q3 and Q4 and those with pruned forests will be very happy with their decision as pruned log prices continue to track around $70/tonne higher than their unpruned cousins, converting to around $8,000/ha at harvest.
Post-New Year carbon trading has been relatively stable with the current spot price at $63.90/NZU.
The next government auction is on March 19 and all eyes will be on whether there is a full or partial clearance.
At current spot levels, the return is still very attractive for anyone looking to retire low-productivity land.
So, things are looking good for the start of the year and export pricing should hold into February, however, things might get a bit sticky post-CNY, depending on supply levels.
That might be a good time to kick the running shoes back under the couch and reach for the fridge again.
