China's demand for logs lifts

In-market log prices are on the rise again in China after tumbling in June and July.

The September Agrifax Forestry Market Report showed a rapid rebound, but prices remain about $10 short of peak values reached earlier in the year.

Chinese inventory levels are still high, although they are being worked through, and competitor log volumes are also strong. But demand has increased and higher buyer activity may have been partially driven by predictions prices would rise, which have resulted in clients looking to buy now while prices are lower.

However, the volume of logs supplied to China by North American countries has more than doubled in the past year as the United States continues to gain market share. New Zealand and Australian exporters are maintaining quantities, but the market is growing and their share is diminishing.

Demand from India also continues to grow, with New Zealand exports to India increasing by 60 per cent in the first seven months of 2011. Japanese and Korean log imports have both decreased.

Total log exports out of New Zealand in 2011 are up to more than $1 billion. Earnings from January to July were 37 per cent higher than for the same period in 2010. Export log volumes were up 24 per cent.

Lumber export revenues, however, fell 11 per cent to $484 million, led by a 10 per cent fall in exports to Australia.

The United States lumber market is also worth 25 per cent less than it was a year ago. The economic situation there is not expected to improve quickly and the value of this market is expected to continue to drop.

Domestic demand is subdued as wood and paper product manufacturing continues to decline.

Carbon trading

New Zealand carbon trading has firmed, but is still relatively subdued. New Zealand units are trading at $14.50-$15.50 per tonne - 26 per cent lower than this time last year.

Trading and carbon prices are expected to be affected by new carbon emissions initiatives in a number of countries. Australia, for example, will have its own credits scheme, although details are yet to be decided.