Rebound in log prices

In-market log prices have rebounded in November, with the previous month's price triggering re-invigoration of the market.

The Agrifax Forestry Market Report for November shows the combination of the earlier price slump and a global reduction in supply, which emptied supply chains, pushed the KS log price back up to US$115/JASsq m and the KI price to US$110.

Analysts suggest that price may now be up by another US$5-8.

"This reflects the volatile market that exists currently. It should be made clear that it is not any sort of increase in demand that has triggered the support to the fall in market prices."

Demand from China could be subdued into the second quarter of 2012 because of the northern China winter and New Year celebrations in January.

In September, New Zealand regained some of the share of that market, which it lost to the Pacific North West nations during June and July and imports from this region into China have reportedly dropped back at the end of October.

The large log volumes coming out of the Pacific North West - predominantly the United States and Canada - may be coming to an end as vast areas have been affected by pine beetle and are being removed. Supply from this region is not seen as reliable in the log and timber sectors, as the larger volumes are only available when not required domestically.

South Korea was the big mover in October, turning a 12-month run of decreased log imports around to record a 115 per cent year-on-year result. However, New Zealand's share of this market has dropped to 27 per cent as the Pacific North West increased its share to 66 per cent.

While the Pacific North West is making headway into most markets, this appears to be at the expense of Russia, rather than New Zealand.

India is still a strong market, with the usual three or fourth shipments a month increased to at least twice that number and New Zealand exports to India are up 39 per cent on last year and 85 per cent higher than two years ago.

The end of the raining season has now passed in the Ghandidham province, improving unloading times.

Overall log exports out of New Zealand are up 24 per cent year-on-year to the end of September and are 46 per cent higher than the same period two years before.

Domestically, supply is tight in some regions as harvesters hold off for better export prices. Mills were previously concerned about a supply shortage during harvesters' longer Christmas breaks, but oversupply means some reports suggest there are mills turning away log offers.

There are reports of mills planning longer Christmas shut-downs to carry out maintenance, which may allow lumber stocks to decrease.

Carbon tradingOngoing economic problems in Europe suggest carbon trading prices will continue to weaken globally.

The New Zealand Unit is down to NZ$13.40, from the $20.40 recorded this time last year and last month's $14.05. The European Union Allowance sits at 10.12 euro, dropping back from 10.43 euro last month and 14.90 euro a year ago.