Warning for forestry exporters following 'fantastic' record year

Exporters coming off record highs need to see there is diminishing demand for logs. Photo / Gerard O'Brien

Amid record returns for forestry exporters, the sector in New Zealand is being warned to take notice of the global demand for logs is beginning to trend downwards.

An increased market share for New Zealand's exporters, against declining market share for both Canada and the United States, has bolstered the sector's earnings: 2018 exports receipts were up by $684 million against 2017.

ASB senior rural economist Nathan Penny said 2018 had been a "fantastic" year for the sector, 2019 had started where it left off and, in New Zealand dollar terms, the forestry index was at record levels.

ASB senior rural economist Nathan Penny. Photo / Supplied

Port Otago is predicting the possibility of yet another record-setting year of log exports, or at least coming close to equalling last year's record.

However, Penny questioned whether prices this year would continue at the same level as 2018.

"We're doubtful. Global demand for logs is actually falling, with log import volumes dipping around 2 per cent in three months to November compared to the same three months a year ago," he said.

Penny is anticipating global log demand will fall further, given world economic growth was slowing, particularly in China.

"China is the world's largest importer of logs and NZ's largest market by a long shot," he said.

For the three months to last November, Penny said New Zealand's market share increased by 4 percentage points to 42 per cent, while the US and Canada's share had fallen 5 percentage points to 15 per cent.

"Unless New Zealand could continue to grab market share from other exporters, it is unlikely to be immune from falling demand, for a second successive year," Penny said.