Export log prices have fallen sharply after demand in China dried up. Photo / Whanganui Chronicle
Export log prices have fallen sharply after demand in China dried up. Photo / Whanganui Chronicle
Forestry Minister Shane Jones said log traders had allowed themselves to become "intoxicated" by very high prices in China at the expense of the local processing industry.
"A" grade log prices have gone from US$138/140 a tonne early in the year to US$110 a tonne, and could sink as lowas US$100 to US$105/tonne due to a raft of factors, among them being cheap imports arriving by rail from Eastern Europe, a weakening renminbi and a cooling local economy.
The decline comes after five years of very strong prices for New Zealand logs in China.
"It's a timely reminder to those were unwilling, in my view, to support domestic industry whilst the log traders were intoxicating themselves with the China connection," Jones told the Herald.
"It's a reminder to them that they turned their back on growing and sustaining the domestic sector at their peril."
Jones said in a phone call from Tolaga Bay, where he was promoting NZ First's One Billion Trees policy, that traders had expected high log prices to continue.
Jones met with the Eastland Wood Council - which represents the forestry industry on the East Coast - in Gisborne this week.
He said the council asked that the Government expedite infrastructure spending in the region while log prices stay weak.
NZ Forest Owners Association president Peter Weir said lower-cost forest operators - particularly those in the central North Island - were likely to remain profitable despite the recent sharp decline in log prices.
Forestry Minister Shane Jones. Photo / File
Weir, who is also president of Ernslaw one - New Zealand's fourth largest forest owner - said he expects the log market to recover but that it would be a matter of months and not weeks.
While prices had dropped back to 2015 levels, they had not gone "through the floor", he said.
"What goes up comes down, then always recovers," he said.
"No one knows the timeline but in will be months not weeks," he said.
"Trees keep growing. Lower cost forestry operators - everyone in the central North Island - are still very profitable."
Log exports to China have skyrocketed in recent years as prices their have tended to be higher than in other export markets.
In the 12 months ended May 2019, China was the main destination of total wood exports from New Zealand, worth about $3.2 billion a year, compared with the second largest market Japan, worth $370 million a year, according Stats NZ.
Exports of logs alone to China were worth $3.02b in the year to May, almost 80 per cent of the $3.8b log export total.
The second biggest market was South Korea, which took $332m worth of the logs in the year.
The average value of log exports to China was about $170 a cubic metre in May after peaking just under $180 in January.
New Zealand's wood exports to China are second only to exports of dairy products, worth $4.67b a year.
After adjusting for usual seasonal patterns, monthly exports of logs, wood and wood articles in May 2019, were up 8 percent, reversing a 6.7 percent fall in April.
Seasonally adjusted, the quantity of logs, wood and wood articles in May 2019 was 2.36 million cubic metres, Stats NZ said.
Plantation forests occupy about seven per cent of New Zealand's land area and forestry and logging employ about 7,000 people directly.
About 50,000 hectares, or 25 million cubic metres, is harvested each year.
