Competition pushes structural log prices to new record

STRUCTURAL LOG PRICES ROSE TO A NEW RECORD IN NEW Zealand last month after local sawmills scrambled to secure supply in the face of competition from overseas buyers so they can meet demand from local builders.

The price for structural S1 logs moved up to $127 per tonne, a rise of $3 on the previous month and $12 higher than a year earlier, according to the monthly survey of exporters, forest owners and saw millers carried out by AgriHQ.

Local timber producers, especially those in Northland and some parts of the South Island, have been fighting for log supplies with exporters over the past year, complaining that they have not been getting a look in as log trucks drive past their gates on the way to the port.

The response has been to drive the price up in order to obtain sufficient logs as the building boom in Auckland shows little sign of abating and migration levels continue to drive demand.

This situation has seen the price for S1 logs rise above the price of export A-grade logs in AgriHQ’s latest data for the first time since late last year.

“A consistently firming export log market has driven increases in structural log prices in recent months, though positive housing construction rates locally have been key to mills being able to stomach these increases,” says AgriHQ analyst Reece Brick.

“The short-term outlook is for either a steady or slightly firmer market, where the exchange rate movements will likely be key to the competitive pressure between the local and export markets.”

He goes on to say that the closing valuation between wharf gate and domestic values may indicate some stabilisation in the market towards the end of the year, assuming no major change occurs in the export market.

Meanwhile, log values at the wharf gate slipped by around $2 per tonne as a result of a rise in the exchange rate with the US dollar that saw it reach a 28-month high of US75 cents at one point, before falling back a couple of cents. Exporters will be watching events in the US to see what effects there will be on the dollar in the coming months.

Demand for logs overseas remains buoyant, especially in China, even though the stock levels at most of the ports has risen to worrying highs again.

The price for unpruned log grades rose US$2/JAS in August, which marked the 13th consecutive month of strong pricing.

Stable oil prices have kept shipping rates at similar levels to previous months and these are expected to continue in the short-tomedium term, but these could be affected if OPEC members agree to limit oil supplies.

NZL