Export log prices may be peaking
DESPITE A STRONG START TO THE YEAR, EXPORT LOG PRICES MAY be close to peaking, according to a number of leading New Zealand foresters.
That sentiment was clear from the latest Log Price Outlook survey conducted by Scion research scientist Dr Carel Bezuidenhout.
The results of his survey seem to have been supported by flat-lining prices at the wharf gate in February and March, after posting healthy increases in both volume and price last year.
It appears that the “growth momentum in these prices is slowing as rebalancing among world markets takes place,” one commentator was quoted as saying in the Scion survey.
That view was supported by a number of foresters who took part in the survey, even as reports from China indicate that demand for logs continues to be strong. But there are some headwinds appearing.
Dr Bezuidenhout notes that while “the price outlooks for pruned and unpruned logs are at an all-time high, some individuals raise valid reasons why the upward trends may not continue for another 12 months”.
One forester was quoted as saying: “(The) rising NZ$ will cap prices even if demand remains about current levels. A rising dollar also makes life more difficult for manufactured exports, thus potentially limiting demand for logs. Infrastructure constraints will also cap the volume we are able to handle. Remember even a 5% lift in volume is over 1million tonnes. Logging, transport and wharves are all close to capacity.” Another commented: “I think we are probably at the top of the price increases we’ve seen over the past 12-to-24 months for various reasons. Shipping has become more expensive with the rise in oil prices, so that is squeezing buyers and they’ll be wary about paying more for logs. Also, there are more sources for logs internationally these days, so NZ is but one of many players and if our prices get ahead of themselves, buyers have other options. And China is still a big worry with its overheated property market.”
That view was echoed by another forester who predicted there could be a challenge from “increased cheap logs from South America to China”.
Whilst another forester believes “NZ’s ability to increase timber harvest (is) beginning to be constrained by labour availability”.
Yet another thinks “China construction sector is likely to drop away putting pressure on pricing but this may be offset by a drop in volume from Australia and NZ”.
Last year New Zealand shipped a record 18.8 million cubic metres of softwood logs overseas, an increase of 18% on 2016, with exports to China jumping 29%, which accounted for three-quarters of the total.
New Zealand was the top source of softwood logs to China last year, with its share of the market lifting to 36.3% from 34.7%. China’s overall demand for softwood logs increased 10% to 31 million tonnes as the country clamped down on harvesting its own forests and reduced tariffs on imported logs to meet demand in its local market.