Log prices reach 23-year high
New Zealand structural log prices have hit their highest level in more than two decades as local mills compete with the export market to secure supply to meet demand from the domestic market.
The price for structural S1 logs lifted to $124 a tonne this month from $123 a tonne last month and $114 a tonne at the same time last year, reaching the highest price for the grade since April 1994, according to AgriHQ’s monthly survey of exporters, forest owners and saw millers.
“Supply and demand fundamentals remain skewed in favour of sellers rather than buyers, squeezing even more returns out of harvested logs,” AgriHQ analyst Reece Brick said in his report.
The market remains strong for most segments of the domestic industry, even as the volumes traded slowed when winter weather stymied construction activity, AgriHQ said, noting that local wood supply had been hampered due to difficulties harvesting in wet weather.
While strength in the local housing market is helping stoke demand, the main driver behind higher domestic prices is that export markets are draining supplies out of New Zealand, the report said.
“Domestic mills are in a tugof-war with export log traders for unpruned logs and are facing the prospect of further hikes in log procurement costs,” Brick said. “A large portion of mills are still paying below the export market for logs. Log suppliers are currently attempting to gauge mills’ ability to absorb higher log prices”.
Forest products are New Zealand’s third-largest commodity export group behind dairy and meat products.