Local exports and global forestry industry holding their own

WITH COVID-19 MAKING THE OUTLOOK for primary industries more uncertain than ever, the Ministry for Primary Industries (MPI) decided to delay the release of its June Situation and Outlook for Primary Industries (SOPI) report.

“The COVID-19 pandemic means the situation changes on an almost daily basis. Instead, MPI has prepared a report on how COVID-19 has disrupted NZ’s primary industry exports. This shows that, in general, primary sector exports are holding up well, primarily due to the NZ dollar weakening against the United States dollar,” says MPI.

In fact, it predicts primary sector exports will grow by $1.7 billion compared to last year, a rise of 4.5%. However, those gains are “exaggerated” by the falling NZ dollar (NZD), without which export revenue would have fallen, the report says.

In terms of forestry, China’s lockdown in February 2020 caused a 23% drop in total forestry exports that month, with further drops in March and April. However, with exports able to start again once NZ moved to Alert Level 3 in late April 2020, by late May, exports were at similar levels to May 2019.

Meanwhile, the Wood Resource Quarterly (WRQ) report which tracks prices for sawlog, pulpwood, lumber and pellets worldwide, and reports on trade and wood market developments in most key regions around the world, has been released. The key points follow:

Global lumber markets

• Importation of softwood lumber to the US fell for the third consecutive year in 2019. However, in the 1Q/20, the import volume was up year-over-year, and the month of March was surprisingly strong despite the Coronavirus Epidemic.

• Softwood lumber imports to China plunged in the 1Q/20, 14% lower than the previous quarter and 37% lower than the all-time-high in the 2Q/19.

• Profitability generally improved for lumber producers around the world in the 1Q/20. This followed a year of mostly gloomy financial news with many lumber producers making very low or even no profits at all.

• Declining export prices for sawmills in the Nordic countries coupled with only incremental reductions in log costs gradually reduced profitability during 2019 and early 2020.

Global timber markets

• There were relatively few price changes for sawlogs throughout the world in the 1Q/20 despite interruptions in trade and uncertainty in short-term lumber demand in many of the key markets.

• The Global Sawlog Price Index (GSPI) remained practically unchanged from the 4Q/19 to the 1Q/20. This followed a period of two years when the Index was in constant decline.

• Over the past two decades, sawlog prices in Eastern Europe have gone up the most on the continent, albeit from low levels, while prices in Central Europe have declined substantially, particularly in 2019.

Global pulpwood markets

• Wood fibre costs fell for many hardwood pulp-producing countries worldwide in the 1Q/20. The biggest declines were seen in the US, Russia, and Latin America.

• The Hardwood Fibre Price Index (HFPI) dropped 4.2% in the 1Q/20. This was the fourth quarter-on-quarter decline, resulting in a 9.2% reduction of the Index since the 1Q/19 and the lowest price in four years.

• The Softwood Fibre Price Index (SFPI) also spent last year in decline, although not as severe of one as the HFPI.

Global pulp markets

• Following a plunge in pulp prices of almost 30% in Europe and approximately 20% in North America from late 2018 to late 2019, prices bottomed out and even saw small price increases in early 2020.

• The premium for softwood pulp over hardwood pulp is currently about $160/ ton, the highest premium in over a year, and substantially more than the 10-years’ average premium of $106/ton.

Global biomass markets

• Domestic prices for residential pellets in the three major markets in Europe (Austria, Germany and Sweden) held up quite well during the first five months of 2020 and were just slightly lower than during the same period in 2019.

NZL