Axe taken to forest harvest volumes

Kiwi felling dropped last year for the first time in seven years. Photo / NZME

New Zealand forest harvest volumes fell last year for the first time in seven years as uncertainty about future prices prompted plantation owners to hold back from felling their trees.

The country harvested 28,896,354 cu m of wood, mostly radiata pine, last year, 3 per cent less than in 2014 and marking the first fall since 2008, AgriHQ said, citing Ministry for Primary Industries data.

The value of wood exports, New Zealand's third-largest commodity export behind dairy and meat, slid 4.1 per cent last year to $3.52 billion, according to Statistics NZ data.

Forest owners generally harvest their trees at between 25 and 30 years old, giving them flexibility to cut trees when prices seem most favourable.

While large forest owners tend to harvest continuously, smaller owners are more price sensitive and boosted production in 2014 to take advantage of record prices then held off in 2015 as the outlook softened, AgriHQ said.

"You have got a window of quite a few years to harvest and a couple of years ago when prices were really high, a lot of those people jumped in, people harvested trees a little bit at the earlier end because prices were so good and then as prices dropped away in the past 18 months or so those people around the fringes haven't harvested as they decided that you are better to sit tight for a while," said AgriHQ forestry analyst Nick Handley.

"Production got a little bit ahead of itself or was pulled forward because prices were good."

While domestic prices had stayed well supported by the rebuilding of quake-damaged Christchurch and growth in Auckland, demand in China, NZ's largest export market, had been flat with local export returns held up by lower shipping rates and a decline in the Kiwi dollar, Handley said.

New Zealand overtook Russia as the largest forestry exporter into China in 2013 and had kept that mantle in 2014 and 2015, AgriHQ said.

Still, a slowdown in manufacturing and construction in China has led to an inventory build-up there and reduced demand for NZ timber, which is typically used for boxing and packaging.

Handley said the NZ forest harvest would probably be flat this year until there was more certainty around the outlook, particularly for China.

Still, over the longer term harvest volumes would probably increase as trees planted in the early 1990s come due for felling, he said.

Forestry plantation activity in New Zealand jumped between 1992 and 1998, as a surge in Asian log prices lured investment syndicates to the sector and the so-called "wall of wood" is expected to start being harvested from about 2018, according to government figures.