Log prices back on the rise

Chinese importers have resumed log buying to lift New Zealand prices. Photo / Warren Buckland

New Zealand export log prices have lifted from a two-year low as Chinese importers resume buying and local returns are bolstered by a decline in the New Zealand dollar and cheaper shipping costs.

The average wharf gate price for New Zealand A-grade logs fell to $76 a tonne in July, the lowest since April 2012, but have since recovered to $80 a tonne in August and $88 a tonne in September, according to Agrifax's monthly survey of exporters, forest owners and sawmills. This month's survey, which is still being collated, is also likely to show a gain, Agrifax said.

Chinese importers have resumed log buying after a glut of inventories on Chinese ports pushed down prices. China is New Zealand's largest log market and wood is the nation's third-largest commodity export.

New Zealand returns in the past two months have been bolstered by a decline in the value of the kiwi and cheaper shipping charges as a result of increased capacity.

"There has been an increase in buying as importers try to take advantage of the lower price but construction activity definitely seems to be down over there," said Agrifax forestry analyst Ivan Luketina, who visited China for the Global Timber and Wood Products Trade Conference last month.

"A lot of importers over there basically speculate on price so once they see that the log price had got to where they saw as the bottom, they started buying again so they would have the inventory at the lower price so they can make a margin on it when prices start rising again," Luketina said.

"The prices could be supported at this level now."

New Zealand logs are mostly used in the construction industry, where demand remains lacklustre.

"We saw that construction activity was not picking up at all," said Luketina, who visited Chinese ports and sawmills as part of a tour organised by Canadian-based International Wood Markets Group.

"A lot of these importers have brought in more imports at the lower price but it's not being passed on to the construction industry. Overall the construction industry seems fairly stagnant, we were visiting some facilities where they had capacity for 80 to 100 sawmilling lines and only 30 were operating in one place. Generally the conversations we had with the sawmill owners were that they had seen quite a big downturn in construction activity and construction lumber."

Many Chinese sawmills were trying to adjust their business to the furniture market, where they saw more demand, Luketina said.

New Zealand wharf gate prices are being distorted by the impact of currency and shipping, with some exporters receiving $110 a tonne this month, Luketina said. The higher wharf gate price "is likely to mean more people are going to be exporting even though the inventories in China haven't actually decreased significantly", he said.

Logging on
• New Zealand log prices have lifted from a two-year low.
• Chinese importers have resumed buying to take advantage of the lower price.
• Returns are being bolstered by a lower-valued kiwi dollar.
• Longer term, construction in China should support demand amid dwindling supplies from Canada and Russia.