High Chinese inventory pushes log prices to lowest level since September

The average price of pruned logs increased leading into the second quarter, now sitting at $160 a tonne. Photo / Alan Gibson

New Zealand export log prices fell to a seven-month low as high inventories on Chinese ports dent demand in the country's largest market.

The average wharf gate price for New Zealand A-grade logs fell to $94 a tonne in April, from $106 a tonne in March, the lowest level since September, according to AgriHQ's monthly survey of exporters, forest owners and sawmillers.

The AgriHQ Log Price Indicator, which measures average log prices weighted by grade, fell to 93.29 from 96.58 in March.

The prices for New Zealand A-grade logs delivered to China are at the lowest level since AgriHQ started tracking the grade in February 2012. Inventories on Chinese ports are reportedly close to 5 million cubic metres, more than double the normal level of around 2 million cubic metres.

"Until these volumes clear we can expect low prices," said Emma Dent, an analyst at AgriHQ. "Inventories are expected to remain high and potentially build through April before starting to clear through May. However, it is likely that inventories won't be at normal levels for up to six months."

Sawmill activity in China lifted in March to around 60,000 tonnes per day and may now be hitting 70,000 tonnes per day, with inventories likely to start reducing provided less supply is shipped, Dent said. Continued decline in export prices will likely impact domestic log prices, she said.

Demand remains strong for structural logs although there were some reports of prices dipping heading into the second quarter, Dent said. Across the country structural logs look to be sitting steady at around $108 a tonne.

The average price of pruned logs increased leading into the second quarter. The average New Zealand price is now sitting at $160 a tonne. Prices are higher in the Central North Island due to tight supply, while prices in the South Island are averaging $145 a tonne.

New Zealand exports of logs and wood slipped 13 per cent to $3.53 billion in the year through March from the year earlier period, according to Statistics NZ data published this week.