NZ export log prices edge up from eight-month low in September

Monday 19th September 2016

New Zealand export log prices edged up from an eight-month low in September as demand, shipping rates and the currency remained relatively stable.

The average wharf gate price for New Zealand A-grade logs edged up to $111 a tonne in September, from an eight-month low of $110 a tonne in August, according to AgriHQ's monthly survey of exporters, forest owners and saw millers. The price is 35 percent ahead of the same period last year.

"Export log returns look to have stabilised following the weakness observed last month, with wharf gate returns faring better than some had previously anticipated through August and early September," AgriHQ analysts Reece Brick and Shaye Lee said in their report. "Few of the key factors which influence returns at the wharf gate moved by any significant degree, leading to this steadying of the market."

Forest products are New Zealand's third-largest commodity export group behind dairy and meat products. Export returns to New Zealand growers are influenced not only by demand in large markets such as China, South Korea and India but also the relative cost of shipping and fluctuations in the exchange rate.

Over the past month, in-market pricing through China has exceeded the expectations of some, helped by lower inventory levels than last year, AgriHQ said.

While the exchange rate has varied over the past four weeks, it has averaged at a level roughly in line with the previous month, ensuring NZ dollar returns haven't been negatively affected, AgriHQ said.

Shipping rates, while fractionally up on last month, are still well below the levels reached in previous years, the report said.

Shipping costs to China, the country's largest log export market, edged up to US$18.1/JAS (Japanese Agriculture and Forestry Standards), from US$17.4/JAS last month, and compared with US$22 a year ago. The cost to South Korea was little changed at US$17.8/JAS from US$17.6/JAS last month, and US$21.2/JAS a year ago, while the cost to India was steady at US$24.4/JAS from US$24.9/JAS last month and US$29.6 a year ago.

All grades of unpruned logs made marginally more at the wharf gate, with pruned logs the only export grade to record a decline in prices, due to pressure on pruned log prices in China, the report said.

"The general perception across the market is for a similar to slightly firmer end to the year, which will flow through into the start of 2017," the analysts said in their report.

In the New Zealand domestic log market, supply and demand were positive, underpinning the market and ensuring prices remained firm, they said.

"There is little indication that the domestic market will move a significant amount in the short term," the report said. "The strong housing construction sector should underpin demand, while there's little to suggest supply will lift for now."

BusinessDesk.co.nz

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