NZ export log prices rise to 9-month high in January as Chinese inventories fall

Tuesday 27th January 2015

New Zealand export log prices rose to an nine month high in January as falling Chinese inventories stoked demand in the nation's largest market and local returns were bolstered by a decline in the kiwi dollar and lower shipping costs.

The average wharf gate price for New Zealand A-grade logs rose to $103 a tonne, from $101 a tonne in December, 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, advanced to an eight-month high of 95.39 from 94 in December

New Zealand log returns are benefiting from a decline in shipping costs, as the price of oil has more than halved from its peak in June last year, and as the New Zealand dollar's drop to a three year low makes the nation's exports more competitive. Chinese log inventories, which climbed last year due to a weak housing market, are estimated to have sunk below 3 million cubic metres, close to their normal range of between 2 to 2.5 million m3.

"Inventories have come right down to near normal levels, which has been helped by a relatively mild winter in China so far meaning more building can take place," said AgriHQ forestry analyst Ivan Luketina. "However, with the Chinese New Year approaching there is potential for inventories to rise again, which would likely mean more price decreases."

Luketina said Chinese buyers were "well aware" of the lower shipping prices and declining kiwi dollar and were seeking to have the savings passed on to them.

Pruned domestic logs have increased slightly in price and there is good demand for finished products in the US, helped by the declining New Zealand dollar, he said.

Still, tight supply in the North Island is keeping log prices elevated, he said.

Wood is New Zealand's third largest commodity export.

BusinessDesk.co.nz

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