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China demand fuels forestry export record

Friday 2nd July 2010

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Chinese log demand has helped create a New Zealand forestry export boom in spite of other key markets’ subdued construction activity.

Local forestry exports to China increased 63% in 2009 from a year earlier, according to the Ministry of Agriculture and Forestry’s Situation and Outlook for New Zealand Agriculture and Forestry, as log exports more than doubled and timber shipments rose 70%.

Forestry exports had their largest ever March quarter at 5.5 million cubic metres and made a record harvest for the year-to-March at 22.2 million cubic metres. China took almost a quarter of all log exports, up from less than 7% in the year to March 2008.

Its increased interest means total forestry-based exports for the year to June 30, 2010 are projected to be 18% higher in volume terms than for the previous year, despite middling demand from Australia and the US.

The timing is perfect for the Kiwi forestry industry that “has come about partly because of Russia’s imposition of an export tax on logs, which has increased Chinese demand for logs from alternative suppliers such as New Zealand,” said MAF director-general Murray Sherwin.

“The increased demand at a time when the construction and building industries in developed countries are still coping with the global downturn has been a blessing.”

Sherwin said criticism of log exports as opposed to value-added products is misplaced in this instance.

“Value-added does not automatically equate to profit-added,” he said.

“It makes a lot more sense to ship logs at a profit than processed wood products at a loss.”

The wood processing industry’s substantial challenge is to develop profitable high productivity processing capacity for world markets while competing effectively with the international log market for raw materials, Sherwin said.

MAF’s SONZAF forecast shows China’s demand slowing as 2010 progresses, with second and third largest log importers, South Korea and India respectively, having the potential to cushion any downward pressure on prices arising from easing Chinese requirements.

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