NZ export log prices rise to 9-month high; domestic logs jump to highest in a decade

Tuesday 24th February 2015

New Zealand export log prices rose to a nine month high in February as 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 $110 a tonne, from $103 a tonne in January, according to AgriHQ's monthly survey of exporters, forest owners and sawmillers. The AgriHQ Log Price Indicator, which measures average log prices weighed by grade, advanced to a nine month high of 97.95 from 95.39 in January.

New Zealand log returns are benefiting from a decline in shipping costs, as the price of oil has slumped from a peak in June last year, and as this year's 3.5 percent decline in the New Zealand dollar makes the nation's exports more competitive. The New Zealand dollar returns aren't reflecting demand in China where log inventories have been climbing after sawmills closed for the Chinese New Year and as log buyers face difficulties getting access to credit.

"New Zealand dollar returns have moved in the opposite direction to prices for logs delivered to China," said AgriHQ forestry analyst Ivan Luketina. "Although there has been a reduction in US dollar payments to exporters, the continued changes in exchange rates and shipping prices have meant that it is more than offset in terms of returns for New Zealand exporters."

Luketina said the availability of Russian logs at cheap prices had weighed on prices for New Zealand logs. Still, he said Russian production was constrained by difficult harvesting conditions and high transport costs.

In the New Zealand domestic market, the average log price has risen to the highest in more than a decade on demand for finished products in Australia and the US, as well as demand for pruned logs for the export market. That is especially true in the Central North Island, where low supply is forcing mills to pay higher prices, Luketina said.

February's average domestic log price of $154 a tonne is the highest since April 2003, according to AgriHQ data.

Wood is New Zealand's third largest commodity export.

BusinessDesk.co.nz

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