NZ export log prices jump to 9-month high on Chinese demand; slowdown looms
By Tina Morrison
Dec. 21 (BusinessDesk) - New Zealand export log prices jumped to a nine-month high amid steady inventories and stronger demand from China, the country's largest market.
The average wharf-gate price for New Zealand A-grade logs rose to $104 a tonne in December from $92 a tonne in November, marking the highest level since March, according to AgriHQ's monthly survey of exporters, forest owners and sawmillers. The AgriHQ Log Price Indicator, which measures log prices weighted by grade, increased to 97.11 from 92.51, its highest level since February.
New Zealand A-grade log prices rose for a third straight month as inventory levels on Chinese ports held steady and demand improved. The in-market, or 'cost and freight' (CFR), price of A-grade logs in China increased to US$117/JAS from US$109/JAS last month. However exporters say CFR prices in China are now starting to decline heading into the slower winter period.
"Prices once again rose sharply on the back of reduced inventories and strong demand for the beginning of December. However exporters are reporting that CFR prices are starting to experience downward pressure," said AgriHQ analyst Emma Dent. "Despite inventories remaining at lower levels, approximately 2.5 million tonnes, winter conditions in China is seeing demand soften. We are expecting CFR prices to drop back for January and the Chinese market is expected to be tough going for the first half of next year."
A decline in the New Zealand dollar and close to record-low shipping rates will help buffer the impact of lower Chinese market prices, Dent said.
Log and wood exports are New Zealand's third-largest commodity export group behind dairy and meat products. Statistics New Zealand say the value of the country's log and wood exports slid 13 percent to $296 million in October compared to the same month a year earlier. The latest trade figures for November are scheduled for release on Wednesday.
Meanwhile, prices for New Zealand domestic logs were unchanged from last month, with pruned logs at $167 a tonne and structural logs at $103 a tonne, according to AgriHQ.
Domestic log prices are forecast to increase in the first quarter of next year, led by pruned logs as demand outweighs supply in the Central North Island, Dent said.