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NZ export log prices lift in May

Monday 23 May 2016 10:44 AM

NZ export log prices lift in May as weaker currency offsets higher shipping costs

By Tina Morrison

May 23 (BusinessDesk) - New Zealand export log prices advanced this month as a decline in the local currency made the country's shipments more competitive, offsetting a lift in shipping costs.

The average wharf gate price for New Zealand A-grade logs edged up to $120 a tonne in May, from $119 a tonne in April, according to AgriHQ's monthly survey of exporters, forest owners and saw millers.

The in-market price of A-grade logs in China, New Zealand's largest market, advanced to US$113/JAS from US$111/JAS last month as inventory levels on Chinese ports remain moderate, following a relatively low build up of stock on ports during the Chinese New Year holiday period. Log inventories on Chinese ports are about 3.6 million cubic metres, with a consistent offtake of 50,000 to 55,000 cubic metres per day, although volumes are coming at a faster rate, suggesting inventories are building, AgriHQ said.

"The outlook for the market varies between NZ market participants," AgriHQ analysts Reece Brick and Shaye Lee said in their report. "Some believe the market will maintain its current trend in the coming months, given the recent stability of the market. Others are more pessimistic, believing current returns are too high to be maintained in the long run."

Chinese log imports lifted 2 percent to 6.1 million tonnes in the first quarter, with New Zealand and Russia each accounting for about a third of the trade. March imports lifted 53 percent from February, signalling recovery of market activity after the Chinese New Year and trade is expected to lift in the second quarter, in line with the seasonal trend, AgriHQ said.

Meanwhile, in the New Zealand domestic market, prices lifted for both pruned and structural logs as demand exceeded supply. In the pruned market, P1 logs rose to $181 a tonne from $180 a tonne last month, supported by house construction.

"The continuation of the housing boom has acted to support structural log markets," AgriHQ said. "Housing construction through both Auckland and Christchurch remains the main driver of demand, but interest in other centres such as Hamilton is also positive, as the high cost of living is leading to some moving away from the Auckland region."

In the structural market, S1 logs firmed to $114 a tonne from $112 a tonne last month. Demand for structural logs is expected to ease heading into harsher seasonal weather, which will slow construction activity, AgriHQ said.

Roundwood demand is stronger than anticipated as demand from the horticulture and viticulture industries is offsetting a decline in demand from the dairy industry. The pulp market was impacted by production issues at multiple mills, although prices remained unchanged at $49 a tonne as some of the backlogged log stock was pushed onto the export market, AgriHQ said.

Shipping rates to China edged up to US$14.7/JAS from US$14.2/JAS last month, while rates to South Korea advanced to US$16.2/JAS from US$15.1/JAS, and rates to India lifted to US$21.6/JAS from US$21.3/JAS.

"It is expected shipping rates will follow a similar trend to the oil price in the coming months, however the large number of shipping vessels operating at present will likely keep rates well below where the market has sat in recent years," AgriHQ said.

Forest products are New Zealand's third-largest commodity export group behind dairy and meat products.

(BusinessDesk)

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