Forest360 NZ market update - September 2024Friday 27 Sep 2024
Spring has sprung, lambs are frolicking, daffodils are blooming, and the feeling of warmer temperatures and better times is hanging heavy in the air. Unfortunately, like the frolicking lambs, logs are still worth bugger all in the export market, with September prices flat and with August at around NZ$113/m3 for A grade. However, that feeling of better times is likely to come to fruition for logs (but probably not lambs), as shipping rates ease and in-market sales prices increase, albeit very marginally. If you run the abacus over what October might look like, you get a number in the early NZ$120’s/m3 for North Island ports. This increase will be as welcome to forest owners as Darlene Tana’s departure from parliament will be to the Greens (and everyone else). On port log inventories in China have increased by over 200,000m3 in August to 3.4million m3 as supply has been stronger than expected, however, offtake has also recently increased by around 10,000m3 per day to 60-65,000m3 per day which should help balance the books. The NZ:US exchange rate has continued to be strong at $US0.62 which has not helped pricing levels. As a rule of thumb, every cent appreciation in the $NZ takes around $NZ3/m3 off the bottom line. There’s still no change in the residential construction activity in China and there’s not likely to be for a while, as there’s currently enough empty new housing stock to rehome the entire Chinese population and still not touch the sides. This is being reflected in the log mix demand, with less demand for the lower industrial grades (Ki and KIS) and more demand for the higher grades (A grade), especially the longer lengths. This is due to demand now coming from the furniture and packaging sectors which require higher quality logs rather than construction and likely represents the new norm going forward. Construction numbers at home don’t look terribly flash either with consents down 22% compared to 2023. While we don’t have the ridiculous over supply issues that China does, we do have other issues. Construction Minister, Chris Penk, said recently that it was “too hard and too expensive to build” and committed to cutting red tape and lowering building costs. This will be great news for homeowners as anyone that has dealt with building consents will understand the cost that bureaucracy adds to a build. Domestic log demand has, however, remained relatively stable despite the current trading conditions facing merchants. The recent closure of the Winstone Pulp and Sawmills in Ohakune as a fallout of the recent power price spikes has rocked the local communities with the loss of 230 jobs. More >> Source & image credit: Forest360  | ||
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