PF Olsen NZ log market report – May 2024Friday 7 Jun 2024
At Wharf Gate (AWG) log prices remained flat with very little market movement. Log Inventory has started to reduce in China. Modest price increases are expected for June log sales, but this is unlikely to translate to increased AWG prices in New Zealand, as shipping costs remain high and the NZD has recently strengthened against the USD. Domestic demand for sawn timber remains very low, and many sawmills now plan to reduce production of structural lumber to match orders. The PF Olsen Log Price Index remains at $113. This is $6 below the two-year average, and $7 below the three and five-year averages. Domestic Log Market Domestic demand for sawn timber is poor and slipping. Construction activity remains very low in New Zealand. Some sawmills are offering significant discounts to move product, as mills compete for market share. This is at a time when the costs of production have increased, so many mills are getting squeezed in the middle. Sales of clear boards into Europe are relatively strong, but high shipping costs and a stronger NZD will reduce the returns from these sales. Sales of sawn timber into Asia are steady, but there is some price pressure developing. Export Log Markets - China China log inventory has reduced, with softwood levels (which is mainly New Zealand radiata pine) at about 3.2m m3. Daily off-take remains at 70-75k per day. The sale price for A grade pine logs in China during May has been around 116 USD. Exporters expect log prices will increase in June. The China Caixin Manufacturing PMI increased in April to 51.4 from 51.1 in March. (Any number above 50 signals manufacturing growth). New export orders grew at the fastest rate in three and half years. China has announced wide-ranging measures to assist its ailing property sector. He Lifeng (vice premier and the Communist Party’s top economic official) wants municipal governments to buy unsold homes and convert them into affordable social housing. To facilitate this, in a coordinated move, the People’s Bank of China (PBOC) announced it will establish a nationwide program to provide 300 billion yuan (41.5b USD) in loans to fund this state purchase of unsold homes. Central government will also encourage commercial banks to support local state-owned enterprises to buy unsold homes in an effort to raise the potential capital input to 69b USD. While share prices have been increasing, any increase in construction will likely be muted. It does signal that China still wants to rescue what was once the engine room of its GDP growth. While the China government does not want to return to the speculation driven excessive construction, they do seem to want sustainable construction activity. New Zealand forest owners and log exporters will need to adjust supply to match this lower demand base. This will be especially important during the New Zealand summer when drier ground conditions facilitate increased harvesting levels. More >> Scott Downs, Director Sales & Marketing, PF Olsen Ltd Source: PF Olsen | ||
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