January 2025 Market Update

Friday 24 Jan 2025

 
Opinion Piece: Marcus Musson, Forest360 Director

Another New Year, another hole in the belt, another bunch of ‘get fit’ and ‘sobriety’ resolutions that probably won’t make it past the couch or fridge, and another year of anticipation on what might be around the corner for the commodity trades. The past few years have certainly been ones to forget with massive inflation related cost increases, erratic demand thanks to the Chinese construction implosion, and unforeseen weather events. Hopefully, like Joe Biden, these will be buried in the past and 2025 will be one out of the box.

We all have hope, but unfortunately, reality generally gives us a quick backhand to shake us out of dreamland. While 2025 has started well with increased At Wharf Gate (AWG) export returns, the underlying demand profile isn’t much different from last year. January’s AWG prices are up a few dollars to around $128/m3 in Southern North Island and Northern South Island ports with $2-3 more in Tauranga and Marsden and up to $20/m3 less in Lyttleton and other southern ports.

These numbers will get the woodlot sector fired back into life, especially during the summer months, but these increases are purely driven by lower shipping and exchange rates, not demand. The market does not need increased supply, and any increase in supply will likely result in lower sales prices.

Chinese New Year holidays (CNY) start on the 29th of January this year and many sawmills have already closed as their workforce return to their home provinces. This shutdown generally lasts 4 weeks, and there is some expectation that this year the break may be slightly longer. Off port uplift in early January was around 65,000m3 per day and inventory is sitting at a shade under 2.9million m3, an increase of approximately 200,000m3 on the month prior. It is likely that inventory will get close to 4 million m3 post CNY which is getting into pucker territory for exporters.

There is some sliver of good news with the Chinese construction sector reporting that residential house price declines have slowed with a 5.3% decline in December compared to 5.7% in November. December marks the 18th consecutive month of price decreases, and it is now widely expected that the bottom has been or is close to being found. There’s still purportedly around $US1 trillion of stimulus to be thrown at the sector to try and get some traction, but with around 2 years’ unsold housing stock in the system, it may not be until mid-2026 that we see some significant upwards momentum.

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Source & image credit: Forest360


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