New Zealand Log Prices - January 2012Friday 27 Jan 2012 Log prices have bounced around over the past couple of months with many saying that this is the sort of behaviour we should expect to see in this market for the foreseeable future. There is still strong demand for New Zealand logs in China even as there are reports of slowing growth. However, the government is trying to cool the rampant property market by building more affordable housing. This is of course doing wonders for the demand for building materials such as timber.Even with large volumes of logs coming out of the Pacific North West, New Zealand is remaining very strong in the Asian log market. Market share for New Zealand has slipped a little over recent months but volumes have increased and record volumes of logs are being exported to China from New Zealand each month. January has seen another lift in the CFR price for logs in market. KS logs are now up to US$124/JASm³, KI logs are US$119/JAsm³ and A Grade logs are US$130/JASm³. This is a more substantial lift than seen last month. China is well balanced heading into the Lunar New Year, off-take is down as expected but so are deliveries. This means port inventories in China are steady at around 2.5Mm³. 0 3Mm is the level that tipped the market over last time. A careful watch on how quickly these inventories grow over the CNY and the impact on the market it could have. It will set the market tone for the next 3-6 months. India has a sufficient inventory and now needs this to drop before there will be any lift in demand. It’s expected that prices for February could also lift again but at the least should remain at current levels. However, once again the Chinese New Year could have an impact on the market and force inventories to go high. Sea freight rates out of New Zealand have remained soft for the past month in-line with global freight prices. Over the past month shipping rates have plummeted with the Baltic Dry Index now below 1000 for the first time since January 2009. This index is an indication of global trade activity; low shipping rates indicate surplus shipping due to less demand for freight services globally. The Agrifax Log Index is up again this month as prices between regions closed up slightly. While some regions experienced no change or even a drop in prices others had significant gains. There is a possibility that the lift in log prices this month could be undone next month should inventory levels in China swell over the Lunar New Year period. Exports out of the Pacific North West were up in December after a decrease in logs leaving this region in November. These December exports should reach markets in early January and coincide with the holiday period in China. North Island
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