Log export update

Friday 9 Aug 2013

New Zealand exports
Prices have decreased in export destinations, which are pushing down prices at the wharf gate, though as expected this has been mitigated to some extent by the drop in the NZ dollar. Most prices this month have remained flat though export pruned prices have dropped considerably.

Pruned exports are down $6/tonne on average, though the largest drop has come in the northern North Island where prices are down $10/tonne. The rest of the country has averaged drops of closer to $3/tonne. This is due to the sap stain issues logs have been having in ports in China, and has had more effect on at-wharf-gate returns as the demand is still high for pruned logs which is supporting the current in-market log prices.

NZ had a very large month for log exports during May, exporting 1.4 million tonnes, including over 1 million tonnes to China. This left NZ well on track to exceed the highest half year total ever for exports, despite including the typically slow January and February period. Exports this year so far are averaging just under 1.3 million tonnes per month.

May was a month of record exports from Tauranga, with 620,000 tonnes exported during the month. This was a large step up from the month previous. But over the last year, growth in Tauranga has not been as rapid as out of Whangarei, which had a 38% increase year on year for the year to May.

China imported another very large amount of logs in May, slightly down on April’s record volume, but at just over 2.9 million m³ it has contributed to a huge first half of 2013 for log imports. 12.4 million m³ have been imported this year to May. NZ is now consistently the largest supplier of logs to China, and has a 36% market share, compared to Russia’s 30% and the Pacific North West with 23%. This is a 2% increase of market share for NZ, compared with a drop of 10% year-on-year for Russia’s market share.

Investment in wood manufacturing within China has increased in May, and has been relatively high through the start of 2013. For the first five months of the year, cumulative investment has been 32% higher than the start of 2012. Investment typically rises in the from April onwards and so while it has been a promising start the total investment is still around 30% lower than when log prices reached their peak in 2011.

South Korea & India
Exports to South Korea dropped back slightly in May, though are still close to the 200,000 m³ mark. Though the South Korean economy has been slowing and there have been issues around slow building and bad weather, it is proving to be a very steady market. The start to exports this year has been 9% higher than the five year average. While exports to South Korea tend to be cheaper industrial K – grade logs, compared to the larger A-grade logs sent to China, the strong prices in China have caused the Korean market to lift as well so that average export prices are 17% above year ago levels as at May.

Exports to India have been much steadier this year than in 2012 when there were large month to month fluctuations. The Indian economy is stagnating, while inflation is growing while productivity wanes. This has caused credit supply problems that go some way to explaining the fluctuations in prices. May prices in India were also up on last year as they are forced to reach parity with China and South Korea, however, they are still only roughly in line with the highest average prices paid last year in June, when there was a short lived upswing due to availability of credit and a gap in the monsoon season.

Source: www.nzxagri.co.nz/agrifax

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