New Zealand Log Prices - April 2014Friday 2 May 2014 High inventories in China have brought an expectation that prices will correct downwards soon, though the size of the correction will be hard to judge. There has been a build-up of volume to more than 4 million tonnes on ports, thanks to imports in February reaching nearly 900,000m³ more than February last year and a slow return from the Chinese New Year for saw milling. This has been reduced slightly with high consumption levels lately though. Throughout the past year there has been significant pressure on prices as port inventories had been kept very low but with big stocks on hand now the pricing pressure is off.Changes in foreign exchange rates and shipping prices have lowered average returns at the wharf gate in April. Though there have just been minor changes in price, in-market the combined effects of that change, the foreign exchange and shipping costs have lowered wharf gate prices by NZ$5-$8/t for log exports. The average price for A-grade logs at Tauranga dropped to NZ$118/tonne from NZ$126/t last month. There have also been large drops in pruned log prices at the wharf gate, with Tauranga average prices dropping NZ$10/t to NZ$141/t. Structural log prices in New Zealand’s domestic market have increased by NZ$5-$6/t for the average this month. Some regions in the North Island have had average increases of up to NZ$9/t. Prices being fixed this quarter had a large increase to catch-up with the market that had become very competitive. Price increases for structural and framing timber have led to very high demand for high quality structural logs. Average prices are now at NZ$116-$119 in the North Island and NZ$112-$115 in the South Island. This put prices at their highest levels since October 1994. High demand has also resulted in a NZ$2/t increase to pruned log prices in the Central North Island area. Utility grade prices have increased along with the at-wharf-gate prices which has brought them up above record levels too. Some buyers are negotiating monthly prices in order to retain supply as the export market has risen so quickly within the quarter. With wharf-gate returns dropping this month, and further corrections in China’s market likely, there should be easing prices on the horizon for these logs types. There has been a 2.1 point drop in the Agrifax Log Price Indicator this month, as a higher NZ dollar and increased shipping prices have dropped at-wharf-gate prices for log exports. In-market prices have held steady at near to record prices, but there’s likely to be a downward correction of unknown size soon. High inventories in China have led to a big easing of pressure on prices, and US log prices have already moved down. A price correction of US$10-$15/JAS seems possible, but a correction that size is likely to bring supply down very quickly. Structural log prices have had a catch-up of $5-$6/t on average for this quarter. There has been very high demand for structural and framing timber as building activity is increasing rapidly in NZ. This has led to record high prices for structural logs which are at up to NZ$119/t in the North Island, which is the highest they have been since October 1994.
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