PF Olsen NZ Log Market Report - November

Friday 2 Dec 2022

At Wharf Gate (AWG) prices for export logs reduced an average of 6 NZD per JASm3 across ports in New Zealand in November. This was caused by a reduction in CFR log prices in China combined with the NZD strengthening against the USD. Log inventory in China remains stable. There is still a lot of uncertainty in China, especially with how the government will continue to manage Covid-19.

Domestic Log Market

Domestic demand for sawn timber has reduced, but this is now at a more manageable level for mills. Most mills still expect a slow-down in demand in the medium term due to inflation and cost increases reducing discretional spending. The usual summer increase in building activity and DIY will likely mean any downturn won’t happen in Quarter 1.

Sawn timber exports remain difficult. China is relatively quiet and has price pressure. Their South East Asian customers struggle with the American buyers of their mainly furniture products demanding extended payment terms as well as coping with tariffs imposed by the US government. They expect better demand in Quarter 2 of next year.

Many sawmills are closing for year-end in mid-December. This is a bit earlier than in the last couple of years as mills struggled to keep up with demand.

Export Log Markets


China softwood log inventory is stable at about 3.5m m3 and port off-take is stubbornly sitting at about 60k per day. Covid restrictions continue to significantly constrain economic activity in China.

The current sale prices for A grade logs range between 120-123 USD per JASm3. Expectations are relatively stable pricing through to the CNY then an increase in CFR prices as log buyers prepare for March and April, which are traditionally the busiest construction months in China.

The China stock market prices had increased through November when market sentiment improved after the Chinese government announced some minor changes to their Covid policy. While these changes were not significant the market read these as a signal for a potential easing of the strict Covid management regime over time. Meetings between leaders from China and the US also prompted hopes of a better economic relationship. However, stock market prices which had risen approximately 20% through November have dropped approximately 4% in the last week as Covid fears resurface.

Shares of Country Garden (China’s largest property developer by sales) more than doubled after the central bank and banking regulator announced measures that encouraged banks to assist the real estate industry. These measures are more about short term liquidity relief for developers than a fundamental improvement in the market.

The October Caixin China Manufacturing PMI increased to 49.2 from 48.1 in September. While there is still downward pressure on the China economy, sentiment has edged up from the 34-month low in September.

Log supply will remain low as Southern Yellow Pine (SYP) imports from the USA remain constrained by the pine nematode policies implemented by China earlier in the year. In Quarter 3 this year only two shipments from South America (one handy and one Capesize). Supply from New Zealand will reduce with less harvesting during December and January. Many sawmills in New Zealand are closing earlier for year-end holidays this year (after a hectic couple of years), so harvest operations will also finish relatively early in many locations.

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Scott Downs, Director Sales & Marketing, PF Olsen Limited

Source: PF Olsen

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