25 Aug 2015

China blamed for latest log price drop

1:51 pm on 25 August 2015

A slow down in demand from China has caused export log prices to fall.

A pile of Pinus radiata logs waits for export at the port in Lyttelton.

A pile of Pinus radiata logs waits for export at the port in Lyttelton. Photo: 123rf

The average wharf gate price for New Zealand A-grade logs dropped from $86 a tonne in July, to $84 a tonne this month.

Forest Owners Association technical manager Glen Mackie said it was due to stock piles building up again in the main market, China, and that was putting pressure on harvesting here.

"The main issue with China at the moment is too many logs. There are extremely high log stocks at the ports, and you can't just turn off harvesting crews.

But he said New Zealand was internationally "very competitive" for the supply of logs and this was allowing radiata to take an increasing percentage of a reducing market.

"What we're finding is that logs from the higher cost supply regions are now dropping out, for example Canada and the US, so it's not all bad, but the New Zealand harvest is definitely declining and that's just reflecting reality in China."

However, log prices on the domestic market are holding up and Mr Mackie said there were positive developments in the New Zealand timber processing industry, in part driven by demand in Christchurch and Auckland.

"There are two new sawmills about to open in Rotorua, which are world scale, much, much larger than what's there at the moment and there's another mill just out of Rotorua that's scaling up as well, putting a new line in.

Auckland and Christchurch were definitely creating a lot of the demand, but some of these mills will also be aimed at the export market.

Mr Mackie said while a number of saw mills have closed in the past few years, a lot of that was due to rationalisaiton of the processing market.

"Although there are fewer mills, the volume of lumber produced actually dropped relatively modestly, and it's just a reflection of the mills getting bigger and becoming more competitive."