New Zealand export log prices to China, which have dropped by about a third to $87 a tonne in the past three months, may start to stabilise next month as supply eases, slowing an inventory build up on the ports of Asia's largest economy, according to Agrifax.
Log inventories on Chinese ports have more than doubled since the start of the year to about 4 million tonnes, which equates to about two-and-a-half months' usage, as an expansion in China's housing market led to a surge in supply from exporters wanting to benefit from higher prices, according to Agrifax forestry analyst Ivan Luketina. A slowdown in the Chinese housing market has caused prices to drop and led to tighter credit for log buyers, denting Chinese log imports, he said.
"House sales in China are slowing down and the flow on effect from that is that the banks are less willing to lend money out for development or buying houses, and that means earlier on in the year there was a dip in usage of the logs," Luketina said. "The dip in usage earlier in the year combined with the massive imports has caused the inventories to really grow quickly. The inventories need to come down, and that should be starting to happen now."
Government figures today showed New Zealand exported $4.14 billion of logs, wood, and wood articles in the 12 months ended May 31, up 24 percent from a year earlier.
Chinese log inventories may not return to more normal levels for at least four months and prices are unlikely to rise before then, Luketina said. A correction following a spike higher in 2011 took about 20 months to recover, suggesting the latest price recovery would likely take a slow, consistent path, he said.
The price decline may be welcomed by the domestic market where mills have struggled to compete for wood with exporters, Luketina said. However, while industrial and utility log types will probably follow the decline in Chinese export prices, structural and pruned grades are likely to decline only marginally as demand remains strong in the Christchurch and Auckland housing markets, he said.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Genius move: Live-stream file-sharing chaos will play into Dotcom’s hands
- MARKET CLOSE: NZ shares rise, Auckland Airport gains while A2 Milk falls
- NZ POLITICS DAILY: Helen Clark’s failing campaign for the UN
- Mad Butcher owner flags going concern issue
- Carmel and Hugh Fisher buy palatial clifftop Takapuna home
Most listened to
- No chief of staff leaves one year before an election, says Matthew Hooton
- 'Grumpy as hell' Bill Bennett says he'll use a VPN to connect to Chelsea's club channel
- NZForex's Alex Hill says the market will be paying more attention to data, than comments from officials
- Timely chief executive Ryan Baker on making an unfashionable profit
- NZ King Salmon CEO Grant Rosewarne on his company's float plans