Export log prices fall in August on weaker demand from China

New Zealand export log prices fell this month as weaker demand from China pushed up inventories in the country's largest market to more than double their normal level.

The average wharf gate price for New Zealand A-grade logs dropped to $84 a tonne in August from $86 a tonne in July, according to AgriHQ's monthly survey of exporters, forest owners and sawmillers. The AgriHQ Log Price Indicator, which measures average log prices weighted by grade, slipped to 88.70 from 89.17.

The prices for New Zealand export logs has weakened as inventories on Chinese ports rose to about 4.7 million tonnes from 3.8 million tonnes last month, and more than double the normal level of about 2 million tonnes. This, combined with lower demand during the country's summer season, caused the price for New Zealand A-grade logs delivered to China to fall to US$98/JAS, the lowest price since AgriHQ started collecting the data in September 2012.

"The lower New Zealand dollar and reduced shipping rates are a bright spot for exporters, buffering the impact on prices at the wharf gate," said AgriHQ analyst Emma Dent. "Market participants are not confident in the Chinese market at present. Buyer confidence is at an all-time low, along with a turbulent stock market and slowing economy. Most are expecting to see demand pick up through September. However, until inventories clear, a price recovery will remain out of reach."

Prices for New Zealand domestic logs fared better, Dent said.

Pruned logs remained unchanged at $163 a tonne as demand continued to exceed supply in the central North Island.

"While some mills are still reporting an influx of pruned logs, overall there is still a shortage," Dent said.

That saw North Island pruned logs fetch a premium of $166 a tonne over South Island logs at $155 a tonne, she said.

The price for structural logs slipped to $105 a tonne from $106 a tonne the previous month as demand weakened over winter, Dent said.

"Market participants are expecting to see demand pick up as we head into summer," she said. "The housing shortage, along with recent building statistics, show that demand is still there for structural logs."

Wood is New Zealand's third-largest commodity export, behind dairy products and meat. The value of wood exports fell 11 percent to $3.56 billion in the year through June, according to Statistics New Zealand.

(BusinessDesk)