Export log prices fall to 7-month low as Chinese inventories build

New Zealand export log prices fell to a seven-month low as high inventories on Chinese ports dent demand in the country's largest market.

The average wharf gate price for New Zealand A-grade logs fell to $94 a tonne in April, from $106 a tonne in March, the lowest level since September, 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, fell to 93.29 from 96.58 in March.

The price for New Zealand A-grade logs delivered to China are at the lowest level since AgriHQ started tracking the grade in February 2012. Inventories on Chinese ports are reportedly close to 5 million cubic metres, more than double the normal level of around 2 million cubic metres.

"Until these volumes clear we can expect low prices," said Emma Dent, an analyst at AgriHQ. "Inventories are expected to remain high and potentially build through April before starting to clear through May. However it is likely that inventories won't be at normal levels for up to six months."

Sawmill activity In China lifted in March to around 60,000 tonnes per day and may now be hitting 70,000 tonnes per day, with inventories likely to start reducing at these levels provided less supply is shipped, Dent said.

Continued decline in export prices will likely impact domestic log prices, she said.

Demand remains strong for structural logs although there were some reports of prices dipping heading into the second quarter, Dent said. Across the country structural logs look to be sitting steady at around $108 tonne.

The average price of pruned logs increased leading in to the second quarter. The average New Zealand price is now sitting at $160 tonne. Prices are higher in the Central North Island due to tight supply, while prices in the South Island are averaging $145 tonne.

New Zealand exports of logs and wood slipped 13 percent to $3.53 billion in the year through March from the year earlier period, according to Statistics NZ data published this week. Wood is the nation's third-largest commodity export, behind dairy products and meat.

(BusinessDesk)