Export log prices hit 3-year low; may start picking up as demand improves

New Zealand export log prices, which fell to a three-year low this month, may start to pick up as demand improves in China, the country's largest market.

The average wharf gate price for New Zealand A-grade logs fell to $83 a tonne in May, from $94 a tonne in April, marking the lowest price since May 2012, 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, dropped to 88.40 from 93.29 in April.

The price for New Zealand A-grade logs delivered to China fell to $US99/JAS from $US111/JAS last month, the lowest level since AgriHQ started collecting the data in 2012. While inventories currently sit at about four million cubic metres, double normal levels, Chinese sawmills have stepped up demand, taking an average 65,000 tonne per day from the ports, leading to optimism that the bottom of the market has been reached and prices will now start rising, AgriHQ said.

"High takeoff from ports is a good indicator that ports will start to clear, which will increase demand leading to prices returning to normal levels," said Emma Dent, an analyst at AgriHQ. "This isn't an overnight fix though; it will take some time for prices to get back to normal levels."

She said the latest survey showed people in the market expected prices may rise between $US5-10/JAS next month.

Demand for New Zealand structural logs remains steady, due to local demand for housing, particularly the shortage of houses in Auckland, Dent said.

However, prices for structural lumber dropped to $107 a tonne this month from $108 a tonne last month, weighed down by lower export prices and as a higher New Zealand dollar dented demand in the key Australian market, leading to an oversupply in the New Zealand domestic market.

Pruned logs continued to rise this month, with the average price sitting at $161 a tonne from $160 a tonne last month. Average prices in the North Island at $164 a tonne continued to outpace the South Island at $148 a tonne due to tight supply in the Central North Island, Ms Dent said. There were more pruned logs available heading into winter, she said.

Wood is New Zealand's third-largest commodity export, behind dairy products and meat.

(BusinessDesk)