Export log prices jump

New Zealand export log prices jumped higher this month, as falling oil prices pushed down shipping rates while a decline in the kiwi dollar made the country's goods more attractive to overseas buyers.

The average wharf-gate price for New Zealand A-grade logs rose to $115 a tonne in January, from $104 a tonne in December, according to AgriHQ's monthly survey of exporters, forest owners and sawmillers.

The in-market price of A-grade logs in China, New Zealand's largest market, remained stable at $US117/JAS – a benchmark measure – amid steady inventory levels at Chinese ports. However, prices for the logs in New Zealand were bolstered by shipping rates to China that were 7%  lower than last month and 26%  lower than a year ago. Some exporters reported the lowest shipping rates in over 20 years while AgriHQ is recording the second-lowest shipping rate to China since 2003. A decline in the kiwi dollar, which has slid more than 5%  against the greenback so far this year, also helped underpin local returns.

"The lower New Zealand dollar combined with close to record-low shipping rates is helping maintain wharfgate pricing, despite the uncertainty in the export market, "AgriHQ analyst Emma Dent said in her report. "Wharfgate log prices are expected to remain relatively flat through February before easing through March."

Demand is expected to slow in China over the next month due to Chinese New Year, before picking up again, she said.

"Following Chinese New Year, off-take from ports is expected to increase as China heads into the spring months," Ms Dent said. "The warmer months will see higher construction levels and thus higher consumption of wood products.

"Overall, 2016 is expected to show some improvement over 2015, particularly in the second half of the year," she said.

Meanwhile, in the New Zealand domestic market, the average pruned log price edged up to $168 a tonne from $167 a tonne last month, marking the highest level since 2002, AgriHQ said. In the Central North Island, where demand is outweighing supply, the price hit $173 a tonne.

"With further increases expected throughout the year, it is likely we will get close to, if not surpass, record highs," Dent said. "The unprecedented demand for pruned logs has seen the market become more diverse, with some mills now taking log lengths they weren't previously. This is allowing forest owners to get the maximum yield out of pruned stands."

Structural log prices held steady at $103 a tonne, although prices are seen increasing toward the end of January and into February amid strong demand from Christchurch and Auckland, she said.

Roundwood log prices, which have been hit by the weak dairy sector, are expected to increase this year on strong demand from horticulture and viticulture, she said. Roundwood prices are currently at $81 a tonne, having fallen from a high of $86 a tonne to a low of $77 a tonne last year.

Pulp log prices remained steady at $51 a tonne and the market is expected to be "challenging" in the first quarter of this year as global prices decline on large volumes of lower priced product from Scandinavia and Russia being exported to Asia.

Log and wood exports are New Zealand's third-largest commodity export group behind dairy and meat products. The latest trade data is due out on Thursday.

(BusinessDesk)]

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