NZ export log prices rise in December, as cheaper shipping offsets weak demand

The Chinese market continues to be weak heading into a seasonal slowdown for winter and Chinese New Year

New Zealand export log prices advanced for a fifth month in December as a decline in shipping costs bolstered local returns and offset weak prices from China, the country's largest market.

The average wharf gate price for New Zealand A-grade logs rose to $101 a tonne, from $98 a tonne in November, 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, advanced to 94 from 92.7 in November.

New Zealand log returns were bolstered in the month by a fall in shipping costs following a collapse in oil prices, and a decline in the New Zealand dollar.

The kiwi averaged 82.42USc in December, from 82.78c in November and a peak of 88.35USc in July, according to Reuters data. Still, prices in China remained lacklustre as demand continues to be weak heading into a seasonal slowdown for winter and Chinese New Year.

"Returns to New Zealand exporters increased due to further drops in shipping costs brought on by the drop in global oil prices," said AgriHQ forestry analyst Ivan Luketina. "In China, building activity is going into its seasonal low patch, which will put further downward pressure on prices there.

"Currently prices in China are below October's price, but it's being more than offset by the fall in shipping costs and the New Zealand dollar. This creates the potential for oversupply in China," he said.

In the New Zealand domestic market, sawn timber production in the third quarter was the highest in four years amid expectations for increased building activity over the New Zealand summer, Luketina said, citing Ministry for Primary Industries figures.

Wood is New Zealand's third-largest commodity export.