
The six months from October to March was one of the longest
spells of market stability this decade. Prices at the New
Zealand wharfgate (that is, what exporters are paying
harvesters) held at or a little above the five-year average
through these months, which was ideal as this timed with the
seasonal increase in log harvesting as weather conditions
improved.
A few different factors all worked in New Zealand log
harvesters’ favour during this time, including a weakening
exchange rate, softening shipping costs, further growth in sales
into India, and a period of stability around China’s economy and
construction sector.
However, if it’s going to get rocky, it’s usually in the months
immediately following Chinese New Year, when buyers there
reassess their requirements against the volume of extra logs
that stacked up on ports while they were on holiday. And this
dynamic was the key driver behind this latest price drop.
Average prices at the New Zealand wharfgate have weakened by
around $20/JASm3 since March to a national average of
US$113/JASm3 for A-grade logs last month. This month’s prices
are yet to be fully collated but appear to be about the same.
We shipped 3.7 million cubic metres of softwood logs to China
through March and April, the highest recorded for these months
and up from 3.2 million m3 in the same months last year.
The volume of softwood logs on port in China rose to around 4.0
million m3 after the Chinese New Year, and the fact that more
logs were on the way meant buyers there could negotiate prices
down.
These on-port volumes weren’t overly large compared to other
times in the past 10 years or so. However, log usage rates in
China aren’t what they used to be since the collapse of various
giant property development companies, which started from the
second half of 2021, a situation that is yet to fully resolve
itself.
Official construction data paints this picture clearly – as of
April, the floor area of new Chinese houses that began
construction this year was the lowest since 2004 at 18 million
square metres, down from 40-59 million m2 through the same
period in 2016-2022.
The United States-China tariff war added further uncertainty to
the market and the wider Chinese economy at the start of March
too. Over the past five years, the US has been the largest
single market for Chinese wood products with an annual market
share of 18-22% by value.
The good news is we appear to be at the bottom of the market, at
least for the short term. The 90-day partial “truce” between the
US and China from mid-May has eased tensions, while log supplies
out of New Zealand are tightening due to the weather and the
weaker pricing.
Log usage rates in China have been somewhat positive too, to the
point where port-level log inventories have declined this month.
The exchange rates and shipping costs have mostly stabilised
too.
India is slowly re-emerging as an alternative market for New
Zealand logs, though they’ve only exceeded a 5% market share by
volume once in the past 12 months.
This trade has been growing in unsteady steps since last year,
following the relaxation of rules in India, which previously
required logs to be fumigated with methyl bromide before
departure. This was outlawed in New Zealand in mid-2021.
Like China, the oversupply of logs has been holding back this
market, mainly due to steady-to-strong supply from Australia and
South America. It is hoped that free trade talks will expand
market opportunities here, given India applies a 5% tariff to
all New Zealand log imports, which can be enough to tip the
scales as to whether this trade is viable considering the cost
to ship to India is more than it is to ship to China/South
Korea.
Source:
agrihq.co.nz