Driven by strong building activity onshore, the insatiable appetite from China for logs and lumber, the weaker NZ dollar and favourable shipping rates, the NZ forestry industry right now is looking in good shape. For the year ending March 2017, exports of logs wood and wood products from the country had increased 15% to NZ$4.14 billion. Providing the global political environment remains stable, the immediate outlook both for domestic and export sales also looks to be positive.
NZ log prices advance as forestry hums
New Zealand export log prices generally rose this month, as key fundamentals move in the country's favour, AgriHQ said. Prices lifted through all unpruned export log grades this month, while pruned logs experienced some minor weakness, according to AgriHQ's monthly survey of exporters, forest owners and saw millers.
"The key fundamentals at the wharfgate have swung ever so slightly into NZ exporters' favour," AgriHQ analyst Reece Brick said in his report titled 'Forestry sectors keeping humming'.
Shipping rates advanced by a small margin but appear to have plateaued and may ease in coming months, exchange rates had moved in New Zealand exporters' favour, and demand from overseas markets was good across the board, he said.
Demand from China, the country's largest wood export market, was positive with imports of New Zealand softwood logs up by 25 percent in the first quarter of this year, compared with the same period last year.
"China is still displaying very good interest in logs, as it has throughout this year so far," Brick said. "Chinese log imports are tracking at quite a high level. Thankfully this has been matched by an equivalent lift in offtake at ports, which has prevented log inventories from ballooning out and subsequently impacting on pricing.
"It's not often that demand will fall back significantly from this point in the year, which bodes well for the coming months." Brick said there's little to suggest either the export or local log markets will suffer from any significant weakness in the future.
In the domestic log market, he said "all demand fundamentals remain well placed, and it's difficult to imagine a scenario where they'd move away from their current path. There is some slight slowing reported among the construction sector, but this is related to the seasonal change in weather rather than any pure market weakness."
Persistent rain over the central North Island through much of April and early May had made access to logging sites more challenging and disrupted supply, helping lift prices for the majority of key grades collected by AgriHQ by $1 a tonne.
Good quality pruned logs were recovering after easing through late 2016, and roundwood had climbed to its highest level since AgriHQ records began in early 2002.