Arbor Resources Blog Updates
Arbor Resources Blog Updates
Log imports up 8% in the first half of year - China’s log imports in the first half of 2017 totalled 25.89 million cubic metres valued at US$4.535 billion, a year on year increase of 8.3% in volume and 14% in value. The average price for imported logs was US$175 per cubic metre, a year on year increase of 6%.
Of total log imports, softwood log imports rose 8.6% to 17.51 million cubic metres, accounting for 68% of the national total. The average price for imported softwood logs was US$130 per cubic metre, up 9% on the same period of 2016.
Hardwood log imports grew 7.6% to 8.38 million cubic metres (32% of the national total log imports). The average price for imported hardwood logs in the first half of 2017 was US$269 per cubic metre, up 3% on the same period of 2016. Of total hardwood log imports, tropical log imports were 4.43 million cubic metres valued at US$1.278 billion, up 7% in volume but down 2% in value on the same period of 2016.
New Zealand and Russia main sources of logs - New Zealand was the main log supplier to China in the first half of 2017 accounting for 24% of total log imports.
Imports from New Zealand totalled 6.2 million cubic metres in the first half of 2017, a year on year increase of 10%.
The second ranked supplier of logs was Russia at 5.87 million cubic metres, accounting for about 23% of the national total. In the first half of 2017 a year on year decrease of 1% was recorded for log imports from Russia.
Average prices for imported logs from New Zealand rose 10%, average prices for imported logs from Russia grew 7% in the first half of 2017.
NZ structural log prices advance to 23-year high as mills compete with export demand - New Zealand structural log prices edged up to the highest level in more than two decades as mills compete with the export market to secure supply for the local construction market.
The price for structural S1 logs lifted to $128 a tonne this month, from $127 a tonne last month, and is sitting 11 percent above last year's level and 21 percent higher than the five-year average, according to AgriHQ's monthly survey of exporters, forest owners and saw millers. The S1 structural log price is at its highest level since April 1994.
Demand for New Zealand logs is strong in China, New Zealand's largest log market, with in-market prices for unpruned logs at their highest level since mid- 2014 and pruned log prices just shy of their last peak in mid-2016, AgriHQ said. China has clamped down on harvesting of its own forests and reduced tariffs on imported logs. It imported 2,894,326 tonne of logs in July, the highest level since April 2014, with New Zealand recording the largest lift, making up 37 percent of imports in the month, ahead of the 35 share it typically holds, AgriHQ said.
"As far as the market is concerned, any potential downward movement in values will have to be driven by wharfgate values," said AgriHQ analyst Reece Brick. "Mills are ruing the on-going strength of the export market, forcing them to meet these values or find themselves short on supply."
Some mills have paid premiums above the main contract market to secure supplies from the spot market, Brick said, noting that the current price for structural S1 logs is about $3 a tonne more than the wharfgate price A-grade logs.
Still, Brick said further upward movement in prices is less likely as domestic pruned log supply moved into balance over recent weeks and export interest remains short of the level experienced in early 2016.
He noted residential construction activity is slowing in Canterbury as the bulk of the earthquake rebuild reaches completion, while talk of stagnating house prices has slowed building from property investors.
"Whether this is a temporary state brought about by winter or an indication of a longer-term trend will become more obvious over the next month or two," Brick said. "Other areas have displayed a little more resilience, though it does appear that construction has come back from its peak through Auckland and the central North Island."
Forest products are New Zealand's third-largest commodity export behind dairy and meat products.
BusinessDesk via Scoop News
ncreased demand for softwood lumber worldwide has pushed lumber prices upward, particularly in the US and China during the first half of 2017, according to the Wood Resource Quarterly.
Global Lumber Trade
International trade of softwood lumber is on pace to a new record high in 2017 if the trend from the first six months of 2017 continues in the second half of the year. Of the ten largest lumber-exporting countries in the world, Russia, Finland, Austria and Ukraine increased shipments the most year-over-year during the first half of 2017.
Russia alone, has accounted for 22% of global lumber trade so far in 2017, which is up from 15% ten years ago, according to the WRQ. Canada’s seven consecutive years of expanding shipments may reach an end this year with export volumes having declined 2.2% during the 1H/17.
Lumber markets – North America
During the first five months of 2017, lumber production in the US South bounced back after having declined during the second half of 2016. The total production output from January through May was 7.3% higher this year as compared to the same period in 2016, according to the WWPA.
In Canada, lumber production was up seven percent in the Eastern provinces during the first five months of 2017, while it fell 2.1% in British Columbia. The decline in BC occurred mostly because of a reduction in lumber exports to China by 10% year-over year.
Lumber prices in both the US and Canada have trended upward for almost two years and reached 13-year highs in July. One exception has been pine lumber prices in the US South, which have fallen the past few months to the lowest level seen in almost a year.
Lumber markets – China
Demand for softwood lumber has picked up in China in 2017 with import volumes during the first seven months being 16% higher than during the same period in 2016. By far, the biggest jump in supply sources has been from Russia, which increased shipments by 24% y-o-y to 7.1 million m3 from January to July.
Russian sawmills also increased their market share from 42% of total Chinese imports in 2014 to 62% in 2017. Despite a substantial decline in the cost of Canadian lumber delivered to China from the record highs in 2013 and 2014, Canadian sawmills have lost market share substantially, dropping from a 40% share in 2013, when it was the largest supplier of softwood lumber to the Chinese market, to a current 22%.
Lumber market – Japan
Japan has increased importation of softwood lumber by two percent during the first half of 2017 as compared to the 1H/16. Total import volume in the 2Q/17 was 1.6 million m3, the highest level in two years. The biggest changes on the supply side this year compared to 2016 has been an increase in imports from Canada and Sweden, and a decline from Russia. In Yen terms, domestic lumber prices have moved up slightly in 2017, while import prices have remained practically unchanged.
Lumber market – Russia
Russian sawmills have increased production by an estimated 14% the past five years, mainly driven by a rise in demand for wood in China. Although domestic softwood lumber demand was up three percent in 2016 from the previous year, domestic consumption has fallen 12 percent the past five years.
Russia has become a major player in the global lumber market the past ten years, but exported a surprisingly small share to Europe or the US. Instead a majority of the Russian lumber has been shipped to China, Japan, Iran and the CIS countries (see detailed export data in the latest WRQ Trade Snapshot). Export prices have trended upward for more than a year, and in June 2017, reached their highest levels since February of 2015.
Source: Wood Resources International
Globally traded softwood lumber reached an all-time high in 2016. WRI estimates that 118 million m3 of lumber was traded last year, or 10 percent more than in 2015. Imports to the US account for about one-third of globally traded lumber and have almost doubled in five years. China accounted for about 17% of import volumes in 2016, followed by the United Kingdom, Japan and Germany.
Lumber markets – North America
Lumber production in North America in 2016 was up six percent from the previous year, reaching its highest level since 2007. The biggest rises in production occurred in the US South and Eastern Canada, while the increases in western Canada and the western US were more modest.
Prices for lumber in the US have jumped during the first four months of the year to hit a 13-year high in April. Many of the commonly traded grades surged in price by more than 20% from April of 2016.
Lumber markets – Northern Europe
Sweden exported 12.9 million m3 of softwood lumber in 2016, which was the highest volume exported since 2006. The increase from 2015 was a modest 1.5%, with shipments to Denmark, Japan, China and France rising the most. Domestic lumber prices in both Finland and Sweden continue to be close to their lowest levels in ten years in US dollar terms, as reported in the Wood Resource Quarterly.
Lumber markets – China
Prices for imported softwood lumber to China have been in a steady upward trend during 2016 and 2017 with the average import price in March 2017 being 13% higher than 18 months earlier. The biggest change in pricing over the past two years has been that prices for Russian lumber are no longer substantially cheaper than those for lumber from other supplying regions, but instead are rather close to the average import price.
Lumber market – Japan
Total housing starts were up 3.2% in Japan in the 1Q/17 as compared to the same quarter in 2016, and the economic outlook for the coming year is slightly more optimistic than that for last year.
Prices for domestic and imported lumber have remained practically unchanged for almost a year in Yen terms. With the Yen strengthening against the US dollar during the first four months of 2017, lumber prices have increased so far this year in US dollar terms.
Lumber market – Russia
After a substantial decline in softwood lumber export prices during 2014 and 2015, Russian lumber prices have trended upward for most of 2016 and early 2017. Average export prices in March 2017 were 12% higher than in the same month last year, and prices for wood going to China have gone up even faster over the same time-period. Export volumes to China in the 1Q/17 were unchanged from the previous quarter, holding steady at the second highest level on record.
Source: Wood Resources International LLC
New Zealand structural log prices have hit their highest level in more than two decades as local mills compete with the export market to secure supply to meet demand from the domestic market.
The price for structural S1 logs lifted to $124 a tonne this month from $123 a tonne last month and $114 a tonne at the same time last year, reaching the highest price for the grade since April 1994, according to AgriHQ's monthly survey of exporters, forest owners and saw millers.
"The New Zealand domestic log market has slowly but consistently risen this year, and the past month was no different," AgriHQ analyst Reece Brick said in his report. "Supply and demand fundamentals remain skewed in favour of sellers rather than buyers, squeezing even more returns out of harvested logs."
The market remains strong for most segments of the domestic industry, even as the volumes traded slowed when winter weather stymied construction activity, AgriHQ said, noting that local wood supply had been hampered due to difficulties harvesting in wet weather. While strength in the local housing market is helping stoke demand, the main driver behind higher domestic prices is that export markets are draining supplies out of New Zealand, the report said.
"Domestic mills are in a tug-of-war with export log traders for unpruned logs and are facing the prospect of further hikes in log procurement costs," Brick said. "A large portion of mills are still paying below the export market for logs. Log suppliers are currently attempting to gauge mills ability to absorb higher log prices. All signs suggest more increases are on the cards."
Prices in the log market are heavily reliant on Chinese demand, which is expected to hold in the medium term after the Chinese government introduced restrictions on logging native forests and reduced tariffs on imported logs to 11 percent from 13 percent to discourage the use of native wood, AgriHQ said.
New Zealand exported 1,666,639 cubic metres of logs in April, up 3 percent on March volumes and 21 percent higher than a year earlier. Some 72 percent of the volume was exported to China. "The volume exported in April is one of the largest amounts exported in the last 10 years and is only surpassed by August 2016," Brick said.
The value of log exports is expected to climb to NZ$2.66 billion this year from NZ$2.22 billion last year and reach $3.14 billion in 2021, according to the latest Situation and Outlook for Primary Industries published by the Ministry for Primary Industries last week.
Global demand fuelling NZ forestry export growth
Strong demand from key markets is driving up export growth in forestry products, New Zealand’s Associate Primary Industries Minister Louise Upston says. The latest Ministry for Primary Industries’ Situation and Outlook for Primary Industries (SOPI) shows strong growth in the forestry sector.
“Forestry exports are expected to grow 6.4 per cent to NZ$5.5 billion in 2017, before increasing further to NZ$6.3 billion by 2021 as increased volumes of wood become available for harvest,” Ms Upston says. Strong demand for logs and sawn timber from key markets such as China and the US are keeping prices high while favourable exchange rates are also contributing to strong returns for exporters, the SOPI shows.
Demand is expected to remain strong, as increased construction activity in China and the US, combined with China’s bans on harvesting native forest should ensure continued demand for New Zealand logs and sawn timber.
“With a bright outlook for forestry production and exports, the Government continues to invest in improved harvesting techniques. This investment is primarily through the Steepland Harvesting Primary Growth Partnership programme, which also encourages afforestation by allowing previously unsuitable land to be planted with production forestry,” Ms Upston says.
Planting is encouraged through other programmes such as the Afforestation Grants Scheme, the Erosion Control Funding Programme and the Sustainable Land Management and Climate Change research programme.Global demand is fueling NZ forestry export growth
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.
Domestic log prices have hit record highs in recent weeks, underpinned by the boom in construction activity.
Local log prices hit record highs in March as the combined construction and horticulture sectors buoyed demand from sawmills around the country, according to AgriHQ's monthly survey of exporters, forest owners and sawmillers.
While the sector has been making the most of gains during the past 18-months, the strength of the New Zealand dollar and rising shipping rates are showing early signs of raining on the party.
The combination of the New Zealand dollar's strength, cheap shipping rates and market prices had led to an uncharacteristically steady market for the past 18 months.
'The driving factor has been China's economy, which is going well. But also helping is China's ban on using any of its own forest stocks, which has been done for environmental reasons.
Similarly, in the North American market, housing construction was picking up, meaning less Canadian and US wood was going into the international market.
'That's what is putting New Zealand in such a strong position. The Korean and Indian markets are also still significant.
Market prices for A-grade timber over the past five years had ranged between $US85 ($NZ113) to $US165 per cubic metre, and were at present about $US130.
Shipping rates had also played an important part in the buoying returns.
The price to move a cubic metre of wood from Dunedin to Asian destinations had averaged about $US45 during the past decade. For the past 18 months that cost had been in a range of $US13 to $US25 per metre, he said. Shipping rates to China edged up from $US19 to $US20 in March, AgriHQ reported.
AgriHQ analyst Reece Brick said the shipping cost rise was not due to oil price increases, but instead, an increase in commodity shipments to China, such as iron ore from Australia,
''This has engaged a significant amount of previously idle shipping capacity in the Pacific, shifting the market in shipping companies' favour,'' he said.
Domestically orders had been flowing into sawmills at a constant but rapid rate, mainly underpinned by the ever present housing construction sector, especially around Auckland.
'This procurement competition between mills meant the AgriHQ price for the majority of key domestic log grades lifted.
The average price for roundwood logs used in the horticulture sector rose by $2 in February to $92 a tonne in March, which was the highest level since AgriHQ began collecting the data in early 2002.
Structural log prices had also increased and S3 grade logs had hit $114 a tonne, the highest since AgriHQ began collecting the data in early 1995. S1 grade logs rose to $122 a tonne, the highest since mid-1994, AgriHQ reported.
The booming horticulture industry was also spurring investment activity, helping drive demand for roundwood. Domestic log market had been busy with sawmill demand fueled by strong domestic building activity.
'However fundamentally the market's still looking good for at least the next six months. This increase in wood flows is expected to deliver strong cash flow during the second half of the financial year.'
Buoyant New Zealand activity has pushed up local log prices to new record highs.
The average price for round wood logs used in the horticulture sector rose to $92 a tonne in March, up $2 from February's average price and at the highest level since AgriHQ began collecting the data in early 2002.
Structural log prices also increased, with S3 logs hitting $114 a tonne, also the highest since AgriHQ began collecting the data in early 1995, while S1 logs rose to $122 a tonne, the highest since mid-1994.
Record high net migration and low interest rates are putting pressure on the nation's housing market, boosting prices and stoking construction activity. A booming horticulture industry is also spurring investment activity in that sector, helping push demand for round wood.
"The New Zealand domestic log market has maintained its incredible strength in recent weeks," AgriHQ analyst Reece Brick says.
"Orders are flowing into sawmills at a constant but rapid rate, mainly underpinned by the ever present housing construction sector, especially around Auckland. This procurement competition between mills means the AgriHQ price for the majority of key domestic log grades lifted."
Mr Brick says demand remains firm in the pulp, pruned and round wood markets.
"There's been little sign of any stagnation in the round wood trade," he says.
Mills at maximum
"Reports suggest many mills are running at or near their maximum capacity as orders keep coming in, and log supply is too tight to prevent any prices increases."
Mr Brick says there is some concern about whether structural log prices may soften as inventory levels increased at North Island mills heading into winter when construction demand tended to slow.
Meanwhile, export prices for New Zealand logs softened by about $2 a tonne across the range of logs measured by AgriHQ.
"The key factor behind the weaker wharf-gate markets was the sudden increase in shipping rates," Mr Brick says.
"Unlike other months, it was not oil prices that created this small surge. Instead, an increase in commodity shipments to China, such as iron ore from Australia, has been the key factor. This has engaged a significant amount of previously idle shipping capacity in the Pacific, shifting the market in shipping companies favour."
Mr Brick says exporters are watching the situation closely to see if the change is short-term, or part of a longer-term trend.
"From a domestic mill's perspective, this softening is a step in the right direction, as it may entice more logs to stay within the New Zealand market," he says.
"That said, a number of logs are still making premiums over domestic trading at the wharf-gate, so any change in trading patterns is unlikely to be major for now. Additionally, exported pruned logs tend to be of lower quality than locally traded product, so not all of these logs would be sought after by New Zealand mills."
Shipping rates to China edged up to $US20/JAS from $US19/JAS last month and $US15.50/JAS a year ago, while rates to South Korea advanced to $US19.10/JAS from $US17.80/JAS last month and $US15.20/JAS a year ago, and rates to India lifted to $US26.30/JAS from $US23.60/JAS last month and $US20.90/JAS a year ago.