Arbor Resources Blog Updates
Early last week we were advised that the flow of our logs into China is facing significant global disruption caused by Coronavirus. China is our main buyer of logs and is the market that sets the price for all other end users – including the New Zealand domestic market.
Last week, after discussions with the exporters and a number of forestry companies we made the decision to stand down the harvest crews. Other forest management companies have made similar decisions. For most of the crews their last day of work was Tuesday last week – with a plan to review operations today.
Over the past week we have been closely monitoring the Coronavirus situation. Businesses, ports and government departments in China remain operating on very restricted capacity. The Chinese workforce is still under movement control and in many cases cannot get to work, or back home. The government extended Chinese New Year, which is normally celebrated around this time of the year, this means log inventories on ports have continued to build. And with no one returning to work, transporting from the ports and processing hasn’t begun.
Because of the build up of logs on the wharves, price indications for February have reduced significantly with indications of A grade logs dropping from around $125 to $90 per JAS. Coupled with this is an increased supply of beetle affected spruce logs being railed from Europe to China and competing with our Radiata.
The situation remains very dynamic. Today we are continuing discussions with the exporters around log movements off the ports. All parties are unsure how long this disruption will last.
The underlying demand from China for logs remains positive – it’s a matter of working through the short term Coronavirus repercussions and the current build-up of inventories on the port.
We will send you more information as the situation develops.
Will Dickie & Roger Dickie