What are the reasons for this?
There are a range of reasons. I have listed them below in no particular order.
     The Spruce Bark Beetle in Europe (now has two breeding seasons each year because of climate change) is overwhelming Spruce forests in Europe causing significant losses. As well massive windstorms in Europe have added to the volume of wood that needs to be salvaged. The outcome is a dramatically accelerated harvest and these low-priced salvaged logs are being exported by rail up to 8,000 km to China under the One Belt – One Road Policy, the freight is government subsidised. Apparently up to 30 trains per week arrive in Germany under the Belt and Road initiative, the train trip is 12 days vs shipping 45 days.
       Devaluation of the Chinese RMB related to the Trump Trade War.
     The Trump Trade war with China (25% tax on Chinese goods into USA) is bringing about a slow down in the Chinese Economy
       Wall of Wood supply chain infrastructure issues. The so called “Wall of Wood” is moderated in New Zealand by the lack of harvest and trucking infrastructure plant and labour availability. However, there are also supply chain infrastructure issues in China.
       The summer is traditionally the low season in China for construction and therefore demand as the weather is very hot in areas and warm and wet in other areas.
       Some sellers of logs in China have noticed under the present premier Mr Xi, there is more state involvement in log purchasing entities.
What is the effect of the log price decrease?
Export log prices are set monthly. On 1st July one large New Zealand exporter dropped prices for A grade logs (The bench mark price –which is then related to all log grades) from NZ $135/mᶾ at Wharf gate (AWG) to $97/mᶾ and $105/mᶾ (different North Island ports). Another exporter has dropped prices to $95/mᶾ and $100/mᶾ. 1 mᶾ approximately = 1 tonne.
 
As forest owners, we join the world of many other producers, where our profit margin is the money left after all other suppliers of services are paid.
An example of the effect of the price decrease is:
A forest located say 80 km from an export port before the prices dropped might have had an average gross income of NZ $130/tonne with average costs of say $80/tonne (90% plus of this is logging/loading, engineering and cartage). Logging, cartage and engineering costs have risen by almost 30% in the past 18 months due to demand and supply pressures, plus higher local wage costs. Some distant and lower yielding forests could have costs of closer to $100/tonne because of lower yields or much higher freight costs.
What this means is that if your costs were say $80/tonne, then under the June prices you would have had a cash surplus of say $50/tonne. Under the July export prices this could be $18/tonne (based on Napier July AWG prices).
Another way of putting this. Assuming 700 tonnes of logs are sold per ha, last month you would have had a cash surplus of say $35,000 per ha. Under the July pricing schedule, this could be reduced to $12,600 per ha.
This $22,400 per ha reduction in stumpage has drastically reduced the surplus to owners, and in some cases has pushed stumpages into negative territory.
What actions should we take in response to the log price decrease?
    Experienced producers and exporters agree we need to immediately shorten log supply to China. As the supply chain is six to eight weeks long, the market will not feel the shortfall for some time.
    If we stop harvest, this will quite quickly decimate the viability of many of our harvest operators. This will create significant medium term consequences as the re-establishment of the harvest crews and their plant and equipment will be hampered by the number of crews able to raise the necessary capital or be able to locate experienced staff to man the crews once they have moved on to other jobs.
    We have canvassed a large portion of the forest owning industry and it is evident that we, in line with the other foresters we have spoken with, should be taking immediate steps to reduce harvest.
    Accordingly, we have instructed our forest managers to reduce the harvest operations of their contractors by approximately 25% overall. This may vary slightly from forest to forest depending on their individual circumstances however, this action should help to shorten up the export supply chain while keeping the contractors alive until the prices recover. We will review the situation in two months.
   If a forest takes 24 or more months to harvest, then low log prices for a short period (i.e. three months) makes very little difference to the average stumpage.

Is there any good news?
Fortunately, there is:
   Chinese log buyers love New Zealand Radiata pine for its consistency, its evenness in quality and its ability to saw easily.
    We have had downturns in price at this time of year before, the last one in 2015 affected one of our forests but the prices quickly recovered.
     By shortening the market, our Chinese log salespeople say we could quite quickly bring about a change in the demand/supply ratio that will lift prices. Chinese buyers know that prices can rise quite quickly as well, and they will not want to be caught short of supply.

Dear All,
​
This message is to bring you up to date with ARBOR GROUP activities.
Reman Factory:
The activities of Arbor Remanufacturing currently sited at 9-11 Kere-iti St, Maunganui, will cease Remanufacturing operations on the 30th November 2019, and  we will relocate our entire plant and  equipment to a new site in Rotorua in the Eastgate business park opposite the Rotorua airport
 
The new address is 2-130 Wahanga-A-Rangi Crescent, Rotorua.
 
Reman will be selling off some of its surplus plant and equipment, and we will, of course, be looking to reduce stock before the move in Nov/December.
 
SUPPLIERS:
To our very valuable supplier sawmills;  please bear with us as we work our way through this relocation as our buying patterns will most surely alter but rest assured we are not out of business and we expect to be back buying aggressively in January 2020.
 
TO ALL OUR CLIENTS export and domestic
Please be aware of the shutdown and get orders  in well in advance for supply over this time and we will do all we can to ensure we forward process material to meet your needs
 
I want to take the opportunity to thank you for your support over the last 20 years, and I look forward to more of the same at our new premises.
 
Regards
ARBOR GROUP
Frank T Davis  CEO
KCMH

An arrangement signed by New Zealand and China this week paves the way for future forestry cooperation and boosting bilateral trade, NZ Forestry Minister Shane Jones says. The arrangement was signed on Monday in Wellington by Shane Jones and Mr Zhang Jianlong, the Administrator of China’s National Forestry and Grasslands Administration. 

“The updated arrangement supports and strengthens links between government, industry and research institutes in New Zealand and China. It provides a framework to address matters such as sustainability, wood processing and utilisation, and trade and investment,” Shane Jones said. 

“The forestry sector is an important and growing part of our bilateral trade with China, with export revenue topping NZ$3.2 billion in the year ending 2018. Much of this growth has come from increased Chinese demand for New Zealand forestry products, supporting both continued high prices and record export volumes”. 

“A number of Chinese companies choose to use wood sourced from New Zealand for their manufacturing, and I’m keen to see how we can grow the relationship further, especially for our respective wood processing industries”. 

“With my Chinese counterpart, I have agreed that officials will cooperate to encourage increased trade, including in value-added wood products. I’m pleased to announce that we will hold talks in China later this year, which industry will be invited to, to promote government-to-government and industry-to-industry collaboration”. 

“Ensuring an end-to-end value chain for our logs and forest products, along with our relationships with trading partners, including China, are an important part of achieving these aspirations,” Shane Jones said. ​

​NOTED ecologist and former leader of Greenpeace Dr Patrick Moore has been elected chair of the CO2 Coalition, a US conservative think tank. 
The board of directors will explain how the increase in CO2 in the atmosphere from human emissions is spurring increased growth of forests, crops and plants. They will also focus on discussing how CO2 is also a very weak greenhouse gas that may have the added benefit of slight warming of the climate.
US government data showing that the modest warming, even if caused in part by industrial CO2,  has resulted in no increase in extreme weather such as hurricanes and droughts or changes in the rate of sea-level rise.
Former chairman Dr. William Happer, an atmospheric physicist, recently left the CO2 Coalition to become a senior director on the National Security Council, where he has proposed a presidential commission to review the science behind claims that climate change threatens national security.
Dr. Moore is a co-founder of Greenpeace and served in the leadership for 15 years, including as a director of Greenpeace International from 1979-1986. He received the Einstein Society’s National Award for Nuclear Science and History in 2009.
Commenting on his new role, Dr. Moore said: “We aim to position the CO2 Coalition as the go-to source for information on the benefits of CO2 for the environment and civilisation.”
He said human CO2 emissions were causing a “greening of Earth”, which will increase agricultural and forestry production, as well as increasing the fertility and abundance of global ecosystems.”
 

China is continuously exploring new sources of softwood logs around the world. Minor log exporters, such as Japan, Poland, Chile and South Africa all expanded their shipments to China in 2018, reports the WRQ. Of the major log supplying countries, only Russia and Canada reduced their exports to China, while New Zealand, the US and Uruguay all increased their shipments year-over-year. Log imports to China reached another record high in 2018, with New Zealand supplying 44% of the volume, reports the WRQ. 

China had another record year of softwood log imports in 2018, when over 40 million m3 of logs landed at Chinese ports. This was the third consecutive year of year-over-year- increases, with 2018 volumes being up 37% from 2015. Although import volumes fell slightly from the 3Q/18 to the 4Q/18, the December numbers were the second highest monthly imports on record. 

Over the past five years, import volumes have declined from the key supplying regions of Russia and Canada, while they have increased from New Zealand and Australia. New Zealand continues to expand its market share, supplying 44% of the total import volume in the 4Q/18, up from 30% just three years earlier, according to the Wood Resource Quarterly (WRQ). 

The biggest decline in market share has been that of Russia, which has fallen from 36% to 18% in the past three years. The only other major change the past few years has been an increase in pine log shipments from Uruguay. These have increased from just a few thousand m3 in 2016 to almost 2.5 million m3 in 2018, making the country the fifth largest log supplier to China last year. 

The average log import price fell three percent from the 3Q/18 to the 4Q/18, mainly because of lower costs for logs originating from New Zealand and the US. The total average import price has gone up for three consecutive years. Although the prices have trended upward over the past few years, they are still lower than import prices in 2013 and 2014, when high-cost suppliers in the US and Canada had a larger market share. 

Another interesting development is that Japan, the sixth largest softwood log importer in the world, has almost tripled log exports to China over the past few years, from just over 300,000 m3 in 2014 to almost a million m3 in 2018. Other smaller log supplying countries that have increased shipments to China in 2018 include Poland, Chile, South Africa and Germany. ​

China is continuously exploring new sources of softwood logs around the world. Minor log exporters, such as Japan, Poland, Chile and South Africa all expanded their shipments to China in 2018, reports the WRQ. Of the major log supplying countries, only Russia and Canada reduced their exports to China, while New Zealand, the US and Uruguay all increased their shipments year-over-year.

Seattle, USA. China had another record year of softwood log imports in 2018, when over 40 million m3 of logs landed at Chinese ports. This was the third consecutive year of year-over-year- increases, with 2018 volumes being up 37% from 2015. Although import volumes fell slightly from the 3Q/18 to the 4Q/18, the December numbers were the second highest monthly imports on record.
 
Over the past five years, import volumes have declined from the key supplying regions of Russia and Canada, while they have increased from New Zealand and Australia. New Zealand continues to expand its market share, supplying 44% of the total import volume in the 4Q/18, up from 30% just three years earlier, according to the Wood Resource Quarterly (WRQ). The biggest decline in market share has been that of Russia, which has fallen from 36% to 18% in the past three years. The only other major change the past few years has been an increase in pine log shipments from Uruguay. These have increased from just a few thousand m3 in 2016 to almost 2.5 million m3 in 2018, making the country the fifth largest log supplier to China last year.
 
The average log import price fell three percent from the 3Q/18 to the 4Q/18, mainly because of lower costs for logs originating from New Zealand and the US. The total average import price has gone up for three consecutive years. Although the prices have trended upward over the past few years, they are still lower than import prices in 2013 and 2014, when high-cost suppliers in the US and Canada had a larger market share.
 
Another interesting development is that Japan, the sixth largest softwood log importer in the world, has almost tripled log exports to China over the past few years, from just over 300,000 m3 in 2014 to almost a million m3 in 2018. Other smaller log supplying countries that have increased shipments to China in 2018 include Poland, Chile, South Africa and Germany.

China is continuously exploring new sources of softwood logs around the world. Minor log exporters, such as Japan, Poland, Chile and South Africa all expanded their shipments to China in 2018, reports the WRQ. Of the major log supplying countries, only Russia and Canada reduced their exports to China, while New Zealand, the US and Uruguay all increased their shipments year-over-year. 

China had another record year of softwood log imports in 2018, when over 40 million m3 of logs landed at Chinese ports. This was the third consecutive year of year- over-year- increases, with 2018 volumes being up 37% from 2015. Although import volumes fell slightly from the 3Q/18 to the 4Q/18, the December numbers were the second highest monthly imports on record. 

Over the past five years, import volumes have declined from the key supplying regions of Russia and Canada, while they have increased from New Zealand and Australia. New Zealand continues to expand its market share, supplying 44% of the total import volume in the 4Q/18, up from 30% just three years earlier, according to the Wood Resource Quarterly (WRQ). 

The biggest decline in market share has been that of Russia, which has fallen from 36% to 18% in the past three years. The only other major change the past few years has been an increase in pine log shipments from Uruguay. These have increased from just a few thousand m3 in 2016 to almost 2.5 million m3 in 2018, making the country the fifth largest log supplier to China last year. 

The average log import price fell three percent from the 3Q/18 to the 4Q/18, mainly because of lower costs for logs originating from New Zealand and the US. The total average import price has gone up for three consecutive years. Although the prices have trended upward over the past few years, they are still lower than import prices in 2013 and 2014, when high-cost suppliers in the US and Canada had a larger market share. 

Another interesting development is that Japan, the sixth largest softwood log importer in the world, has almost tripled log exports to China over the past few years, from just over 300,000 m3 in 2014 to almost a million m3 in 2018. Other smaller log supplying countries that have increased shipments to China in 2018 include Poland, Chile, South Africa and Germany. ​

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