Arbor Resources Blog Updates
You will be aware that in early July, following the significant reduction in export log prices, we carried out a full review of our harvest operations. We subsequently instructed our forest managers to place harvest production caps on their contractors of approximately 25%. Over the past two months, we have monitored the export log markets and as advised in July, have now undertaken a further review of our harvest operations now that we have the September prices from the exporters.
What has happened to pricing since then?
You will have seen from the abbreviated August review that log prices have risen from their July lows. Recent September prices have also shown another incremental increase. Overall prices have risen approximately 10% from the July lows and have recovered more than 25% of the June to July fall. This is welcome news for all harvesting forests.
The market summary
This month we engaged once again with our two major log exporters to obtain a market update. Between them they export approximately 30% of New Zealand’s logs. The overall sentiment is that the Chinese markets have stabilised since the dramatic price decreases in July. While our exporters expect further incremental price increases into the end of 2019, they remain cautious in their longer-term view. We discussed the many drivers for those log price reductions in our July correspondence, below is an updated summary of changes since that July review.
Price expectations from here?
The unfolding supply/demand pressures are creating positive tensions and exporters expect this theme to continue and for log inventories to decrease. This should be the key driver for prices to continue with incremental moves upwards. There appears to be a consensus that log prices could move toward $120-$125 over the next three months as a result of supply and demand pressures. Most caution remains around the trade wars and the medium-term impact this is having on both the Chinese and USA economies; it is for this reason that price increases are expected to remain modest.
RDNZ initiatives going forward
Given the modest recovery and upward trajectory of export log prices since we last reviewed them in July, RDNZ has decided to take the following initiatives. Please note the viability and extent of these initiatives may vary from forest to forest for a variety of reasons. The specifics for your forest will be discussed subsequently. Key initiatives are: