forest talk
Chinese log demand still strong, for now... THE MINISTRY FOR PRIMARY INDUSTRIES (MPI) MOST RECENT report prior to the latest COVID-19 Delta variant outbreak, predicts log exports will reach $3.6 billion in the year ending June 2021, led by demand from China raising prices and incentivising harvesting. This is an increase of 25.5% compared to the previous year, following four consecutive quarters of growth. This strong demand has pushed log export prices near the record levels observed in 2018-19. The strong demand for logs has been driven by increased construction activity and further supported by supply constraints such as the ban on Australian logs, and a reduction in global shipping capacity. New Zealand remains the largest supplier of softwood logs to China followed by Germany, Russia, the US, Uruguay, and the Czech Republic. China’s log imports from most countries have been growing, including New Zealand, and accounted for 83.3% of New Zealand’s total volume of log exports in the year ended March 2021. Log export revenue is forecast to reach $3.8 billion in the year ending June 2022, on the back of continued strong demand as China ramps up infrastructure projects. But Chinese buyers are finally pushing back on the prices being asked for by NZ exporters. The outlook for log prices is expected to decline slightly due to increased supply from other countries. In-market prices have eased after peaking at about USD194 per JASm3. The value of a log delivered to China is now about USD10 lower than this, and further downwards price pressure is expected. European and South American foresters anticipate increased log shipments to China, which is likely to put downward pressure on New Zealand log prices. It’s not clear whether Russia’s proposed log export ban in early 2022 will be a complete or phased-in ban, but nevertheless, the ban is expected to partly offset the impact of increased supply into China and support New Zealand log demand and prices in the medium-term. The annual slowdown during the winter months (China’s hot summer), as well as an oversupply caused by the high prices from earlier this year will also influence the softening of the demand for logs in China. The closure of some of China’s mills has further eroded short-term demand for logs. The strength of the domestic
market, combined with the challenges and cost of getting product to export markets, may mean more home-grown timber stays on NZ shores. Added to this, forestry owners, particularly wood lots, are more reluctant to harvest with prices undetermined and the usual winter slowdown. There are hopes that prices will start to rise again around springtime, leading to more harvesting and renewed work for contractors. However, the influence of the new COVID remains to be seen. As New Zealand’s second largest log export market, accounting for 8.0% of total log exports, demand for logs from South Korea slowed over the past few years as economic growth has weakened, says MPI. In addition, importers are forced to compete on price with Chinese importers, so while volumes have decreased, the value of exports has remained relatively steady, as rising Chinese demand has lifted prices. Export volumes to South Korea are expected to remain low as Australian logs are being rerouted following China’s ban on them, placing further downward pressure on demand for New Zealand logs. India’s demand for New Zealand logs plunged due to the COVID-19 pandemic and is yet to rebound. Export volumes are down 69.5% in the year ended March 2021 compared to last year. India now accounts for only 2.0% of total log exports. Demand from India is expected to remain subdued for the rest of the calendar year, as COVID-19 cases remain high. In addition, Australian logs have been redirected to India after China banned them, putting pressure on this market. Over the medium-term, demand from India is expected to increase as the pandemic wanes and conditions improve there. NZL
Government says it won’t limit timber exports MATERIALS SHORTAGES, LABOUR shortages, supply delays and increased costs are now all part of the everyday experience of those in the building industry. The postlockdown housing market boom has seen house prices skyrocket, with the lack of supply cited as one of the main reasons. Government has backtracked on its cited intention to put limits on timber exports as one option to protect domestic supply, with Minister for Building and Construction, Poto Williams, recently saying Government would
4 NZ LOGGER | September 2021
not be interfering in timber exports. Just as well, with word from the industry strong on delays: • Merchant shelves are almost empty of timber framing, plywood and engineered timber beams. Concrete can take weeks to arrive. Window joinery takes months. • Imported items have even longer delays due to shipping, container supply and transport hold ups. Claddings can now take 18 weeks if you are lucky enough to get your order in on time.
• Some major contractors will not quote for work involving structural steel due to the uncertainty of supply and pricing. Prices can change within the day, up or down by 20%. • With design, planning, and consenting, there are delays. Council staff are overloaded and seldom meet their 20 day processing targets. Even bookings for a building inspection can be weeks out. • Electrical components and whiteware can also be months out, if even available.
