Drop in NZ export log prices

High inventory levels in Chinese ports have now converted to a lowering of in-market (CFR) pricing for New Zealand logs. A similar situation occurred this time last year when China was importing what were then record volumes of logs. In the January to April 2011 period China imported over 9 million cubic metres of softwood logs which was 33% more than the same period in 2010. Prices in 2010 peaked in April at just over US$140/JASm3 for a KS log. In 2011, prices appear to have peaked in May at close to US$160/JASm3.

CFR prices then plunged more than 15% over a period of four months before again climbing in September. It is anticipated that a similar situation will unfold in 2011. But whether prices can recover all of the ground lost by the end of the year, as happened in 2010, remains uncertain. The majority of the uncertainty centres around potential supply from North America and Russia through this period.

Supply from North America has contributed the most to the rising Chinese log imports. In the 12 months to April 2011, Chinese softwood log imports (by volume) grew 25% compared to the previous year. Two thirds of that increase was contributed by North American log exporters. Almost one third was contributed by New Zealand exporters. The very weak domestic construction market in North America has created a focus on the Asian markets for these producers.

Source: NZX Agrifax at www.nzxagri.com/agrifax