New Zealand Log Prices - June 2010

April 2010 was a month where record volumes of pinus radiata logs were shipped out of New Zealand. The vast majority were headed for Asia where other suppliers such as the USA and Canada, are also ramping up supply. The ability of Asia and in particular China, to absorb the increased supply, is being tested. However, it appears that despite the influx, inventories in China have been reduced. In-market (CFR) prices for KS and KI logs to China and Korea have softened a little in the past month to be at US$134/JASm3 and US$129/JASm3 respectively. The lower prices are a result of the increased supply, and these price adjustments have flowed through to prices at the wharf gate (AWG), where exports logs are now priced NZ$2/T to NZ$3/T lower.

Exports to China moved upwards during the month as New Zealand log supplies swelled. However, the biggest jump in supply volumes, were those to India, which jumped 68% in the January to April 2010 period from a year ago. In April, over 160 000m3 of logs were shipped to India, making the country the third biggest destination for New Zealand logs for the calendar year so far, behind China and Korea and ahead of Japan.

In the lumber markets, for the first quarter of 2010, New Zealand exported 30% more lumber into the US than a year ago. This would appear to be partly due to a recovery in the US building industry from the doldrums of 2009. However, it would seem that New Zealand also filled gaps in supply left by the Chilean earthquake affecting supply from that region. Chilean exports to the US for the first quarter of 2010 declined 12% from 2009.

Housing data out of the US for May 2010 showed that privately owned housing starts increased to a level that hasnt been seen in over a year, but the shine was taken off this figure by a decline in housing permits which fell close to 2009 monthly levels. There are reports from the US that there is a housing surplus due to the volume of recent foreclosures and the shortage of credit available. However, this will assist keeping US interest rates low for the time being.

China still remains the largest single destination for New Zealand lumber in quantity, taking 22% for the calendar year so far. However, the highest value markets for New Zealand pinus radiata lumber remain Australia and USA who account for 45% of New Zealand lumber exports by value, with China making up just 16%.

Domestic log prices in New Zealand have remained firm this month, with some of the structural grades edging up a little further. Logs have been in good supply despite the strong export demand. However, supplies may dwindle as the recent rain across the country takes effect on logging activities in some parts of the country.

The NZX Agrifax Combined Log Price Index, which measures returns from the whole forest, eased NZ$1/T to NZ$87/T. Domestic log prices have remained firm, however, prices for export logs have softened as increased supply to New Zealand’s major markets takes effect.

Log price changes:
North Island:

·  Domestic: Prices are mostly steady

• Export: Grades are down $2/T to $3/TSouth Island:

·  Domestic: Prices are firm

• Export: Prices are down $1/T to $4/T