New Zealand log prices update

New Zealand log exports have remained consistent this year, now recording a 7th consecutive month above 1million m³ in August. Year to date figures show a 3% increase in exports compared to the year to August 2011 on the back of a strong month in June. Since June exports have fallen to be similar to 2011. Exports to China are up 9% compared to year to August totals for 2011 despite China importing less logs overall during this time.

China. China has continued its trend of decreasing imports, with August’s rolling quarter total being 21% below the rolling quarter total for 2011. Average monthly imports for 2012 have been over 450,000 m³ below those of 2011. Growth in China is slowing down, as its economy is heavily linked to the Euro zone through its exports. As Europe slows down most Asian markets will to some extent go with it. China is, however, investing heavily in domestic infrastructure that will give a boost to construction. Much of the investment is in the interior, where Russian logs may be better placed to take advantage of demand as New Zealand logs will have to enter through eastern ports.

Most of the decreases in China’s imports are from Russian and Pacific North Western markets. This has led to New Zealand significantly increasing its market share in China this year, moving from a 23% share in August last year to a 34% share in August this year.

India. Indian demand is slowing for logs as inventories are full up and investment in infrastructure is waning. Supply is fragmented, while exports to India in July were very low they have picked back up again in August. Export volumes are down for 2012 compared to last year, and monthly volumes have been much more variable as high prices have attracted huge volumes at times which have then caused oversupply that suppressed demand. Supply to India is reducing, and that should see inventories right themselves in the coming months.

South Korea. Korean inventories are in good balance with supply matching consumption. Building activity in South Korea is easing, as like most of New Zealand’s major markets in Asia its economy is largely tied to Europe. Though New Zealand exports to Korea are reduced by around 15% in comparison to last year, New Zealand still retains a large market share. South Korean imports of New Zealand logs made up 60% of log imports for Q3 2012.

Japan. Exports to Japan increased in August to just over 95,000 m³; the largest monthly figure in the last 4 years, besides May’s total of 145,260m³. Though New Zealand supplies close to 20% of Japans log imports, it has a very small contribution to Japans imports of lumber. Japans lumber imports are a much bigger market than log imports.

Pacific North West. Pacific North West (PNW) exports to China have lowered considerably this year. Most of the decrease is from the US, although until August Canada was on track to export less to China than in 2011. China imported a considerable amount of logs to China in August. Though much of the increase was in logs for pulping so will not be in direct competition with much of New Zealand’s exports. As the US housing recovery gains momentum less wood will be exported. This will likely lead to New Zealand gaining more market share in the major Asian markets.