26 Aug 2019

Log prices rise after last month's big tumble

3:23 pm on 26 August 2019

Log prices have improved slightly, after falling to their lowest level in four years.

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Photo: RNZ / Susan Murray

In July a backlog of imports into China, a downturn in demand, and nervousness over its trade war with the United States pushed prices down about 25 percent to their lowest point in four years.

AgriHQ forestry analyst Reece Brick said A-grade logs, which were considered the benchmark grade, had for six months been sitting around $150 - $145 per JASm3 (Japanese Agricultural Standard cubic metre), but in the space of two weeks fell sharply to $105.

Mr Brick said the wider forestry industry was still feeling the strain from the recent Chinese log price re-adjustment.

But he said prices had recovered slightly, helped by a small decrease in port-level inventories. Latest figures from August showed A-grade log prices were now sitting at $110 per JASm3.

Mr Brick said while it was hard to quantify, it was estimated there had been a 20 percent drop-off in harvesting while some in the industry opted to wait for prices to improve.

Most of the people that have stopped harvesting now are those with woodlots planted 25-30 years ago and who are looking to cash.

"They can only really make money in one go.

"The bigger companies, which have constant harvesting rotations, they're just going to keep on going as per usual more or less."

Mr Brick believed those in the sector were cautiously optimistic that prices would start picking up in the short term, although they were still a long way from the record high levels seen earlier in 2019.

"I guess it's at which point does everyone bite the bullet and say 'hey, we'll just take this slightly lower price and be happy with it', or if they just keep holding off.

"Volumes leaving New Zealand shores are already tightening, which is expected to impact on China from September/October, when Chinese log use usually increases. This is creating some level of confidence that the market should rise from here to the end of the year," he said.