1 Dec 2014

Forest trade to China to pick up in 2016

3:48 pm on 1 December 2014

A new report looking at New Zealand's log trade to China is predicting demand will pick up from 2016, after a slump in demand and prices earlier this year.

China put the brakes on log imports this year after an excess supply resulted in a build up in its ports.

The report, by the market analysts AgriHQ, said migration from rural to urban areas in China would maintain the demand for construction.

Analyst Ivan Luketina said next year's demand from China was expected to be similar to this year's, but it was likely to pick up in 2016.

"We're expecting demand to pick back up as China's construction market is going to have to build enough houses to house 120 million people that they're expecting to move into urban centres by 2020."

"Returns at the moment have actually increased off the lows that were seen earlier in the year and exporters are still making money at the returns that they're getting at the moment, so even if prices remain flat or possibly slightly up during next year, it won't be a major issue for log exporters," said Mr Luketina.

He said New Zealand would also benefit from predictions that Canada and Russia's supply could slow down.

"From 2016 onwards it's expected that Canadian supply will start falling away and Canada makes up quite a large proportion of supply to China.

"Russian supply is unlikely to return to the highs that were seen in 2007 and 2008 and more and more North American supply is going to be soaked up by the US housing market, so we're actually expecting demand to be strong in China but also more demand specifically for New Zealand products."

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