The weakening Chinese log export market has led to a 14.5% decline in bulk trade at PrimePort Timaru in New Zealand’s Central South Island.
CEO Phil Melhopt of PrimePort noted, “Bulk trade volumes have come from last year’s record highs.”
According to a report by Stuff NZ, the total trade passing through the port in the last fiscal year amounted to 1.77 tonnes—a drop of 300,000 tonnes compared to the previous year.
In a statement published on Friday, PrimePort’s 2022-2023 revealed an after-tax profit of $5.05m, a decline of 31.3% on 2021-2022.
Meanwhile, the operating profit before tax, was down $2.3m, which translates to a 24.5% drop.
“As market demand slowed in some trade areas and the business felt the ongoing effects of an inflationary environment.”
Significant cost pressures for the business – jointly owned by Timaru District Holdings Ltd and NZ’s largest terminal, the Port of Tauranga – included staff pay increases, finance costs, and insurance premiums rises.
“Overall, operational costs were up 15.1% while reductions in bulk dry, logs and cement lowered trade volumes by 14.5%,” the company said.
According to Mr Melhopt, “fertiliser, stock feeds and cement were down 26%, 15% and 6% respectively on last year.”
However, the most significant impact was in log exports.
As reported by Wood Central, NZ log exports – among the country’s three largest export commodity markets – have slowed on the back of a slowdown in Chinese demand for logs.
China currently makes up 55% of trade – although NZ is looking to diversify into new markets.
Log exports are a core business for the port, with Mr Melhopt noting that exports for 2022-2023 dropped 149,000 tonnes from the previous year – representing almost half of the bulk trade drop.
“The China log export market remained subdued, and the low ‘at wharf gate’ rates on offer to forest owners meant many decided to leave them on the stump,” Mr Melhopt said.
Wharf Gate (AWG) pricing – the price exporters can sell timbers, including additional freight costs, has been steadily decreasing for months.
Last month, Wood Central reported that New Zealand’s log export prices continued to tumble due to slower-than-expected Chinese economic growth.
This has led some economists to raise concerns that the country could be in the midst of a double-dip recession caused by a ‘timber tantrum.’