NZ log exports remain sluggish, with wharf prices falling $4 to $5 (JASm3) to just $110 to $117 during October.
Yesterday, Wood Central reported that it has been more profitable for NZ forest companies to sell raw logs to China, which are, in turn, exported back as manufactured Laminated Veneer Lumber (LVL).
However, new data from the NZ-based Business Insider shows that the total Chinese softwood inventory for the last quarter stood at just 2.7 million cubic metres, well below the 4 million cubic metres “price trigger.”
With more than 89% of the country’s NZ $3.45 Billion log export market, China dwarfs all others export markets for logs and effectively controls NZ’s third largest export commodity.
Leading up to the Chinese slowdown, NZ exports more than 20 million cubic metres of sawn wood, with South Korea a distant second at just 2 million cubic metres.
And whilst the Chinese manufacturing market is showing signs of recovery, consumer sentiment remains at a 12-month low amid lingering concerns over the Chinese construction market, which in turn is having a significant impact on demand for raw logs.
In recent months, NZ has looked to restore the country’s $250m, 1.7 million cubic metre trade with India as a potential hedge against the Chinese market and to capitalise on its booming construction market.
According to the NZ Ministry of Foreign Affairs and Trade, logs and wood products are among the key drivers of NZ’s relationship with India.
Until recently, India was among NZ’s top 3 export markets for sawn wood; however, concerns over the use of methyl bromide have led to trade between both countries shrinking to just $28m.
The dramatic reduction in trade centred on a dispute over the handling of treated timber. Following a successful delegation to India, the Ministry of Primary Industries (MPI) started a trial that saw fumigation occur in India rather than in NZ.
Wood Central understands the trial finished earlier this week (October 31), with Shane Olsen, Manager of Plant Exports at Biosecurity NZ, reporting that the option “could provide an alternative treatment option for NZ logs to India.”
However, NZ exporters are reluctant to fully embrace the export of unfumigated logs to India amid uncertainty over the cost an exporter’s log shipment may face on arrival in India to have the load fumigated.
Beyond sluggish demand, exporters are also battling port congestion, with weighting times at Port of Tauranga, in North Island, for example, stretching beyond 12 days.
