New Zealand’s sawmills are struggling with intense competition and a need for product diversification, creating an environment where the supply of raw materials exceeds demand and creating havoc with pricing.
That is, according to Allan Laurie, who said Juken’s decision to close its Gisborne mill came amid a surge of raw logs in global markets.
“Yes, that is a shame. It reflects a sawmilling capacity in New Zealand, which in a standard month is more than demand, so you see challenges around pricing,” Mr Laurie told Radio New Zealand this morning.
“Sawmills tend to compete with each other very rigorously, so it’s a challenging time for sawmills; their margins are down.”
He said sawmill owners now “take on big losses in export lumber sales, with Southeast Asia inundated with supply amid weak pricing.”
As reported by Radio New Zealand, November prices rose to NZ $110 per Japanese Agricultural Standard metre-squared at the wharf gate of South Island ports and $5-10 more for North Island exporters.
Log exports account for 10% of New Zealand’s trade with China (up to 20 million cubic metres); however, Mr Laurie points to an over-reliance on the Chinese construction industry, leaving the $6B market at risk.
“China continues to be 80% of what we do into export markets, and that’s a challenge, of course, and one that the New Zealand forestry sector has to consider,” according to Mr Laurie.
He is now pushing for New Zealand Forestry Inc. to “get out into the world and start looking at other markets and sale opportunities”, including “non-traditional markets where radiata pine stands very well against many other species.”
But he said money-tight forestry companies would struggle to fund in-market research and trips abroad to find new customers globally.
According to Mr Laurie, larger tariffs and increased levy fees would allow exporters to partner with the NZ government to develop new markets.
He said the South Korean market, NZ’s second-largest export market (2 million cubic metres), was “probably in even worse shape than China right now” – but India stood out as having good opportunities for New Zealand radiata pine exporters – at prices close to Chinese values.
“India has not been a great market for New Zealand over the last couple of years, with countries like Uruguay shipping in cheaper fibre.
“But there is some pressure on exporters at the moment to look back to India as an opportunity,” he said.
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.
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 handling 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.
The trial finished last month, and according to M Laurice, “My understanding is there’s a vessel heading up there this month for the first time in some time.”
Beyond sluggish demand, exporters are also battling port congestion, with Wood Central reporting earlier this month that waiting times at Port of Tauranga, in North Island, for example, stretch beyond 12 days.