China demand drives up New Zealand log prices

Summary

In November, NZ log prices at port increased by NZ$12 per JASm3 month-on-month, driven by stable Chinese demand, favourable US dollar exchange rates, and lower transport costs. Scott Downs, Sales Director of forestry consultancy PF Olsen, said North Island prices rose by NZ$10, while South Island ports saw larger gains; export freight costs continue to fall, with North Island to China freight around US$30/JASm3. In China, A-grade pine logs are priced at about US$125-130/JASm3 (NZ$202-210).

The PF Olsen Log Price Index rose NZ$6 this month to NZ$118, still NZ$4 below the five-year average, but narrowing by NZ$6 from last month. Specific increases vary by region and grade, overall reflecting sustained Chinese demand for construction timber.

Commentary

New Zealand log exporters have a short-term positive outlook, with November prices rebounding on the back of demand, exchange rates, and freight costs. For SME owners, direct beneficiaries include suppliers in some North Island and South Island ports, but note that the price index remains below the five-year average, indicating the rebound is not yet solid. Chinese demand is stable, but property regulation and competition from alternative materials may curb long-term growth.

Lower freight costs reduce export expenses, but international freight volatility remains a risk. It is advisable to lock in short-term contracts while monitoring signals of recovery in China's construction sector and the RMB exchange rate. If the NZ dollar appreciates, it will erode NZD-denominated returns.

Additionally, consider diversifying markets to Southeast Asia or other regions to reduce reliance on China. Overall, this uptick is a phased opportunity and should not be over-optimistic.

Keywords: New Zealand logs, price index, China demand, export freight, PF Olsen, Scott Downs, A-grade pine, exchange rates, November, port prices

Source: Fujian Provincial Department of Commerce Official Website