Southern NZ forestry companies optimistic | 20 Feb 2018

Log export prices are having a 25-year high, with southern industry insiders optimistic longer-term gains are likely to be sustained. As of December 17, key indicator the At Wharf Gate price for A-grade logs 30cm or more at the small end, stood at $148 per export cubic metre, according to the latest available data from PF Olsen Ltd.

Invercargill-based Log Marketing NZ Ltd general manager Greg Lindsay said that put average prices at their highest since August 1993. The peak had been driven by strong demand from Chinese and Indian markets.

“China has had environmental constraints applied reducing domestic log production, which has contributed to increased export demand. Shipping rates are also relatively competitive currently. Allied with strong domestic and Australian demand during recent years, typical seasonal price peaks and troughs were also diminishing”, Lindsay said.

Southern Wood Council chairman Grant Dodson said market indicators suggested current good prices would be sustained. “We expect some volatility with price up and downs across the year. This is business as usual for forestry but fundamental demand and market conditions remain strong.”

Although council members across the region were “very positive” about industry prospects, Dodson highlighted possible concerns on the horizon. “The impact of the recent share market correction is yet to play out. There may be some impact depending on how significant the correction ends up,” he said.

“Additionally, although local log demand is strong, local mills are having to compete with export log prices, which is causing some discomfort while markets adjust. But forest owners and mills are simply working through this as they have many times in the past. It’s great to see strong returns from forestry and lots of busy domestic mills.”

Rayonier Matariki Forests managing director Paul Nicholls was also positive, while urging perspective over current prices. “Log prices peaked in 1993 but, when adjusted for inflation, there have been several other price peaks higher than today,” he said.

Rayonier had operated in the south since 1992, with current market conditions allowing for greater business flexibility, he said. “We’re in a good position to export the logs that don’t meet domestic processors’ specifications. We’re also able to harvest and export minor species established by the Forest Service that have been uneconomic until now. This allows us to establish more commercially-focused plantations.”