PF Olsen: Log markets update
Wednesday 28 Aug 2019
The trade war and now potentially a currency war between China and the US could have an impact on log buyer confidence, and the resultant movements in the relative exchange rates will likely have a significant effect on September AWG prices.
There will likely be an increase in sawn timber inventory in NZ as some sawmills have signed-up to a supply of logs at lower prices yet don’t have the sawn timber sales to match. The domestic market is currently two paced with reasonable demand for structural sawn timber yet weak demand for industrial grade sawn timber.
Due to the increase in the AWG prices the PF Olsen Log Price Index for August increased $2 to $114. The index is currently $14 below the two-year average, $13 below the three-year average, and $6 lower than the five-year average.
Export Log Market Update: China - The CFR sale price for A grade logs in China has recently increased and now sits around 113 USD per JASm3 and expected to increase next month. However, the more recent depreciation in the CNY against the USD is of concern as this has reduced the buying power of the Chinese log buyers. There was a similar sudden depreciation of the CNY this time last year which caused a drop in CFR and resulting AWG prices for one month. The market recovered quite quickly then due to steady demand and the stabilisation of the CNY against the USD.
There was a wide range of August AWG prices offered by log exporters with higher prices in some locations as exporters manoeuvred to maintain their position in the supply chain or made up shortfalls of volumes for pre-ordered vessels. We have also fixed modest increases in AWG with some exporters over the next three months to provide some owners with certainty.
Total softwood inventory in China is around 4.5million m3 so has only risen about 600K over the last month. Daily consumption is currently 65-70k m3 per day which is the same as this time last year. While the daily usage has dropped from the 73-74k m3 per day used at the start of July, this was expected as the temperature increases in China. The demand is still reasonably healthy for this time of year in China.
For a more comprehensive market analysis and summary of factors including port inventories, search Wood Matters on the PF Olsen website or click the link below:
Source: PF Olsen - Wood Matters
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