MPI: Quarterly forestry exports update

Wednesday 15 Jan 2020

Here are the latest forestry export statistics from the Ministry of Primary Industries - Forestry exports for the year ended June 2019 reached $6.9 billion. Just over half of this value was from log exports, through record high export volumes and prices. Looking more closely at the detailed statistics:

  • Log export prices for A grade logs dropped sharply (down 11 percent to a low of $138.0/m3 in July due to a build-up of softwood inventories in China following very high log export volumes from New Zealand. At the same time, the supply of logs increased from Europe and Russia. Prices recovered to $143.5/m3 in September (Figure 8), and are expected to continue rising to $155-$165 m3 by the middle of 2020. This has driven a forecast fall of $726 million (nearly 20 percent) for New Zealand log export value for the year ending June 2020.

  • The price recovery during August and September was driven by log inventories at China’s ports declining much quicker than expected. This recovery is unlikely to continue over the next few months as sales to China traditionally slow in January and February. High volumes of logs from beetle-damaged forests are continuing to arrive in China from Europe. As these have a similar use as New Zealand logs they are slowing the export volume recovery. However, we are expecting to see volumes increasing in subsequent years as both small and corporate growers respond to the log price recovery by increasing harvest volumes.

  • China’s construction market remains active and there is no sign of decreased demand. Therefore, industry is expecting export volumes to China to recover over the next year, but for prices to be slightly lower than recent levels. However, any increase in shipping costs resulting from new requirements on the sulphur content of fuels from 2020 could slow down the export volume recovery by impacting the marginal returns on harvest.

  • Longer-term, the recent log price drop has underlined the importance of increasing domestic processing and diversifying export markets. Interestingly, the price of wood products has not followed the log price drop, and demand from other export markets such as Japan, South Korea, and India, has remained stable with potential to increase.

  • Additionally, log exports have grown from 24 percent of forestry exports in 2009 to 55 percent in 2019 (Figure 9). With 75 percent of New Zealand’s exports going to China, forestry is heavily exposed to risks of changing demand in this market. The key drivers for this are New Zealand’s increased log supply, the increasing log demand from the China’s construction industry and New Zealand’s wood processing capacity remaining relatively static over the last decade.





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