Five Years On: Steady Growth

Wednesday 1 Sep 2021

The forestry sector has continued to benefit from rising global demand for our key forestry products, as well as strong domestic demand. Internationally, rising demand for New Zealand’s logs and sawn timber, especially from China and the US, is putting upward pressure on export prices. Domestically, there has been strong demand for construction materials due to a robust housing market.

Today’s graphic shows steady growth in both log export volumes and prices over the past 5 years:

MPI Situation and Outlook for Primary Industries: Forestry – Log export revenue is forecast to reach $3.8 billion in the year ending June 2022, on the back of continued strong demand as China ramps up infrastructure projects. The outlook for log prices is expected to decline slightly due to increased supply from other countries. European and South American foresters anticipate increased log shipments to China, which is likely to put downward pressure on New Zealand log prices. It’s not clear whether Russia's proposed log export ban in early 2022 will be a complete or phased-in ban, but nevertheless, the ban is expected to partly offset the impact of increased supply into China and support New Zealand log demand and prices in the medium-term.

South Korea is New Zealand's second largest log export market and accounts for 8.0 percent of total log exports. Demand for logs slowed over the past few years as economic growth has weakened. In addition, importers are forced to compete on price with Chinese importers, so while volumes have decreased, the value of exports has remained relatively steady, as rising Chinese demand has lifted prices. Export volumes to South Korea are expected to remain low as Australian logs are being rerouted following China’s ban on them, placing further downward pressure on demand for New Zealand logs.

India’s demand for New Zealand logs dived due to the COVID-19 pandemic and is yet to rebound. Export volumes are down 69.5 percent in the year ended March 2021 compared to last year. India now accounts for only 2.0 percent of total log exports. Demand from India is expected to remain subdued for the rest of the calendar year, as COVID-19 cases remain high. In addition, Australian logs have been redirected to India after China banned them, putting pressure on this market. Over the medium-term, demand from India is expected to increase as the pandemic wanes and conditions improve.

Sawn timber outlook is positive – Sawn timber export revenue is forecast to reach $910 million in the year ending June 2021, up 12.5 percent compared to last year. Timber export prices are strong due to a combination of strong international and domestic demand as well as a greater proportion of higher value appearance grade products driving up average prices to an all-time high of $550 per cubic metre in March 2021.

Timber production decreased slightly despite increased harvest volumes and is most likely due to bottlenecks caused by capacity expansion projects in some mills. In addition, domestic timber consumption has risen at the expense of export volumes due to high levels of domestic residential construction.

Timber export revenue is forecast to increase further to $920 million in the year ending June 2022, due to continued strong demand. However, prices are expected to decline slightly, as supplies increase.
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