PF Olsen Export Market Commentary

Wednesday 15 Sep 2021

Export Log Market AWG prices – AWG prices are usually set at the start of each month. This month In August exporters were very reluctant to set prices, with CFR prices still not confirmed in China as there was a standoff over prices in LC’s for vessels enroute. During this time shipping costs increased, and the New Zealand dollar strengthened, which did not help the AWG calculations. Once the dust settled there was still differences in AWG between exporters but not the array seen in July. The average drop in prices was about 35 NZD per JASm3. AWG prices in Gisborne were again affected by the high demurrage costs, but the ability to load vessels during the Covid Level 4 lockdown has eased this situation.

China – The price for A grade logs was in the mid 160’s USD per m3 for A grade. Exporters noted log buyers were immediately more active upon announcement of the Covid lockdown in New Zealand. This lockdown will be for two weeks to the end of August. Vessels have been able to be loaded during this time, but all harvesting has ceased. This has assisted with port congestion at Gisborne and Tauranga. The average number of vessels departing New Zealand each month has been 55 this year. There are currently less than 35 vessels planned for September. This reduction in supply will hopefully assist with port congestion in China, where at two main port areas Lanshan and Xinminzhou log vessels are now waiting longer than three weeks.

Softwood log inventory has not risen in the last month and sits around 5.5m m3 although there is significant volume sitting on vessels. Daily port off-take has increased about 15k per day over the last month to around 75k m3 per day. Market participants in China expect further increases in demand over September.

There is an audit underway of sawmills in the Lanshan area to see if they are achieving set environmental targets. Hopefully, this will not significantly impact log demand in the short term.

The use of prefabricated wood structures is featured in the latest five-year provincial plan for new construction in China counties. This is a promising sign for increased consumption of logs in China. In June, the Chinese Ministry of Housing and Urban-Rural Development (MOHURD), released the formal Guideline on Strengthening Green and Low-carbon Construction in Counties. The policy contains specific requirements on county development and states that new residential buildings in counties should be predominantly six storeys and, in principle, not higher than 18 storeys. No less than 70 percent of newly built residential buildings should be 6-storeys and lower. Requirements to achieve this guideline indicate significant opportunities for wood-frame and prefabricated wood structures in construction.

India – The price for sawn timber in Kandla is weak at INR 591 levels per CFT, due to negative sentiments and seasonal factors. The log market in Kandla expects about 9 vessels to arrive in September, from Australia, New Zealand and Uruguay, with an additional five vessels in October.

Tuticorin should receive its first bulk log ship in about three years when they receive a shipment from Uruguay. They used to regularly receive log shipments from New Zealand. Container shortages has made shipping companies quote excessively high freight rates which have made log shipments in containers untenable.

The Indian monsoon should subside in September. The log market anticipates log buyer sentiment will become more positive in October. The North Indian new accounting year starts on Diwali day, November 4th and demand should increase through to the year-end.

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Source: PF Olsen Wood Matters


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