PF Olsen: Log export market update

Wednesday 11 May 2022

April At Wharf Gate (AWG) prices for export logs decreased by $15-$18 per JASm3. This decrease in AWG price was caused by a spike in shipping costs as well as the NZD strengthening against the USD. Significantly reduced log supply into China has maintained log prices, but if Covid forced lockdowns in China continue, then log demand reductions may put pressure on CFR log prices in China.

The PF Olsen Log Price Index dropped $8 to $120 which is $3 below the two-year average, $1 below the three year-average and $4 below the five-year average.

Export Log Markets

- The total log demand in China has reduced since last year’s real estate and construction crisis in China due to Government crackdown on speculation and a tighter lending environment. Log supply has also reduced dramatically. Due to COVID-19 and Russia’s invasion of Ukraine significantly affecting the supply chain, we are yet to see where the balance between supply and demand truly sits.

China imports of softwood logs in the first Quarter of 2022 was 44% down on Quarter 1 2021. New Zealand’s log supply was 25% down. Log supply will remain constrained. New Zealand is entering its winter months, and price instability has not encouraged a significant increase in harvest levels. Supply from Europe and North America will also remain lower than last year.

Log vessels currently must wait an average of 10 days in Tauranga before berthing. Not because there are increased log volumes, but most log exporters from New Zealand did not sufficiently prepare for the change in fumigation rules. Many exporters are now queuing while they debark more logs.

Reductions in log volume to start Quarter 2 has also been caused by COVID-19 disruptions to staff levels in New Zealand and storms in the East Coast region of NZ.

India - Kandla port is forecast to be very busy with four log vessels arriving from Uruguay and Argentina as well as two from Australia at least one from USA arriving in May. There is however an expected three weeks berthing delay for these log vessels, due to priority berthing facility accorded to export wheat vessels. Wheat exports from India are increasing significantly due to the Russian invasion of Ukraine.

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Source: PF Olsen Wood Matters

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