A shortage of logs and increasing demand out of China at wharf gate prices for export grade saw logs climb 14% this month, or $18 per Japanese Agricultural Standard cubic metre.
In a note to clients, PF Olsen said that while demand in China has increased, it is still “well below” normal levels for this time of year.
Scott Downs, PF Olsen’s director of sales and marketing, said that domestic demand for lumber (rakau) – and therefore logs – is also weakening, with most log processors operating below capacity.
Downs said this is on the back of an oversupply of structural products in the construction sector. It follows “panic ordering and purchasing” after the covid lockdown periods, when the local supply of timber products and associated building products resulted in shortages during the building boom.
He said despite prices holding up to date, there is the “strong possibility” of spot discounting for more products.
That could be offset slightly by price increases for sawn timber sales in Asia, where prices across all markets have improved by an average of 7%. The Olsen log price index is up $8 to $135, its highest level since July 2021 and $12 above the two-year average.
A-grade radiata logs are currently trading in a range between US$140-US$145 ($225-$234) per Japanese Agricultural Standard cubic metre (JASm3) at cost and freight price (CFR) – the price paid by the end buyer – although there remain some restrictions on buyers getting letters of credit.
ANZ Bank agricultural economist Susan Kilsby said there is a surplus of timber available, but with processing also affected by the wet summer conditions, storm damage on the North Island is expected to result in a surge in construction activity.
In the bank’s agri-focus research note last month, Kilsby noted that carbon prices had also eased back, meaning that the volume of New Zealand Units that will be released this year will be reduced to 17.9 million NZU, down from the 19.3 million NZU released last year.
She said some of the 159 million NZU that were held at September 30 may be held to offset future obligations, “but many will have been purchased as a speculative investment”.