Saturday, December 2, 2023

Timber usage slows significantly

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Aside from the obvious challenges brought on by Cyclone Gabrielle, harvesting crews equipment has also been destroyed.
Economist Nathaniel Keall says of all New Zealand’s major exports, the forestry sector is by far the most dependent on the Chinese market.
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There has been plenty going on this month, most of which bring another level of anxiety to the future.

After finally reaching some sort of normality since the pandemic, Cyclone Gabrielle decided to throw another spanner in the works. The North and East Coast have been battered yet again adding salt on the wounds to the East Cape that has had a year of storms. Forests sounded like gun fire as pines snapped in the wind and road access broke away.

Aside from the obvious challenges, harvesting crews equipment has also been destroyed. Road access and port hold ups add to a situation that is going to take months to years to recover from. The only possible positive from this is that as things begin to recover the demand for timber is surely going to grow. Thousands of houses are in line to be destroyed and replaced. Likewise, widespread fencing damage should keep orders for posts and the like strong over the coming months.

Prior to the cyclone, sentiment from mills remained pessimistic. Timber usage had slowed significantly through all sectors. There’ve been reports of large manufacturers of framing timber going from at least four months of back orders down pre-covid levels of less than a month. Following extended holiday breaks, it’s been common for mills to only operate at 80% or less of potential capacity in an attempt to balance supplies with the reduced demand.

Domestic log pricing has mainly remained steady since the start of the year. Some regions were expecting a small price decrease, but the turn around of the export market was a counter-weight to this.

The housing market has seen home values plummet for the tenth consecutive month in January. A total drop in property value of 7.2% has occurred compared to last year. This is the largest drop since May 2009, but as we know, house prices have been at record highs so this doesn’t come as a major surprise.

There has been no major uptick in sales and unemployment remains low. Official unemployment data released in December revealed that the unemployment rate currently sits at 3.4%. The low rate does put New Zealand in a strong position but there is still a tough year ahead for the global economy.

Major developer Fletcher Buildings is putting a pause on some developments as the company has seen significant reductions in residential units sold. The company has forecasted 800 houses to be sold in the current fiscal year ending June 30th. This is a drop from the previously expected 1000. To reach its target sales need to increase from 16 to 20-22 a week. After recent events, this could be challenging but remains achievable.

This article was written by AgriHQ analyst Reece Brick. Reece’s reports provide key insights into what makes our sheep and beef and forestry markets tick. Subscribe to AgriHQ reports here.

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