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Falling fuel prices lift log exports

2014-10-30 11.40.42

Prices and demand for New Zealand’s main forestry export, raw logs, fell during the year when China put the brakes on the trade. Source: Radio New Zealand

There had been little change in market conditions in China, but foresters were getting a bit more for their logs at the wharf.

According to Radio New Zealand there’s been global oil prices lowering cost of shipping, that has added to returns for New Zealand exporters.

Since August, the price for A-grade logs in China has risen by just two US dollars a tonne, but due to shipping costs falling and a lower New Zealand dollar, the price for logs delivered to a wharf in New Zealand has increased by NZ $13 a tonne.

So returns have lifted at the wharf gate for six consecutive months now. But the foreign exchange and shipping cost changes are disguising what is still a pretty flat Chinese log market.

Currently the inventories at China’s ports remain much higher than normal, but are slowly reducing.

The concern however, is with building in China going into its seasonal slow patch, and New Zealand prices distorting the market signal somewhat, there’s now a chance that the market could tip back into oversupply, which would put more pressure on it going into 2015.

The drop in log prices earlier in the year had put the local timber industry in a stronger position. Sawn timber production is at a four year high, driven by the Christchurch rebuild and new building going on in Auckland.