Unprecedented demand for timber, largely from China, is pushing the price higher for local processors, according to the New Zealand Pine Manufacturers Association.
Chief Executive, Lawrie Halkett, says that this is a significant and rapid development for the industry. There are a number of contributing factors, chief among them is the appetite of the Asian markets, and China in particular for logs and lumber.
In the case of China, “the fall off of other suppliers, notibly Russia, has meant greater demand for New Zealand wood and therefore higher wood prices for international and local players.
Over the past year China imported more than half of the logs we exported, and nearly a quarter of our export lumber, Mr Halkett says.
In addition to the more traditional industrial end uses, Mr Halkett says that Chinese manufacturers are now using our radiata pine for veneer, plywood and many other high-end value-added uses.
This potentially systemic shift in sourcing patterns from China is being exacerbated by mounting demand in other Pacific Rim markets like Korea, Viet Nam and the United States. Adding to pressure on supply is the earthquake in Chile, removing a major supplier into these same markets for a period of time.
Increased international demand does impact on domestic prices for timber, Halkett says. “This impact is already being seen, as saw millers pass on log cost increases they have to pay to secure supply to their mills. Likewise, manufacturers need to pay saw millers for increases in lumber prices. Normally this is not an issue, but the speed with which prices are moving is causing tension in the supply chain resulting in minimal time for manufacturers to negotiate increases with up line customers.”
It is uncertain to what extent New Zealand forest owners will divert domestic supplies to meet the growing international demand. But Halkett believes the forest owners appreciate the need to sustain a strong domestic market for wood.
“It is of strategic importance to have a strong domestic processing and manufacturing base. Our home market provides much needed stability, especially in times when commodity cycles experience a fall off in international demand.” said Halkett.