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Despite low domestic demand, log availability might be limited because low prices barely justify harvesting. China & India in wait-and-see mode on tariff uncertainties which flow back here too

Rural News / analysis
Despite low domestic demand, log availability might be limited because low prices barely justify harvesting. China & India in wait-and-see mode on tariff uncertainties which flow back here too
Yard storage at Chinese plywood manufacturer
Yard storage at Chinese plywood manufacturer

Everybody involved in log markets around the world will be waiting to see what happens to the balance between supply and demand early next year. The local market is eager to see what demand is like after the Christmas and New Years holiday period. Both local and China market participants will wait to see if log supply from New Zealand is reduced to match reduced demand in China during the Chinese New Year holiday period in late January. While India is waiting to see if log demand increases after the monsoon weather.    

The CFR price range for A grade logs in China has dropped from US$125 per JASmlast month to a range of US$118-124. A weaker NZD against the USD and slightly reduced shipping costs has reduced the negative impact of this price drop on At Wharf Gate (AWG) prices in New Zealand. December AWG prices for export sawlogs dropped $2 per JASm3 from November pricing.

The PF Olsen Log Price Index decreased $1 in December to NZ$121. The Index is now $3 above the two-year average, and $1 above the five-year average.

Domestic Log Market

Negotiations are ongoing between sawmill operators and forest owners for log pricing in Quarter 1, 2025. This is a difficult situation as mills seek price relief, but forest owners are in a position where their financial returns barely justify harvesting.  

The construction industry is expected to remain weak in New Zealand. Advanced indicators of activity such as consent insurance remain low. The New Zealand economy continues to perform around the recessionary level. Many people are less secure about employment or business since, so are unlikely to spend on housing. Government spending is also down, and many projects involving building are likely to be delayed or reduced.

Export Log Markets

China

China softwood log inventory remains at 2.4m m3 with log demand also steady around 55k mper day. The CFR price range for A grade is currently in the range 118-124 per JASmfor A grade.   

The China Caixin Manufacturing PMI increased in November to 51.5 from 50.3 in October. (Any number above 50 signals manufacturing growth). It had the fastest manufacturing expansion since June, driven by strong growth in foreign orders. Employment levels fell again for the third time in a row. Confidence levels were at an eight-month high. Despite all this, log demand remains subdued in China. Mills will start to reduce inventory levels as they prepare for Chinese New Year. Many people in China are waiting to see what will happen with the relationship between China and the incoming USA government.    

There has been a lot of comments about tariffs announced by the incoming USA government. What has been relatively unnoticed is the introduction or change in Russian tariffs on furniture parts manufactured in China. As an example, the tariff on sliding rail components in furniture has increased from 0 to 55.65% over the past few weeks. Interestingly, it is now more cost effective for Russians to import fully finished furniture from China (which incurs a 9-12% tariff) rather than manufacture the furniture in Russia, using parts from China. This tariff seems to be imposed by tariff hungry city officials, who are prioritising short-term tariff revenue over long term relationships and economics.

New Zealand pine logs are widely used in China for plywood manufacturing and China produces more than 70% of the world’s plywood. Nearly half of the USA’s total plywood imports last year came from China. Any tariffs imposed could have a significant effect on this supply chain. In recent months, FSC certified bamboo used in China, has come under increased scrutiny with some brands making false and misleading statements about sustainability. 

India

Vessels have a waiting time of three to four weeks at Kandla port due to congestion. There are approximately nine log vessels arriving in January. The sale price of green-sawn timber in nearby Gandhidham is around 481 INR per CFT, with poor demand. The market expects demand to increase  in January.  

Log demand in Tuticorin remains weak as the Northeast monsoon rains continue until mid-January. The market expects demand to increase after the harvest festival in mid-January. The price for sawn timber in Tuticorin is around 621 INR per CFT. Green sawn timber is arriving from Gandhidham via coastal container shipping, due to the price differential with the Gandhidham market.

Exchange rates

The NZD weakened against the USD through December. If this trend continues it will offset some of the log price drops in China when calculating AWG pricing for January. The CNY also continues to weaken against the USD reducing the buying power of Chinese log buyers. This will put more downward pressure on log sale prices in China.
 

NZDUSD-915

NZD:USD

CNYUSD-958

CNY:USD

Shipping costs

Shipping costs have reduced and the price to ship logs from New Zealand to China is now in the low to mid 30’s USD range per JASm3

The Bulk Dry Index (BDI) shown below is a composite of three sub-indices, each covering a different carrier size; Capesize (40%), Panamax (30%), and Supramax (30%). It displays an index of the daily USD hire rates across 20 ocean shipping routes. Whilst most of the NZ log trade is shipped in Handysize vessels, this segment is strongly influenced by the BDI.  The BDI index is now at its lowest point since February this year. This decline is shown across all vessel segments.    

BDI-203

Baltic Dry Index (BDI)
Source: TradingEconomics.com

BunkerPrice-908

Singapore Bunker Price (VLSO) (red line) versus Brent Oil Price (grey line)
Source: Ship & Bunker

PF Olsen Log Price Index - December 2024

The PF Olsen Log Price Index decreased $1 in December to $121. The Index is now $3 above the two-year average, and $1 above the five-year average.

LogPriceIndex-743

Basis of Index: This Index is based on prices in the table below weighted in proportions that represent
a broad average of log grades produced from a typical pruned forest with an
approximate mix of 40% domestic and 60% export supply.

Indicative Average Current Log Prices – December 2024

Log Grade $/tonne at mill $/JAS m3 at wharf
  Dec-24 Nov-24 Oct-24 Aug-24 Jul-24 Jun-24 Dec-24 Nov-24 Oct-24 Aug-24 Jul-24 Jun-24
                         
Pruned (P40) 175-200 175-200 175-200 175-200 175-200 175-200 190 190 180 175 175 180
Structural (S30) 120-145 120-145 120-145 120-145 120-145 120-145            
Structural (S20) 93-100 93-100 93-100 93-100 93-100 93-100            
Export A             126 128 125 118 118 114
Export K             117 119 116 107 109 105
Export KI             107 109 106 98 100 96
Export KIS             98 100 97 89 91 87
Pulp 46 46 46 46 46 46            

Note: Actual prices will vary according to regional supply/demand balances, varying cost structures and grade variation. These prices should be used as a guide only.

A longer series of these prices is available here.

Log Prices

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This article is reproduced from PF Olsen's Wood Matters, with permission.

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