Log markets are in transition with China and India unsure of their prospects. Domestic demand recovery expected but hasn't happened yet. Prices holding because the NZD has fallen

The log markets for New Zealand’s pine logs are in a period of transition as the industry assesses post-holiday demand across key markets. In China, log supply from New Zealand has adjusted slightly following the reduced demand over the Chinese New Year period that started in late January. India is also experiencing shifts, with demand expected to rise as some mills convert from processing hardwood logs to softwood logs. Interest rates have fallen in New Zealand, which is often a key driver to stimulate construction activity.  

A continued weaker NZD against the USD and marginally lower shipping costs have helped mitigate the impact of these price fluctuations on At Wharf Gate (AWG) prices in New Zealand. February AWG prices for export sawlogs have remained flat compared to January levels. There is upward pressure on shipping costs so AWG prices in New Zealand are fragile. 

The PF Olsen Log Price Index remains at $123. This is the highest level since February last year. The Index is now $4 above the two-year average, and $2 above the five-year average.

Domestic Log Market

Most domestic pricing for log supply remained flat for Quarter 1 2025. Mill owners continue to seek price relief but are also cognisant that if they reduce price, forest owners may stop or reduce harvest levels. Both mills and forest owners are facing tight financial margins, making harvesting decisions more challenging.

The New Zealand construction sector remains weak, with building consent approvals still trending at lower levels. Broader economic indicators suggest continued subdued activity, as government spending cuts further dampen infrastructure and housing projects. The industry hopes recent interest rate drops will continue.

Export Log Markets

China

China softwood log inventory has grown to just over 4m m3 with log demand at the end of February still not fully recovered after the Chinese New Year holiday period. Log stocks are still rising slightly as log demand is about 40k m3 per day. The CFR price for A grade logs through February was in the range 118-120 USD per JASm3 for A grade.  Some log exporters are trying to increase to 121/122 USD, to cover rising freight costs, but the market is not very accepting of any increase. Log supply from New Zealand often increases at the back end of the summer months, when ground conditions suit harvesting.  So, we really need to see an uplift in demand in China, or log inventory levels will increase.    

The futures market for logs that had been increasing in price, fell from 900 RMB/m3 to 850 RMB/m3 in the last week towards the end of February. While the first ‘sell’ is still a few months away, this is starting to influence the market.  

The China Caixin Manufacturing PMI in January is 51.8, marking slight growth from December and signalling steady manufacturing activity.

Geopolitical developments, particularly trade relations between China and the USA, continue to cast uncertainty over the market. Trump has just announced a doubling of tariffs on Chinese made goods from 10% to 20%. His earlier comments that the USA was going to earn money from all these tariffs, seems to show he doesn’t understand that the company importing the goods pays the tariff, not the Chinese manufacturer. Increased costs will also mean some construction projects being delayed or cancelled. The tariffs on sawn timber will likely lead to a reordering of the global trade flows, as suppliers redirect their exports to other markets.

India

The green-sawn timber price in Gandhidham has softened due to liquidity issues in the market. Sawn timber produced from Australia and New Zealand pine sells for 521 INR per CFT, while sawn timber produced from South American and USA logs sells for 491 INR per CFT. Demand is expected to grow as hardwood log supply is dwindling, so some mills are switching from processing hardwood logs to processing softwood logs.  

Kandla port expects four log vessels in total arriving from Uruguay, New Zealand and Australia.   

Tuticorin now imports mostly K grade pine logs (22cm minimum SED) from South Africa in containers, as container freight rates are not workable from Australia, New Zealand and USA. Many USA shippers of SYP logs are waiting on the sidelines to see if any trade war develops between USA and India, if USA President Trump imposes tariffs on Indian goods. The supply of kiln dried sawn timber from Europe is also dampening demand for green sawn timber in and around Tuticorin.

Exchange rates 

The NZD has remained weak against the USD, supporting local AWG prices despite international market softness. The NZD/USD rate at the end of February is very similar to the end of January rate, so will have no impact on March AWG prices.

The CNY has continued to depreciate against the USD, putting additional pressure on Chinese log buyers' purchasing power and, in turn, potential log sale prices.

NZD:USD

 
CNY:USD

Shipping costs 

There is some volatility in the shipping market depending on the timing of booking a vessel, but on average the cost of shipping logs from New Zealand to China has risen by 2-3 USD 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.    

Baltic Dry Index (BDI)
Source: TradingEconomics.com


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

PF Olsen Log Price Index - February 2025

The PF Olsen Log Price Index remains at $123. This is the highest level since February last year. The Index is now $4 above the two-year average, and $2 above the five-year average.
 

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 – February 2025

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.

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