New Zealand export log prices lift in October, underpinned by lower kiwi

Thursday 16th October 2014

New Zealand export log prices lifted for the third month, as a weaker kiwi boosted local currency returns.

The average wharf gate price for New Zealand A-grade logs rose to $95.7 a tonne, from $87.6 a tonne in September, according to Agrifax's monthly survey of exporters, forest owners and sawmills. The Agrifax Log Price Indicator, which measures average log prices weighted by grade, advanced to 91.5 from 87.9 in September.

New Zealand returns are being bolstered by a drop in the value of the New Zealand dollar, which has fallen almost 10 percent from its peak of 88.35 US cents in July. Meantime import prices in China, the largest market for New Zealand logs, are little changed as inventory levels in Asia's largest economy remain high amid a weak housing market.

"With the New Zealand dollar coming back so far against the US dollar, that's meant there's been a big increase in wharf gate prices, boosting the New Zealand dollar returns," said Agrifax forestry analyst Ivan Luketina.

The Chinese price for logs has "barely moved" in the past month, Luketina said. "There's slightly lower confidence in the log market there because the construction industry hasn't really shown any sign of recovering. There is only very slight declines in inventory."

More benefits from the lower kiwi were being passed through this month in the belief the currency's decline was sustainable, he said.

While some foresters in the northern North Island were receiving average prices for A-grade logs of $100 a tonne, they were unlikely to boost production to take advantage of the higher price because of concern about weak Chinese demand, he said.

"It's actually reasonably good returns but the large scale owners that I have been talking to are not intending to increase their harvests this summer to take advantage of that because they see the China inventories as not coming down and big increases in volumes there are likely to mean decreases in prices."

There was the possibility smaller scale owners may take the opportunity to increase their harvests, although they may want to wait for higher prices, Luketina said.

Wood is New Zealand's third-largest commodity export.

BusinessDesk.co.nz

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