Forest Datasheet : MAY 2003
Contacts
Northern
NI
Brendan Muller
Central
NI
Peter Harington
Eastern
NI
Ian Bell
Southern
NI
Geoff Keall
South
Island
Robert Watson
Gerard Lynch
|
What
is the Forest Datasheet? The Forest Datasheet is a regular update of
market changes within the NZ forest industry.
It’s designed to assist owners of private forests gain a
snapshot of factors that could impact on the value of their trees.
SUMMARY
Neither SARS or the war
in Iraq, now largely concluded, can be blamed for the rather dismal
returns being earned overseas for New Zealand radiata produce. Mostly to
blame is the ongoing high NZ$ exchange rate and the supply of substitutes
into markets where we were traditionally price competitive.
The New Zealand domestic market remains bouyed by construction activity in both New Zealand and Australia. Prices for structural grades remain firm but market supply is starting to increase as exporters look to place more volume in the better returning local market. The falling prices in the US radiata markets appear to have halted. Crow's report prices around the US$900 level for radiata Mouldings & Better grades, up slightly on recent record lows. Shop grade prices have also firmed as suppliers reduce input into the market. This is good news for NZ pruned log producers, who may now see a similar trend in their log prices. Sawmillers are unlikely to react too quickly though as their returns, which are well down, are still under threat from the NZ exchange rate and relatively high freight rates. The industrial situation at Kinleith
continues to create an oversupply on the CNI pulplog market. Logs are
being stockpiled in the bush, crews are on short weeks, and as much volume
as possible is passing over the wharf. Sales are restricted with many
suppliers on quotas. Prices are weak, and no new suppliers can expect to
enter the market until the situation is resolved. This has occurred at a
time when the private supply is at its seasonal low, so private growers
are impacted less than the larger plantation growers.
The threat of a possible war with North Korea, occasioned by the nuclear development programs apparently being undertaken in that country, has put a big dampener on the South Korean economy. GDP projections have fallen from 7% to 4%, the country registered its second month of negative trade balances, and commercial and personal construction activity is down. This has impacted on demand for New Zealand logs, which is down 20% for the same period last year, at a time when log inventories are increasing. Trans-Tasman neighbour Australia are also supplying more volume. Another factor is that Korean domestic lumber prices are down and sawmillers there are saying they can ill afford to pay more for radiata logs. The current outlook
for the rest of the year is for a continuation of the declining demand,
although prices should remain steady.
The Japanese market is in a balanced state, with future price expectations soft but steady. The Japanese economy continues to slide with all economic indicators (eg GDP, domestic and commercial construction) falling. Log and lumber imports in 2002 were down 1.3 million and 0.4 million m3 respectively on 2001 levels. Imported plywood volumes rose marginally, up 100,000 m3, whilst woodchip and laminated lumber volumes remained reasonably steady (Japan Lumber Journal). Prices for most log and lumber products in April were weak to holding. The A Grade radiata price is holding, with the crating sector, benefiting by the steady level of domestic production. Cheap imported
plywood, particularly from China, and the substitution of Russian red pine
have impacted on the J grade radiata market, with price for this grade
being under some pressure. The use of Japan's own domestic resource is
also being actively encouraged by the government, who would rather see a
better use of this wood than has previously been the case. Plywood prices
were also off in March and April as suppliers took the opportunity to quit
stocks that do not meet the formaldehyde emissions levels under the new
Building Standards Law which comes into effect in July.
The Chinese economy continues to rumble along, with log imports predicted to remain at the same level as in 2002. A Grade logs remain in demand on the back of an active furniture market. Prices for this grade are strong with NZ suppliers looking for increases in coming months. Industrial sawlog (KI grade radiata) is now being extensively substituted by Russian red pine, as they have now reached a similar price level. Returns for this grade are not good and exporters are now trying to find homes for it elsewhere. Pulp
log volumes continue to move, at prices which are considered acceptable.
The main purchases are being made by the Chinese plywood industry, who are
turning it into the cheap plywood affecting the Japanese J grade market.
A market of highs and lows for NZ exporters. The use of radiata in higher end markets (ie furniture and housing) is a good sign for radiata producers, who are now seeing strong demand and improving prices. Radiata is now in use across the timber market in India, with a recent trade group visit noting its use in cable drums, school furniture, door frames and stair balustrades. These changes come at a time when the Indian domestic economy is strengthening and significant housing activity is occurring. New infrastructure aimed at processing increasing volumes of radiata logs, into sawn product and plywood, is being developed around the major discharge port of Kandla. The IPEG agreement between FCF, CHH and Pentarch ("the Consortium") has been re-signed so the bulk of NZ's India production will continue to be managed on a single trading desk basis. On
the other hand 'rogue' trading into this market, of New Zealand and South
African volume, by those who still treat India as a market of last resort,
may continue to be an issue into the future.
|