Export log prices rise in June as demand improves in China

New Zealand export log prices rose from a three-year low this month, helped by a decline in the kiwi dollar and increased demand in China, the country's largest market.

The average wharf gate price for New Zealand A-grade logs increased to $86 a tonne from $83 a tonne in May, halting three months of declines, according to AgriHQ's monthly survey of exporters, forest owners and sawmillers. The AgriHQ Log Price Indicator, which measures average log prices weighted by grade, rose to 89.38 from 88.40 last month.

The prices for New Zealand export logs have picked up from their lows as inventories on Chinese ports fell below four million cubic metres, cementing optimism that last month represented the bottom of the market cycle. The price for New Zealand A-grade logs delivered to China increased to $US101/JAS from $US99/JAS last month, which was the lowest level since AgriHQ started collecting the data in 2012.

A decline in the New Zealand dollar, which has dropped 8.9% since the start of May, had aided export log prices, as have low shipping rates, AgriHQ said.

"While the situation in China is anticipated to improve, it is important to remember the China market is currently volatile," said AgriHQ analyst Emma Dent. "While the level of recovery in coming months is uncertain, the market is unlikely to worsen."

Demand from China is typically lower in the third quarter heading into summer, which will slow the recovery in prices, Ms Dent said.

Prices for New Zealand domestic logs remained steady. Pruned logs held at an average $161 a tonne although a shortage in the Central North Island is creating regional price differences, she said.

The price for structural logs was also unchanged at $107 a tonne, although it's expected to decline as supplies increase. While there is strong demand from housing markets in Auckland and Christchurch, the price is expected to decline heading into the third quarter on weak demand from Australia, where New Zealand exports are being hurt by a higher New Zealand/Australian exchange rate and by an increase in cheap forestry products from Europe, Ms Dent said.

Wood is New Zealand's third-largest commodity export, behind dairy products and meat.

(BusinessDesk)