Forest harvest volumes fall in 2015 for first time in seven years

New Zealand forest harvest volumes declined in 2015 for the first time in seven years as uncertainty about future prices prompted plantation owners to hold back from felling their trees.

The country harvested 28,896,354 cubic metres of wood, mostly radiata pine, last year, 3% less than in 2014 and marking the first decline since 2008, AgriHQ said, citing data from the Ministry for Primary Industries. The value of wood exports, New Zealand's third-largest commodity export behind dairy and meat, slid 4.1% last year to $3.52 billion, according to Statistics NZ data.

Forest owners generally harvest their trees at between 25 and 30 years old, giving them flexibility to cut trees when prices seem most favourable. While large forest owners tend to harvest continuously, smaller forestry owners are more price sensitive and stepped up production in 2014 to take advantage of record prices then held off in 2015 as the outlook softened, AgriHQ said.

"You have got a window of quite a few years to harvest and a couple of years ago when prices were really high, a lot of those people jumped in. People harvested trees a little bit at the earlier end because prices were so good and then, as prices dropped away in the past 18 months or so, those people around the fringes haven't harvested as they decided that they are better to sit tight for a while," said AgriHQ forestry analyst Nick Handley. "Production got a little bit ahead of itself or was pulled forward because prices were good."

While prices in the domestic market have remained well supported by the rebuilding of earthquake-damaged Christchurch and growth in Auckland, demand in China, the country's largest export market, has been flat with local export returns held up by lower shipping rates and a decline in the kiwi dollar, Handley said.

New Zealand overtook Russia as the largest forestry exporter into China in 2013 and has kept that mantle in 2014 and 2015, AgriHQ said. Still, a slowdown in manufacturing and construction in China has led to an inventory build-up in that market and reduced demand for New Zealand timber, which is typically used for boxing and packaging.

Handley said the New Zealand forest harvest will probably be flat this year until there is more certainty around the outlook, particularly for China.

Still, over the longer term harvest volumes will probably increase as trees planted in the early 1990s come due for felling, he said.

Forestry plantation activity in New Zealand jumped between 1992 and 1998, as a surge in Asian log prices lured investment syndicates to the sector and the so-called "wall of wood" is expected to start being harvested from about 2018, according to government figures.

(BusinessDesk)