Analysts warn that New Zealand timber market may tumble

NZ timber

By Cate Hull

China giveth, China taketh away.

Industry analysts are cautioning New Zealand timber companies that a 2018 boom in New Zealand may be followed by a bust in 2019, according to media reports.

In 2018, with the Canadian and United States seeing declining shares, New Zealand’s timber exports saw a $684M increase against 2017 numbers.

ASB senior rural economist Nathan Penny said 2018 had been a “fantastic” year for the sector, 2019 had started where it left off and, in New Zealand dollar terms, the forestry index was at record levels.

However, Penny questioned whether prices this year would continue at the same level as 2018, according to a report in the Otago Daily Times.

“We’re doubtful. Global demand for logs is actually falling, with log import volumes dipping around two per cent in three months to November compared to the same three months a year ago,” he said.

Penny is anticipating global log demand will fall further, given world economic growth was slowing, particularly in China.
“China is the world’s largest importer of logs and NZ’s largest market by a long shot,” he said.

“Unless New Zealand could continue to grab market share from other exporters, it is unlikely to be immune from falling demand, for a second successive year,” Penny said.

With the U.S. delaying a series of additional Chinese tariffs that were scheduled to begin on March 1, both sides continue to negotiate a definitive end to a wide-ranging trade dispute.

The dilemma for the New Zealand timber industry is a double-edged sword. While forest owners are reaping the benefits from harvesting and exporting, processors and manufacturers are struggling to compete for high-priced logs.

The price to move a cubic metre of wood from Dunedin to Asian destinations had averaged about $US45 during the past decade, but early last year that cost was in a range of $US13 to $US25 per metre during the preceding 18 months.

Port Otago’s last financial year moved a record 957,000 tonnes of export logs across its wharves.

Wood Processors & Manufacturers Association of New Zealand Chief Executive Jon Tanner said last year’s record exports underscored concerns of local manufacturers that the country was sending too many unprocessed logs overseas.

Tanner said the issue of timber exports has raised the profile of New Zealand’s timber industry in the government.

The country’s KiwiBuild Programme, designed to increase home ownership by providing eligible first home buyers with exclusive access to a range of fixed price modest starter homes, is ramping up demand.

The new administration has made positive moves for the industry, including re-establishment of the Forest Service, planting more trees, focusing on regional economic development and its requirement of greater scrutiny of overseas investment in forestry.

“We’re certainly on the radar now with the government very much pushing in the right direction,” Tanner said.

As a Sydney-based freight management company, FreightExchange is committed to moving freight in an efficient and cost-effective manner.

Cate Hull is the CEO of FreightExchange, a Sydney-based freight and logistics management company.