Log harvest volumes in New Zealand are being significantly reduced due to a decline in both export and domestic demand. This decrease in demand has resulted in falling prices for logs. Despite the closure of some local mills caused by the recent cyclone, inventories of sawn timber are increasing, leading to further cutbacks in log production. Chinese log buyers are also facing credit issues, contributing to the reduction in log demand in New Zealand. Construction activity in the country is declining due to high inflation and interest costs, further impacting the demand for logs.
At Wharf Gate (AWG) prices for logs have dropped by 5-10 NZD per JASm3, with the largest decreases observed at South Island ports. In anticipation of a challenging Quarter 3, some New Zealand mills and forest owners have already taken proactive measures to adjust their production levels. This includes reducing log harvest volumes to align with the weakening market conditions.
The decrease in log demand from China is a significant factor in the current situation. Chinese buyers are grappling with credit issues, making it difficult for them to maintain their previous levels of log imports. As a result, New Zealand log exporters are experiencing a reduction in orders from this key market. The decline in construction activity in China, coupled with the ongoing credit challenges, has led to a decrease in log demand.
In addition to the challenges posed by the Chinese market, New Zealand’s domestic construction sector is also facing difficulties. High inflation and interest costs have resulted in a slowdown in construction activity, leading to a reduced need for logs. As a primary input in the construction industry, the decline in log demand is directly linked to the overall decline in construction activity.
The closure of some local mills due to the recent cyclone has had a limited impact on log supply. While the closures have temporarily disrupted the supply chain, sawn timber inventories are still increasing. This suggests that the reduced log harvest volumes are outpacing the demand. As a result, more cutbacks in log production are expected in the coming months.
The current market conditions in New Zealand’s log industry highlight the challenges faced by both export and domestic sectors. Falling prices, reduced demand from China, and a slowdown in domestic construction activity have all contributed to the need for log producers to adjust their production levels. The decrease in log harvest volumes is a proactive response to the softening market conditions and is aimed at ensuring a balance between supply and demand in the industry.
It remains to be seen how long the current challenges will persist and what impact they will have on the overall log industry in New Zealand. However, industry players are closely monitoring the situation and taking necessary steps to navigate through these difficult times. As the log harvest volumes continue to be cut back, it is hoped that the market conditions will eventually stabilize, leading to a recovery in both demand and prices for New Zealand’s log industry.