5 February 2015

Export log prices have moved up recently, due largely to falling freight costs, says the February edition of ANZ AgriFocus. Freight costs are now at their lowest levels in nearly six years due to the fall in oil prices and extra shipping capacity.

Chinese buyers are well aware of falling freight costs and a lower NZD/USD and have been pushing for lower prices. However, their ability to talk prices down is limited by inventory levels that have fallen to normal levels as a result of a slow-down in log arrivals and an increased offtake in late 2014.

The increase in offtake appears to have been driven by a Chinese government support package announced in September. This package included an easing of mortgage restrictions and loan ratios for owner-occupiers, more lenient credit for developers and extra funding for social housing/urban renewal.

Inventory levels are likely to increase again during the Chinese New Year shut-down, which could put pressure on export prices.

Domestic log prices are mostly unchanged, apart from small increases in pruned log prices. Growing demand in the US has meant good prices for finished pruned products exported there, especially with the falling NZD/USD. Although tight supply has limited the opportunity to do more business.

The housing market has got a second wind in Auckland and the Canterbury rebuild continues. Over the past year, new dwelling consents for Auckland are up 20%, Canterbury up 27% and the rest of New Zealand 6%. This bodes well for continued domestic demand in the main centres.

Source: ANZ Agrifocus, February 2015 (edited)