New Zealand export log prices to China fell in January 2016 and rallied again in February to end up pretty much back at December 2015 levels, said Wood Matters Friday. Domestic log prices have continued to strengthen on the back of solid demand, especially for pruned logs.
China log inventory has fallen from 2.7 million cubic metres as Wood Matters Log Market Report last reported in December, to 2.4 million m3 just prior to the Chinese New Year holidays, but is expected to increase again to around 3.6 million cubic metres by the end of this month.
China Log Export Market
As speculated in the December report, January prices fell based on a CFR price drop [CFR is the price logs sell for in US$ at the destination port]. This was partly offset by favourable movements in the NZ$: US$ cross rate and, believe it or not, further reductions in [already very low] ocean freight costs (mainly lower bunkers – ship fuel oil). Modest firming of CFR price and a continued favourable NZ$:US$ cross rate and ocean freight rates saw the export log price rally again in February to recover almost all of January’s reduction.
With the A-grade CFR in China at around the [relatively low] price of US$116/JAS m3, it is not stimulatory for North American log supply. The strengthening trend of the US$ adds to the decreasing competitiveness of log exports from the USA. This will help keep a lid on excessive inventory build beyond the expected increase through Chinese New Year.
PF Olsen Log Price Index to February 2016
The PF Olsen log price index rose two points from $119 last month to $121 this month. It is now $36 higher than its cyclical low of $85 in November 2011 and $17 above the two-year average and $18 above the five-year average.