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February 2023 NZ log market update

5 March 2023
Opinion Piece, Marcus Musson, Director, Forest360

As expected, February has seen another solid lift in export prices courtesy of some increased in-market sales prices (CFR) and a reasonably subdued shipping market. The At Wharf Gate (AWG) prices offered by the different exporters ranges between $NZ134 and $NZ142/m3 for Export A grade which is the largest spread we have seen in a while.

The prices at the lower end are more than likely due to some trying to make back losses from some pretty horrific 2022 trading conditions, while those at the upper end are likely running short in vessel cargo and looking down the barrel of some significant demurrage costs should the cargo not eventuate. The latter is becoming more evident as exporters trade volume between themselves to try to fill vessels as they arrive in the face of short supply.

Port deliveries have been all over the place with continued weather events hampering the ability for harvesting crews to produce and carriers to get access to harvest sites. This is especially the case in the woodlot sector where many are operating in ‘summer’ blocks with little or no roading infrastructure. While we are getting used to significant rain events during summer, this latest event is one out of the box and, aside from the issues in Auckland and Gisborne, many other regions have also suffered massive infrastructure damage.

One thing our industry has done exceptionally well in previous years is react very quickly to increased sales prices by opening the supply tap. As price increases have generally coincided with summer, this supply increase has been reasonably easy by cranking up the woodlot sector and taking the brakes off the more productive corporate crews. This almost always led to an over supply situation coming into winter and subsequent market correction/crash/implosion which is always great fun to navigate through, especially in the middle of winter.

This year will be a little bit different as we will collectively grab the tap and wind it open as far as possible but the result will be more like a prostrate affected dribble. Harvest contractors have been exiting the system over the past 12 months and a quick search on Trademe will show the extent of this with enough harvesting gear for sale to make machinery salesman about as comfortable in their employment as Nania Mahuta. Reports are of at least 26 contractors having left the East Coast in the past 12 months, some of which will have repatriated to other regions but many have simply closed the doors.

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Source: Forest360

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