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PF Olsen NZ log market report – Jan 2023

1 February 2024

Market Summary

There were mixed signals from the China log market at the end of 2023, but January At Wharf Gate (AWG) prices for export logs in New Zealand increased slightly from December AWG prices. 

Domestic log prices were stable with some small price increases for structural logs.

The PF Olsen Log Price Index increased $2 to $125. The index is currently $5 above the two-year average, $3 above the three-year average, and $4 above the five-year average.

Domestic Log Market

Many sawmills in New Zealand took longer end-of-year breaks than usual. Sales of decking material this summer are higher than last summer, but still below the longer-term average sale figures. Domestic sales of structural and outdoor products have picked up from last year but sawmillers are still wary of sale figures in the winter months ahead. Many sawmillers expect sales similar to last year as interest rates remain high. 

Sales of sawn timber into Australia are okay, but sales of clear sawn timber into Europe remain low, and it is unlikely demand will increase during the European winter. 

Domestic log prices are stable with some small increases in structural logs in the Central North Island and Southland regions.

China

China softwood log inventory is stable but daily port off-take has started to reduce in preparation for the Chinese Lunar New Year. Daily offtake is now around 55k m3 per day. Many sawmills across China are taking a longer break than normal this year. The sale price for A-grade pine logs in China remained stable in January within the 127-130 USD range. Some log exporters have asked for price increases for February sales. 

By the end of December China wholesale log prices had reduced by approximately 60 RMB per m3 (6%) from the peak (when sawmillers had a minor panic that log supply would not keep up with demand). However, wholesale prices have risen 25% since mid-June and finished the year slightly above 2022 price levels.

The China Caixin Manufacturing PMI increased from 50.7 in November to 50.8 in December. (Any number above 50 signals manufacturing growth). Output grew the most in seven months and new orders rose at the fastest pace since February. 

A Hong Kong-based court has ordered the liquidation of property developer China Evergrande Group which initially defaulted on its debts in 2021. The court appointed Alvarez & Marsal as the liquidator. This default contributed to the property sector entering into a downward spiral at that time. The market expects this liquidation will have little immediate effect on construction and log demand. It will likely be a drawn-out process for an offshore liquidator to take control of Evergrande’s operations across mainland China.

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Scott Downs, Director Sales & Marketing, PF Olsen Ltd
Source: PF Olsen

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