North Canterbury News: May 14, 2020

HARVESTING CONTRACTORS HAPPY TOBEBACK ATWORK
Harvesting contractors in Canterbury are feeling
more optimistic following the return to work
under COVID-19 Alert Level 3. Log markets in
China plummeted inFebruary, and all harvesting
operations were forced to stop under Alert Level
4leaving many workers with an uncertain future.
Operations have been allowed to start upagain
with strict protocols around physical distancing
and hygiene. International and domestic markets
for New Zealand logs are improving and there is
renewed interest from private forest owners
wanting to take advantage ofthe current
opportunity.
Alex Davies ofDavies Logging (pictured) says he
is just happy to be able tostart harvesting again.
“It has been atough year for loggers, especially
these last few months. It’s great to see the
demand for logs recovering and being able to get
back to work”. Alex ispictured here inhis Tiger
Cat processor in asmall woodlot inthe
Waimakariri District.
The logs Alex iscutting will be sold through PF
Olsen into domestic and export markets to
generate the best returns for the forest owner.
The Canterbury region isfortunate to have solid
and well-established domestic log processing
facilities. This domestic processing capacity
provides price stability that benefits the forest
owner and workers right along the supply chain
by reducing exposure to volatile export prices.
The mix of domestic and export log options
enables forest owners to maximize financial
returns and utilize all different parts ofthe tree
with variable log qualities.
Market update
Domestic demand for structural grade sawntimber
prior to the COVID-19 lockdown was very strong,
driven mainly by construction in the upper North
Island. There was also asurge in DIY sales.
Sawmills are currently assessing demand
post-lockdown as they recommence production.
The New Zealand Government has also signalled
an intent to undertake infrastructure projects to
kick start the economy.
Log prices inChina have increased by30% since
New Zealand entered the COVID-19 lockdown.
The log sales are in USD and with the NZD also
weakening against the USD over this period, this
has further increased the prices New Zealand
forest owners receive for their logs. Ocean freight
is also very cheap currently with reduced demand
and low oil prices.
Before the New Zealand COVID-19 lockdown log
stocks inChina had reached 8million m 3 .They
remained stubbornly high as New Zealand logs
continued to arrive in China onvessels that set sail
just prior to lockdown. Log stocks have started to
reduce and are now below 4million m 3 .This trend
will continue as it will beseveral weeks before the
first of New Zealand’s post-lockdown logs reach
China.
Concern among Chinese log buyers about global
log supply is supporting current strong pricing. Log
supply from many countries is still affected by
COVID-19 restrictions. There is reduced supply of
logs and lumber from Russia due to unseasonably
warm weather hindering their winter harvest
programme. The previously growing supply of
spruce from Europe is currently constrained due to
alack of consumer demand in Europe for Chinese
products leaving very few containers available to
be back-loaded with logs.
During the first three months of the year (Q1
2020), China imported just short of 12m m 3 of
logs which was down about 20% from last quarter
of 2019 (Q4 2019) and down around 15% in
comparison with the first quarter of 2019 (Q1
2019).
While the current situation is very positive, there
are some concerns about the China log market in
the medium term. Some sawmills inChina are
struggling to operate profitably with the high cost
of logs and we have yet to see any stimulus
package from the Chinese Government have a
material effect ondemand. Let’s hope that
demand for logs continues to recover post
COVID-19 both domestically and internationally
and benefit New Zealand forest owners, logging
contractors and wood processors alike.
IS YOUR FOREST OLDER THAN 24 YEARS?
Are you ready to take advantage of the upswing in
the domestic and international log markets?
Demand in the NZ and Chinese log markets is strong
The domestic and Chinese log markets are already improving as
industry continues to return to normal levels with low global
supply. Chinese log stocks have reduced while NZhas been in
lockdown and demand for NZ logs is returning to normal levels.
This points toward strong pricing.
Don’t get stuck in the queue waiting for
contractors!
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If your forest is older than 24 years you would benefit from
getting “harvest ready” to ensure you are able totake
advantage of strong market conditions.
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Act now to
take advantage of
strong prices asour domestic and
international markets recover from the
effects of COVID-19
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Visit www.pfolsen.com
Call Chris Perry on 029 777 0583