On December 2, the Prime Minister of New Zealand announced that New Zealand will enter a new "traffic light" epidemic prevention system. Each area will be divided into red, orange or green. At the same time, different response regulations will be adopted for vaccinated and unvaccinated people. People who have not been vaccinated will not be able to enter most places.
As Christmas approached at the end of the year, New Zealand once again introduced a new anti-epidemic policy so that local forestry exporters slammed on the brakes and stopped in front of the "traffic lights." Most New Zealand foresters hope to increase the price of log exports more reasonably before Christmas, but the reality is that the results are not satisfactory.
Although the price of logs at the beginning of December increased slightly compared to the prices in November, they were still US$20/m3 lower than the average price of A-grade logs in the past three years.
In June 2021, New Zealand's export trade volume reached a new high. Among them, the export of logs and timber increased by 23% year on year. China became New Zealand's largest buyer. However, between July and November, due to the record decline in log and timber export profits, the overall output of the New Zealand region fell by 30%.
The continued low prices made New Zealand forestry workers take a breath before Christmas. Large-scale forest land was produced in accordance with quotas, and some smaller forest land workers have begun to look for jobs again. Repeated epidemics are undoubtedly the main reason for the decline in output, but the pressure of the external market is the main factor affecting the export price of logs.
The decline in New Zealand log export prices from July to November was largely due to the sharp increase in global transportation costs. Most of the expenses are based on the demurrage fees during the period when the ship is berthed and waiting to enter the port. After a large number of logs are cut down, they cannot be shipped out and are stranded at the port. In order to improve the port’s shipping turnover efficiency, log sellers have to take the initiative to bear the extra cost of shipping. Excess detention and transportation fees.
With the recent decline in shipping costs, although it has not yet returned to the normal period, the downward freight rates have simultaneously lowered the transaction costs of the entire log trading market. Coupled with this year’s New Zealand’s Christmas holiday break will be longer than in previous years, which means that the subsequent log timber cut-off cycle will be longer.
At present, China's cork inventory will maintain supply with an inventory of more than 5 million cubic meters. In the future, the decline in domestic cork inventory may promote the recovery of supply and demand prices to a certain equilibrium point, but the current Chinese construction demand is still not hot. It is expected that domestic construction activities in 2022 will drop by 20% compared to 2021. Not surprisingly, the price of New Zealand's logs exported to the Chinese market has no hope of boosting in the short term.
New Zealand's domestic demand for wood cannot be ignored. The New Zealand government is currently amending the Building Act, which plans to double the minimum insulation requirements for new houses nationwide, and the windows must also be warmer. This initiative will help New Zealand reduce household heating energy consumption by as much as 40%, and better help New Zealand achieve its goal of carbon neutrality.
However, New Zealand is experiencing an unprecedented shortage of wood. The original plan was to increase the standard thickness of the wall frame from 90 mm to 140 mm or make other improvements. Taking into account the current domestic timber supply status in New Zealand, the implementation of this initiative will face many difficulties. In this way, the shortage of internal timber and the decline of external prices have undoubtedly brought more operational pressure to the timber industry.
Overall, the fundamentals of the New Zealand timber market have not changed much yet. 2021 is a roller coaster year, and the huge contrast makes New Zealand timber people at a loss. Many local forest owners are quietly waiting for the arrival of the first quarter of 2022, hoping that market conditions will improve with the passage of time.