Over the years, June has typically been the worst month for New Zealand's log market exports, and this year's June appears to be no exception. It is understood that most New Zealand exporters currently maintain some A-grade lumber prices at around US$90/cubic.
Timber prices affected by rising fuel costs
The current global timber market prices are affected by the rising cost of crude oil caused by the situation in Russia and Ukraine. Unlike past price levels, New Zealand lumber prices this year appear to be more affected by higher fuel costs. A timber trader said that assuming that the increase in labour and transport costs over the past year is deducted from the current export price, it would find a return of around $12/t lower in timber prices. This has brought the export price of equivalent Grade A lumber back to $80/m3 and the lowest level since November 2015 (when costs were as low as nearly $20/t). In addition to rising fuel costs, rising shipping costs, rising labor costs and other factors are also important factors affecting timber prices, and some of the rising costs will inevitably be absorbed by timber importers.
New Zealand's timber supply to China to drop by 40%
Amid the changing structure of global timber supply, industry sources predict that New Zealand's timber supply to China will drop by around 40% in the coming months. And, New Zealand's logging industry and transport contractors are likely to feel the effects of this decline. At present, they have felt the pressure from the superposition of labor costs and other costs. Among them, the reason for the decline is mainly due to the global supply chain crisis and uncertainties in the timber market. Many local forests are currently facing two options: closing down and sharply reducing production. Prior to this, the North American lumber giant Canfor once again announced production cuts and adopted a summer rotation to stop production. Most of the sawmills in Russia also chose to stop production due to the saturation of domestic timber stocks and the obstruction of logistics. Therefore, in the downturn in the global economy and the demand for timber market has not yet returned to the pre-pandemic level, New Zealand timber mills are likely to be affected by this and choose to shorten supply and reduce production.
Exports of logs and forest products fell slightly
Affected by factors such as port congestion, rising crude oil prices, supply chain shortages, and the global economic downturn, both buyers and sellers have low confidence in the international market. Looking at the data, New Zealand's timber supply is down from previous months, despite rising export values. New Zealand's Ministry of Primary Industries' latest Primary Industries Situation and Outlook report forecasts a slight decline in log and forest product exports to an estimated S$6.2 billion, down 4% year-on-year. In this regard, New Zealand's Forestry Minister Nash said that the decline in log and forest product exports was mainly due to the decline in export volumes caused by global freight congestion, which affected the value of product exports.
Despite this, New Zealand remains optimistic about local forestry exports. They believe that with the recovery of infrastructure projects such as housing and the effective mitigation of global supply chain shortages and freight problems, the demand for New Zealand's forest products in the international market will pick up next year. With the Russian-Ukrainian incident showing no signs of abating, the global timber supply pattern has also changed. For example, Europe's original export share will be shifted to meet its own regional needs; North American timber prices have plummeted; Russian timber has lost the European market; at the same time, tropical timber has also ushered in new development opportunities. The current international market can be described as chaotic and sluggish. Therefore, to a large extent, it is very likely that New Zealand's timber supply will remain current in the second half of this year and will not increase significantly. Moreover, due to the shrinking supply and uncertainties in the future market, it is expected that the price of New Zealand timber imported to my country will rise more or less.