Export log prices fell in July as China's seasonal demand fell. However, New Zealand's domestic demand remains strong and India's demand is picking up.

The price of AWG log in July decreased by 8-9 USD / m3 (JAS gauge) on average compared with that in June. Demurrage due to the congestion of Gisborne port affects the price of AWG logs. Therefore, the prices vary greatly in different geographical locations. AWG pricing for log exporters is also different.

The Chinese government forced some sawmills to relocate from Taicang, Jiangsu Province, exacerbating the general decline in productivity in the summer.

There are signs of recovery in the Indian log market and a log shortage is expected in tuticolin.

New Zealand's demand for logs and sawn timber did not decrease during the winter.

Pf Olsen log price index fell to $139 from $143 in June, a decrease of $4. The index is currently $16 higher than the two-year average and $14 higher than the three-year and five-year average

New Zealand domestic log Market

Log supply and pricing

Throughout the winter, the supply of logs was sufficient to meet the needs of the factory, and the price increased steadily.

Sawn timber market

New Zealand's demand for logs and sawn timber did not slow down in winter. Consent forms for new homes in New Zealand continue to rise. The new residence permit is shown in the figure below. By the end of May, the number and value of consents had increased by 17% and 21% respectively over the previous year. This is evident in the North Island, where consent letters increased by 28% in Auckland and 24% in the rest of the North Island. Canterbury rose 13%, while the rest of South Island fell 4%.

Export log Market

AWG price

The AWG price in July fell by an average of $8-9 per cubic meter. The decline was even greater in Gisborne, where ships now have to queue up for more than a month before berthing. These demurrage costs are passed on to forest owners at a lower AWG price. Recently, this has also begun to affect Tauranga, where the waiting time for ships has been extended to 10 days. If the waiting time of the ship does not improve, it will affect the AWG price in August.

China

The price of class a logs shipped in June and early July is about 195 US dollars. Now there is a deadlock between log exporters and Chinese log buyers. The LC offer of class A is 185 US dollars per cubic meter.

Cork log inventory has risen to about 5.5 million cubic meters, and daily port shipments have fallen to about 60000 cubic meters per day. Although the sales volume is expected to decline due to the hot and humid weather in China, it is lower than the shipment volume in the past three years (about 75000 cubic meters per day in July) (last year was an abnormal situation caused by the catastrophic flood in China). Over the years, both demand and log prices rose in the fourth quarter.

With little warning from the government, many log processing plants in Taicang will have to be closed or relocated. Supervision will be implemented in early July to limit the sawing industry to specific industrial areas. It is preliminarily estimated that this will reduce the milling capacity by about 50%. Taicang is the second largest softwood import port in China, accounting for about 20% of China's total softwood imports. Taicang is only more than 50 kilometers northwest of Shanghai, so these Regulations are likely that the government wants to reuse land and reduce pollution. The land is likely to be reused for housing or high-tech companies（ Interestingly, Taicang is the hub of more than 250 German companies in China).

We have seen similar events in China before. These events have disrupted the log market in the short term, but have no long-term impact. In 2018, under the government's "three-year plan to protect the blue sky", more than 3000 board making enterprises in Hebei Province were required to stop production, repair or relocate. In 2019, the local government of Shenzhen decided to move the sawmill and use the land for other industries.

China's log demand usually rises sharply after the golden week in early October. At the same time, the supply may still be limited due to the following reasons:

Australia no longer exports logs to China.

If China's log prices fall, making the supply chain unsustainable, Uruguay's supply may slow down significantly.

The warm weather in spring in Europe means that the infestation of bark beetles this year is less than in previous years. Therefore, the wood rescued from the storm does not need to be cut down and used quickly, so it can be processed locally in Germany and other EU countries. The Czech Republic does not have an important sawmilling industry, so it is likely to continue to export most logs.

Russia will begin preparing to ban the export of logs in 2022.

As supply is difficult to keep up with demand, log prices may continue to rise in the fourth quarter.

India

Candela is expected to receive one ship from Uruguay and one from Australia in August. Six ships are expected to arrive in September, including five from Uruguay and one from Australia, which may be loaded in August. The price of sawn timber in kandra is weak, at rs. 601 per cubic foot.

The container transportation of burnt logs exported from Australia to mondra port is close to zero. The quality of logs within the specification range varies greatly.

A log shortage is expected in tuticolin in September because shipping companies say the area is congested and unable to provide containers to Indian ports. In South Africa, the Durban riots caused many shippers to calculate their losses and cancel shipments. In Tuticorin market, the price of sawn timber has risen to about 700 rupees per cubic foot.

The quotation range of European pallet grade sawn timber in Tuticorin is 275 euro to 400 euro. The price depends on whether the sale is in stock or by order size. Some Indian log importers plan to test the use of cheap poplar logs from Europe to make pallets.

exchange rate

The New Zealand dollar weakened against the US dollar in June, falling from 0.7277 to 0.6982 against the US dollar. This reduced the decline in AWG pricing in July.

ocean shipping

The transportation cost from Beidao port to China has climbed to more than $60 per cubic meter. The Baltic dry bulk freight index was 1200 in November and is now 3059. The demurrage cost caused by the congestion in Gisborne and recently Tauranga will greatly increase the cost of exporters.

The Baltic dry bulk index (BDI) consists of three sub indexes, each covering different carrier sizes: Cape of good hope (40%), Panamax (30%) and super large (30%). It shows the daily dollar rent index of 20 shipping routes. Although most of New Zealand's log trade is transported by light ships, this part is strongly affected by BDI.

Fuel prices in Singapore continued to rise slightly.

Pf Olsen log price index - July 2021

Pf Olsen log price index fell to $139 from $143 in June, a decrease of $4. The index is currently $16 higher than the two-year average and $14 higher than the three-year and five-year average.