However, while logs are in strong demand, the outlook for sawn timber, woodchips and panels for export remain challenging. Some products face a decline in global prices, the Ministry for Primary Industries said in an industries outlook released this week.
South of the Waitaki River, southern forestry companies have reaped some of the recent benefits, but also face challenges from a shortage of contractors, log storage and truck sizes. Home builders may also face rising costs in the future.
Southern Wood Council chairman, Grant Dodson, said the report was a ''good summary'' of the sector. Growth in Otago and Southland was reflected in ''very strong log volumes being harvested and exported from Port Otago and Bluff ''.
''Some sectors, such as forestry, are currently doing very well, based on improved export pricing, and log export volumes out of New Zealand have increased 7% year-on year,'' Mr Dodson said, when contacted for comment.
New Zealand's log exports, at 13.8 million cu m during calender 2012, were ''extremely high'' as market share in China increased when Canadian supply went to the US and Russia's exports declined, the report said.
''This is great news for New Zealand economic growth, employment and investment,' Mr Dodson said.
Export volume records were broken in the June and December quarters.
The ministry said, ''New Zealand has experienced strong demand from China for its logs in recent years and this is expected to continue.
"Steady demand and attractive export log prices are driving harvest growth.''
The report said during the next decade it was expected the forest harvest would grow by about 40% to 35 million cu m, as the small forests planted in the 1990s are harvested.
Mr Dodson said, ''Favourable returns are encouraging many small forest owners to bring private forest to the market.
''Regionally, the wood supply and forest logistic systems are working well. However, there is a need for more harvesting contractors as harvest levels increase,'' he said.
Other issues facing the South are log storage facilities and the need for bigger trucks.
Mr Dodson said across the country the capacity of ports was becoming a constraint and this would become an issue in the South as harvest levels expanded during the next decade.
Port Otago commercial manager Peter Brown said when contacted he was confident the port could satisfactorily meet log space demands during the coming decade.
The port company could use more ''intensive stacking'' methods in the areas available and a greater number of log ships visiting Port Chalmers would equate to a greater log volume.
''In Dunedin, we have several options for additional storage areas that we can bring on stream over the next two to five years,'' Mr Brown said.
Mr Dodson said there was also a growing need for better access for high productivity vehicles on roads; trucks with bigger payloads, so that fewer, more efficient trips, could be made to sawmills and ports.
Aside from the high-profile loss of southern sawmills in recent years, several of the smaller contracting businesses also downsized, or had to quit the sector.
''The local wood processing sector has had a tough couple of years, due to the reasons outlined in the report, however, the situation is now improving gradually,'' Mr Dodson said.
The overvaluation of the New Zealand dollar has been of concern and the export industry had welcomed ''the meaningful drop'' which occurred this month.
With a pick-up in sawn timber exports being forecast, the question then arises whether increased export prices will be reflected in higher prices for domestic sawn timber.
''The [New Zealand] sawmilling sector has had to accept increasing log prices, in order to compete with prices offered by log exporters,'' Mr Dodson said.
Combined with the fact that many domestic mills have struggled to generate sufficient profitability in recent years, it indicates timber prices will need to rise as market forces allow.
''This should not be of great concern to new home builders, as timber is only a relatively small part of building construction cost,'' Mr Dodson said.
Sawn timber exports are estimated to have gained in both volume and value for the year to the end of June, up respectively 0.9% and 3.6%.
While demand for structural timber from Australia and New Zealand had waned, due to weak housing markets, the Canterbury rebuild and Auckland building had ''slightly'' improved the situation, the ministry said.
''In contrast to log exporters, New Zealand wood processors generally continue to experience challenging conditions,'' the report said.
While there had been an unfavourable exchange rate for sawn timber exporters, that had been partially offset by an improvement in the US housing market.
Prices for woodchips, pulp and paper are estimated to be down respectively 16%, 13.5% and 6% for the year to June. Declining volumes in woodchips and paper will see export vales decline 10%, on a year ago.
''Weaker pulp markets are forcing pulp manufacturers worldwide to reduce costs, resulting in the lowest softwood fibre prices since 2010,'' the ministry report said.
In Otago and Southland recently, woodchip exports have all but dried up for the year. Japanese volumes and Chinese prices were both down around 30%.
The woodchips which would have been exported are being used for medium density fibreboard manufacture in Southland.
''Softwood chip is currently experiencing low demand and price,'' Mr Dodson said. As recently reported, Otago Chipmill has suspended operations, as a result of the market, while woodchip export operation at Port Chalmers was similarly suspended, he said.
''We expect this to continue until at least the end of 2013,'' Mr Dodson said.
Panel export volumes are expected to remain at the same level as a year ago, but increased competition had weighed on prices, which are forecast to decrease by 6.8%.
The report said the international plywood market had been significantly affected by new European union regulations requiring panel traceability, designed to reduce illegal logging.
Following a surge of Chinese imports in late-2012, before the new regulations came into force, few orders had since been placed with Chinese suppliers, because of difficulties of meeting the new regulations.
The ministry said that with increased wood availability, the Wood Council of New Zealand wanted to increase exports - to double to $12 billion by 2022.
The council has commissioned an investigation of opportunities and challenges to profitably process more logs in New Zealand.
The study findings are due to be released shortly.
Export revenue
Byproducts ... (year to March)
Logs and chips: $1.80 billion, or 40.9%
Sawn timber: $788 million, or 17.9%
Pulp: $549 million, or 12.5%
Other products: $461 million, or 10.5% (such as mouldings, furniture and parts, prefab' buildings)
Panels: $459 million, or 10.3%
Paper and paperboard: $349 million, or 7.9%
NZ's top 10 markets . . .
- China 36% (top importer of logs, woodchips, pulp and sawn timber)
- Australia 17% (top importer of paper, paperboard, and other products)
- Japan 12% (top importer of panels)
- Southeast Asia 10%
- South Korea 9%
- South Asia 4%
- United States 4%
- Taiwan 2%
- Opec 1%
- European Union 1%
Source: Ministry for Primary Industries.
