New Zealand log prices have improved to the point where
forestry companies can now start to reinvest after a period
of low prices throughout the 2000s, Rayonier NZ managing
director Paul Nicholls says.
Latest data from the Ministry for Primary Industries (MPI)
showed prices firmed over the September quarter, reflecting a
better outlook for construction in some Pacific Rim
countries. Prices generally have improved over the last 18
months after spending the better part of a decade in the
MPI data showed prices for pruned export logs were in a $177
to $201 a cubic metre (freight on board) range over the
September quarter, up from a previous 12-quarter average of
Unpruned A grade log prices were at $143-$162 a cubic metre,
up from the 12-quarter average of $128. Unpruned K grade
prices were at $132-$156, up from the 12-quarter average of
$119. Even pulp log prices were better - trading in a $128 to
$131 range, up from a 12-quarter average of $112.
"It's where we needed to be in order to generate money to
reinvest in forestry in New Zealand," Nicholls told APNZ.
"Prices are OK at the minute, but the (high) exchange rate is
a concern," Nicholls said.
The New Zealand dollar remains high by historical standards,
trading today at US84.5c, just US4c short of its record post
float high of US88.40c set in 2011.
Log demand out of China was steady and better prices were
being paid in Korea and India, Nicholls said.
"Clearly, as the housing market in the US picks up, there are
less logs leaving the West Coast of the United States going
into Asia, which allows New Zealand logs and lumber to find a
home relatively easily in those markets," Nicholls said.
The Australian market was patchy, with construction in some
states picking up while others were slowing down.
"Overall you could say that there is more construction
activity, but it's not by any means consistent across the
Pacific basin," he said.
Rayonier - New Zealand third biggest forestry company - sells
about 60 per cent of its logs to the domestic market and
exports about 35 per cent.
Nicholls said improved prices would help forestry businesses
make their investment decisions. "Where they are at the
minute certainly helps the business, but if they were another
$10 to $15 higher that would be great," he said.
ASB economist Christina Leung said log prices were being
supported by strong demand from the Canterbury rebuild,
house-building demand in Auckland, a recovery in the US
housing market and strong construction activity in China.
"In New Zealand, we expect the Canterbury rebuild and
increased house-building demand in Auckland to remain the key
drivers of construction growth given the extent of housing
shortages in these two regions," she said.
In the US, favourable weather had boosted construction
activity, although the uncertainty over US fiscal issues more
recently had led to some slowing in demand, Leung said.