Log exports look set to double

Port Otago's log exports could double this financial year as Chinese and Korean demand for southern radiata pine surges, in turn boosting prices more than 60% for the hard-hit forestry sector.

Thanks to plummeting Russian log supplies and escalating Chinese demand, New Zealand foresters, who were left reeling during the recession, are revelling in record pre-recession log prices, with potential for more gains.

Record levels of almost 200,000 cubic metres went through Port Otago's wharves for the six months to December last year, which compares with 240,000cu m for the entire previous year, and 200,000cu m the year before that.

Port Otago chief executive Geoff Plunket said that after almost 200,0000cu m was shipped during the first half of the financial year, the present quarter's log exports were tracking at about the same level, involving three ship calls per month.

"Korea and China have shown a very strong export demand.

"Market indications [for the rest of the year] look like similar levels ahead," Mr Plunket said.

Council-owned City Forests exported 85,000cu m of logs for the seven months to January, which compares with 98,000cu m for the entire 2007-08 year and 126,000cu m the year before.

At a recent China Forestry Society Conference, a director of the Chinese Society of Forestry predicted China's total wood fibre demand would increase 42% from 245 million cu m this year to 350 million cu m by 2015.

Of this up to 150 million cu m could be imported in 2015, according to a report by the International Wood Markets Group.

China's share of log imports over the next five years was predicted to rise almost 60%, from 95 million cu m this year to 150 million cu m by 2015.

City Forests' chief executive Grant Dodson said log prices per cubic metre had slumped 36% from a pre-recession high of $US130 ($NZ186) to about $US83 more than a year ago, but were last week up 62% at $US135.

"This is all down to the China growth engine.

"There are concerns of the rapid price rise, but we're hoping we're in for some good times," Mr Dodson said, referring to forestry-related company closures and hundreds of job losses during the past two years.

City Forests' main market is Korea, but with Chinese demand up and Russian supply down, New Zealand's exports to Korea and China were increasing markedly, he said.

Industry sources said China's 2008 imports of 30 million tonnes of logs included 25 million tonnes from Russia, but last year Russia's exports declined 40% to 14.8 million tonnes, because of dwindling border forests and infrastructure decay, creating demand for New Zealand logs.

New Zealand log exports to China in 2008 was 1.9 million tonnes but last year rose 300% to 4.4 million tonnes.

Mr Dodson cautioned that while the first six months' operation had seen log demand up, prices had only recently moved to $US135 and this boon would not show up on the balance sheet immediately.

He was "pretty optimistic" demand during 2010 could see prices rise beyond $US135.

Space for logs around Port Chalmers has been a problem in the past, but Mr Plunket said exporters were working together well to ensure space was available.

However, "the pressure on space was coming on" when two vessels called at the same time, he said.

Port Otago had offered a further 3000sq m of space near its Beach St warehouses and recently had logs stacked at Sawyers Bay, while other exporters had used alternative Dunedin sites to store logs.

Separately, Port Chalmers log chip exports were well down on previous years, but Mr Plunket expected demand to increase in coming months and estimated the annual rate of 80,000-100,000 tonnes exported would be achieved.