forestry market report november 2014 - farmersweekly.co.nz · the south korean won and the indian...

ph +64 6 323 1512 email [email protected] web agrihq.co.nz

Ivan LuketinaAnalyst

This year has been one of extreme volatility in the export market, and it’s been the domestic mills that have been a safe haven in the past few months.

Record high prices in March quickly turned to custard as China’s construction market slowed, credit tightened and inventories built.

In contrast there’s been slow and steady growth in the domestic market.

Structural wood has been in high demand, production of sawn timber in the third quarter was at a four year high and panel production was the highest in two years. Stocks of sawn timber have increased to a five year high in anticipation of demand for building over the summer.

This has meant that, for now, the domestic log market appears solid and the growth prospects are good for the NZ building and US housing markets. The export market on the other hand looks tenuous.

Despite six consecutive months of price increases at the wharf gate since July, there’s been significant distortion from falling foreign exchange rates and falling shipping rates that

hide the true story to some extent. In-market prices have been stagnant for three months.

Inventories are declining, but slower than expected and

China is heading into the slow period of Chinese New Year. This means there is still downside risk for the first quarter of 2015.

Positivity in domestic market


VIEWPOINT

new look to our reports

Pg 1Ph 0800 85 25 80 l Fax +64 9 925 1184 l Email [email protected] l www.nzxagri.com/agrifax

Forestry Market Report November 2014

In-Market Log Prices

Foreign Exchange and Shipping

Ph 0800 85 25 80 l Fax +64 9 925 1184 l Email [email protected] l www.nzxagri.com/agrifax Pg 1

THIS MONTH

IN-MARKET LOG PRICES –

Slight easing P1

EXPORT LOG MARKET –

Export volume well down P2

DOMESTIC LOG MARKET –

Prices flat P5

DOLLAR STEADYThe NZ dollar fell against the US dollar during the month, but

has since increased to be at similar levels to a month ago. The major drivers this month have been the inflation rate and house prices. Towards the end of October, inflation rates announced by the Reserve Bank of NZ were lower than expected, at 1% for the year. It’s possible now that the continued easing in dairy export prices will weigh down the NZ dollar further.

The South Korean won and the Indian rupee both depreciated against the US dollar in the past month, which continues the trends seen since June. The won fell to a 12-month low during November, while the rupee is slightly higher than a year ago.

FUEL DROPSShipping rates have continued at very low levels, aided by

a fall in bunker fuel rates. Brent Crude Oil prices have crashed

to US$78.38 per barrel from over US$100 per barrel in mid-September. It’s expected that at current prices at least 50% of shale oil producers will have to stop production, which would push the price back up.

There have been many causes of the price drop suggested, but most are suggesting weaker than expected demand, and a smaller than expected response from OPEC nations. Many expected the OPEC nations to cut production in order to lift prices, but there are potential reasons for the lack of response. It’s suggested that with lower prices there will be less expansion of North American production which has a higher production cost, and this would mean greater demand for OPEC nations oil in the long run. Also some OPEC nations will be hesitant to cut production as it could be very costly to their economies. In the long term, fundamental demand growth is not expected to change, which has meant futures prices out to 2020 are barely moving.

SLIGHT EASINGIn-market log prices in China have eased slightly in the past

month. This wasn’t unexpected, given the rapid rise in price relative to the slow decline in inventories. The average CFR price for A-grade logs is currently at US$132/JAS, but the top end of prices that had ranged up to US$136/JAS for some during October has flattened out. The threat of larger falls, however, appears to be abating for now as inventories continue to come down. Inventories are now estimated to sit close to 3.5 million m³, as supply has lowered significantly in the last quarter. Daily sales off ports are reported to be good, and are greater than supply at the moment, but they typically fall off towards winter as building slows and nearly cease completely during the Chinese New Year period in January-February.

Some of the easing can also be attributed to the difficulty that buyers in China are finding in getting letters of credit (LC) from banks. Some practises that firms had been using to get credit are being cracked down on. These included importing products (including logs) to open an LC which is then used to fund other developments, or having non-existent inventory to act as collateral for cheap bank loans. This is slowing down the flow of cash to importers and also making it difficult for legitimate importers to open credit as the lenders placing much higher scrutiny on importers of all products.

0

10

20

30

40

50

0

200

400

600

800

1000

Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14

US$/JAS

Bal+c Ha

ndysize Inde

x

Shipping Prices

Bal3c Handysize Index China -‐ Shipping US$/JAS Source: Agrifax/Bloomberg

0.5 0.55 0.6 0.65 0.7 0.75 0.8 0.85 0.9

90 100 110 120 130 140 150 160 170

Jan 12 Jul 12 Feb 13 Sep 13 Mar 14 Oct 14

NZD

/USD

US$/JAS

m³

NZ Pinus Radiata Log Average In-‐Market Price

KS-‐Grade US$/JAS KI-‐grade US$/JAS NZD/USD

Source: Agrifax/Bloomberg

FORESTRYMARKET REPORT


DECEMBER 2014

S1 DomeStic LogS(NZ$/toNNe)

107

A-grADe export LogS (US$/JAS [cFr])

131

ShippiNg – chiNA (US$/JAS)

30.0

cArBoN (NZ$/NZU)

5.50

USD:NZD

0.7805

harvest drops in third quarter

export log prices up

china real estate sales improve

US lumber imports up

Key Points

Ivan LuketinaAnalyst

This year has been one of extreme volatility in the export market, and it’s been the domestic mills that have been a safe haven in the past few months.

Record high prices in March quickly turned to custard as China’s construction market slowed, credit tightened and inventories built.

In contrast there’s been slow and steady growth in the domestic market.

Structural wood has been in high demand, production of sawn timber in the third quarter was at a four year high and panel production was the highest in two years. Stocks of sawn timber have increased to a five year high in anticipation of demand for building over the summer.


Despite six consecutive months of price increases at the wharf gate since July, there’s been significant distortion from falling foreign exchange rates and falling shipping rates that

hide the true story to some extent. In-market prices have been stagnant for three months.

Inventories are declining, but slower than expected and

China is heading into the slow period of Chinese New Year. This means there is still downside risk for the first quarter of 2015.

Positivity in domestic market


VIEWPOINT


DECEMBER 2014FORESTRY MARKET REPORT


PAGE 2

NEW ZEALAND DOMESTIC MARKET

Processing heats upDomestic processing rose through winter,

in direct contrast to the export market. As expected, Ministry for Primary Industries (MPI) figures show that third quarter harvesting was down 9% year-on-year. This was a 6% drop from the total harvest in the second quarter, with an increase in harvesting of all domestic log types being offset by a 13% drop in export logs.

Pruned log production increased 3% in the third quarter, which came on the back of three consecutive quarterly increases, to put production up 9% year-on-year in the third quarter.

Reports suggest there’s greater demand from the domestic sector than has been seen for many years, and a greater willingness to supply the domestic sector given the export log price drops. This means that the proportion of logs harvested in the third quarter of 2014 for domestic use was the highest since third quarter 2012, at 49%.

Building consents ease slightlyCanterbury building consents were down

5.3% in October from September, but were up 9% year-on-year. A slow pace of consents in August has dragged down the three month average to 3% lower than a year ago, but some of that is being attributed to a lack of confidence during the election. There is a similar case in Auckland, where consents fell in August and September, but bounced back strongly to be 13% above a year ago for the three month average to October.

Structural log market strongThe structural log market is surging ahead,

driven by demand from Christchurch and Auckland. Prices are steady and are expected to remain so for the first quarter next year as supply has leveled out to sit in balance with current demand. MPI figures show that in the third quarter supply of domestic saw logs was up 7% on the second quarter. Year-on-year, however there was a 2% decrease in supply for

the 12 months ending September. Production of sawn timber was also down 2% for the same time period despite third quarter production at a four year high.

Estimated domestic use of sawn timber increased by 11% year-on-year during the 12 months to September, following NZ building consents which were up 13% during the same timeframe. This is calculated using MPI figures for production, exports and changes in stock levels. Stocks, however are building with sawmills anticipating the high demand over summer. Stocks of sawn timber in the third quarter reached 556,000m³ which is the highest level since the first quarter of 2009. This means that as mills time their breaks over the Christmas period there is not a lot of pressure on supply so log prices are likely to remain flat.

Pruned log extends premiumPruned log prices are expected to increase

in the first quarter next year as demand rises for exports of finished products. Domestic pruned log production was up 13% year-on-year for the 12 months ended September. Unlike unpruned logs, there has been little drop-off in export pruned log prices, but there’s only limited export demand for this type of log.

The spread between pruned log prices and structural log prices has stretched to $44/t which is the largest gap since March 2013. But with the average NZ price reaching $151.30/t in the fourth quarter it was the highest NZ average price since May 2003. The spread between the AgriHQ Log Price Indicator values for pruned and unpruned logs reached over $50/t during the third quarter of 2014 for the first time since 2008 but has since eased back to an average spread of $47/t due to the rise in export prices. Indications from forest owners, however, suggest that this spread isn’t enough to justify the expense of pruning and the different regime.

-6% +6%harvesting down

panel production up

highlights

120

130

140

150

160

J F M A M J J A S O N D

NZ$

/t

Pruned Log Prices

5 yr ave 2013 2014 Source: AgriHQ

0.0

0.5

1.0

1.5

2.0

2.5


mill

ion

m³

Cumulative sawn timber exports

5 yr ave 2014 2013

Source: GTIS

0%

50%

100%

Oct 12 Sep 13 Aug 14

Sawn timber exports

China SE Asia US Australia Other Source: GTIS

0 100 200 300 400 500


000

m² f

loor

are

a

NZ residential consents

2012 2013 2014 Source: StatsNZ

80

90

100

110

120


NZ$

/t

Structural Log Prices


0 1 2 3 4 5

Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14

mill

ion

m³

Domestic log production vs. exports

Peeler Saw Logs Small Pulp Expt Source: MPI Source: MPI




0

100

200

300

400

500

600

Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14

thou

sand

m³

NZ Log exports by ports

Tauranga Gisborne/Napier Other Whangarei Picton/Nelson

Source: GTIS, StatsNZ

PAGE 3

NEW ZEALAND EXPORT LOgS

3% Rise for export logsExport log prices at the wharf gate are up

by 3-4% this month. Unpruned log prices have increased $2-3/t on average, which is mostly due to shipping prices falling further. Export pruned prices have increased $6/t on average, which has been due to a movement with in-market prices in China.

Export A-grade logs have increased to $101/t on average at the wharf gate in NZ, up $3/t from November.

There have been similar increases to K-grade and KS grade logs. Export pruned log prices have increased from $141/t to $147/t at the wharfgate.

These movements have again been based on cheaper shipping and a low NZ dollar, which has fallen below US$0.78.

In-market prices in China have stagnated, with prices over the past month averaging US$131/JAS, down US$1/JAS from a month ago.

Some reports have suggested that the latest prices received in China have slipped below US$130/JAS.

Exports rebalanceLog exports during October were similar

to a year ago but a slightly greater proportion was exported to countries other than China.

The volume exported to China was over 1 million m³ for the first time since April, up 58% from the low of 680,000m³ exported in September.

Exports in September and October averaged just below 880,000m³ which is consistent with monthly export volumes since May.

This suggests the difference is likely due to shipment timing rather than a dip and sudden rise in exports, which wouldn’t be consistent with market conditions.

There were large increases in volume exported from Gisborne and Whangarei during October, with Whangarei exporting its second largest monthly volume of all time, below only March 2013.

Most of the extra volume exported from Whangarei was destined for India and Japan, rather than a large increase in exports to China.

Gisborne exports for October were a record monthly volume, but this came off a significantly reduced volume in September, so it’s likely to have been mostly down to ship timing.

Oil prices lower shipping costsContinued drops in global oil prices have

eased shipping costs. However, offsetting this is some

expectation of general increase in global output and trade in some regions as industries adjust to lower fuel costs.

This would put upwards pressure on shipping prices.

The Baltic Handysize Index is up slightly from a month ago, but so far it’s not a change that will pull shipping rates to China up from the low US$30/JAS rate, with some exporters fixing rates under US$30/JAS as the lower fuel costs now allow it.

Dollar down furtherThe NZ dollar has remained below

US$0.78 lately. It has found this new level since the large reductions mid-year that have cut 10 cents off the exchange rate.

The big movements have come in the exchange rate with Australia. Since the beginning of November the NZ dollar exchange rate with Australia has increased from below AU$0.89, to above AU$0.94.

NZ dollar exchanges

This mth Last mth Yr ago

USD 0.7805 0.7891 0.8217

AUD 0.9456 0.9051 0.9064

WON 861.0 865.3 869.4

JPY 92.94 91.35 83.57

INR 48.76 48.74 50.67

+4% +96%pruned log prices up

Whangarei exports

highlights

0

5

10

15

20


mill

ion

m³

Cumulative log exports 5 yr ave 2013 2014

Source: GTIS

Log export destination

China

India

Japan

Korea

Source: GTIS

20

30

40

200

400

600

800

Jan 12 Dec 12 Nov 13 Oct 14

US

$/JA

S

Shipping cost

Baltic Handysize Index China Source: AgriHQ, Bloomberg

60 80

100 120 140


NZ$

/t at

-wha

rf-ga

te A-grade export price





-30

-15

0

15

30

45

60

75

Jan 10 Jan 11 Jan 12 Jan 13 Jan 14

% c

hng

yoy

3 m

th a

vg

Real estate sales and softwood imports growth

Real estate sales Estimated softwood imports Source: China NBS

PAGE 4

CHINA

Prices hold for pineA-grade radiata log prices are holding

steady in the low US$130/JAS range, but there are still some mixed views on the outlook for first quarter 2015.

Companies will be checking their inventories and planning shutdowns for Chinese New Year at the moment, and it’s possible that a recent surge in buying has been brought on by this, and therefore won’t be sustained.

The buying has, however, helped to bring down the inventory level on ports which is estimated between 3.4 and 3.2 million m³.

It’s also been aided by a further drop in total log imports during October.

With inventories still over 3 million m³ it seems that the balance is still tipped toward oversupply for the time being and some softness expected in the first quarter for 2015.

There are reports in China that trades have gone through at US$126/JAS, which could indicate the direction prices are going.

However, what is clear is that the large price correction has reduced supply significantly, and the current softness in the market is part of the overall rebalancing act.

Imports still fallingChina’s imports during October were

down significantly on previous months, to just in excess of 2 million m³.

When excluding January and February figures, which are affected by the Chinese New Year shut-down, this is the lowest monthly import figure since May 2010. When including those months it is the lowest figure since February 2013.

The largest drop came from NZ, where supply was down by almost 240,000m³ from the previous month.

NZ exports in October, which will start to arrive in November/December, were well up so supply will balance out to previous levels.

Supply from the US was down 116,000m³ but in October US exports were actually down. This means that any bounce back in imports in November’s figures is not expected to be major.

Small boost to house salesChina’s central bank has cut interest

rates in an attempt to stimulate the housing market but early reports suggest that it has had less of an impact than expected.

However, there has been some positive impact seen due to relaxation of mortgage restrictions in September.

The cumulative value of real estate sales for the year to October was down 7.9% year-on-year, an improvement from September and August, for which it was down 8.9%.

The floor space of residential buildings sold also improved slightly, down 9.5%, whereas sales were down 10.3% for the year to September.

House prices are still falling, however, and in October were 2.6% below a year ago. This means that China will continue its stimulatory measures in the housing market.

gDP target too highChina now appears certain to miss its

target GDP growth of 7.5% for 2014, and is currently at 7.3%.

The manufacturing Purchasing Managers Index (PMI) remains above 50, which signals growth in manufacturing, but this has been falling since July and in November was at just 50.3.

-28% -7.9%log imports from NZ

real estate sales for the year

highlights

The cumulative value of real estate sales for the year to October was down 7.9% year-on-year, an improvement from September and August, for which it was down 8.9%

0

10

20

30

40

J F M A M J J A S O N D M

illio

n m³

China cumulative log imports

5 yr ave 2013 2014

Source: GTIS

100 115 130 145 160 175 190

Jan 13 Dec 13 Nov 14

US

$/JA

S

Radiata pine CFR prices

P A KI KS Source: AgriHQ

-4 -2 0 2 4 6 8

10 12

Jan 11 Dec 11 Nov 12 Oct 13 Sep 14

% c

hang

e y-

o-y

China house price index

Source: China NBS

China log imports (3 month average)

Oct-14 Sep-14 Oct-13

NZ 32% 33% 35%

US/Canada 25% 26% 24%

Russia 28% 26% 25%




PAGE 5

SOUTH KOREA

JAPAN

INDIA

Steady demand in Korea

Japan at the polls

India takes more

-1.2% -13%gDp growth log imports

highlights

5.2% +2% gDp growth house prices

highlights

+3.2% -14%gDp growth log imports

highlightsOfficial import figures for South Korea

show a large increase in log imports during 2014. There are, however, two large spikes in the data in imports from NZ and Japan, neither of which are reflected in those countries’ export statistics.

Using the total value of log imports to date, the total value is very similar to a year ago, which suggests that actual volume imported is unlikely to be far off.

Reports indicate demand has been steady, and there appears to have been a significant increase in imports during the third quarter. End-users there would have taken the opportunity to build inventories going into the winter with the lower prices available after the drop in the market in China.

There may also be some lift in demand from South Korea due to MDF processors reportedly being short of fibre but this isn’t

expected to result in a significant change to imports. With heavy snow now falling in South Korea, there will be the usual winter drop-off in activity occurring.

Manufacturing shrinkingAlthough construction appears to be

recovering in South Korea after a slow year in 2013, there are other factors that appear to point towards a slowing of the economy. The annual GDP growth rate has slipped down to 3.2%.

Growth peaked in the first quarter at 3.9% but has been falling steadily since, and the manufacturing PMI has sat below 50 for every month bar one since May, which indicates a shrinking manufacturing sector.

Total exports, however, have increased during 2014 despite a rising Korean won against the US dollar. This could signal good news for log imports, as much of it is used

Japan’s snap election has delivered a greater majority to the incumbent government there, which was widely expected. Japan’s Prime Minister called the early election two years into a four year term in order to solidify a mandate for economic changes that his government were attempting to push through. The reforms that have been pushed through were intended to come in three changes which consist of fiscal stimulus, monetary easing and structural reforms.

The first two of these reforms had been implemented but there has been significant opposition to the reform of protectionist policies in Japan’s trade. The election was supposed to provide a mandate to make these changes but there is still significant opposition from many areas, including from within the leading party.

Currently Japan’s economy has been pushed into recession. The third quarter annual growth rate was -1.2% and there’s debate as to whether the reforms will pull Japan out of this, or if they have been the cause.

Imports are slidingLog imports to Japan started the year

rapidly and were 14% above 2013 in the first quarter. First quarter log imports were the highest since 2008, but second and third quarter imports fell rapidly to be 17% and 13% less than a year ago respectively. For the full year to October, log imports were down 6%.

There has been a similar trend with lumber imports, which were 4% below 2013 in the first quarter, the 16% and 27% in the following two quarters.

NZ log exports to India will be close to record levels for the year of 2014, but at 1.3 million m³ for the year to October it is still a small proportion of NZ’s total log exports. There have been much more consistent exports to that country during 2014 than have been seen in the past.

Economic data out of India has been positive this year, with the GDP annual growth rate reaching 5.7% in the second quarter before falling back to 5.2% in the third quarter. This is the highest it has been since the fourth quarter of 2011.

The manufacturing PMI is 53, which

indicates growth in manufacturing is expected.

Housing slows upHouse prices in India grew just 2% in the

second quarter, the latest for which data was available. The pace of price rises in India has been slowing over the past year, and the number of sales is also slowing up.

There is a high level of unsold inventory that is weighing on growth which is particularly so in the major cities of Mumbai and Delhi, whereas smaller main centres are growing at a stronger pace.

0

2

4


Mill

ion

m³

NZ exports to SK

5 yr ave 2013 2014

Source: GTIS

0

0.5

1


Mill

ion

m³

NZ exports to Japan

5 yr ave 2013 2014

Source: GTIS

0

1

2


Mill

ion

m³

NZ exports to India

5 yr ave 2013 2014

Source: GTIS

Likewise the NZ dollar value of NZ exports of panels to Japan has dropped throughout 2014 to be 17% below a year ago for the year to October.

for boxing timber in exports, but the lift so far has not been significant enough to have an impact.




PAGE 6

USA

CANADA

Lumber imports follow construction

Small increase to production

+1% +5%production lumber exports

highlights

+4% +5% lumber prices housing

permits

highlightsLumber prices are easing in the US

as building slows for winter. However, prices remain close to the 2014 highs that occurred in August and October. Futures prices on the Chicago Board of Trade are up 4% from November, but are 4% behind year ago prices. The recovery in US housing has started to lift timber prices, but it has been tempered by the slow recovery of single family house building relative to multifamily house building.

Lumber imports were up 12% for the year to October, and October imports were the largest for a single month since May 2008, which is a clear signal of the recovery in demand in the US. The vast majority, 97%, of lumber imports were from Canada.

Imports from NZ remained relatively steady, and for the year to October were down 1% in volume, but the total value of the imports increased 2.5% due to the higher prices.

EU-supplied lumber decreased 10% in volume. Demand for lumber in the EU is increasing, which is evidenced by EU lumber imports increasing faster than US

imports. This has resulted in the slide in supply of lumber from the EU to the US.

Six year high for building permits

US building permits reached a six-year high during October when they reached 1.08 million buildings approved at a seasonally adjusted annualised rate. Housing starts, however, were back slightly at 1.01 million. Both were above October last year, and the average for the three months to October for housing starts was 12% higher than the same period a year ago.

Single family house starts increased in October but there was a drop-off in multifamily housing starts. The biggest lift in permits, however, came from multifamily housing. The increase in permits leading into winter is expected to mean that growth in construction will be more rapid in spring 2015. A large increase in building was not seen in spring this year as an extended cold patch in late winter put off a lot of home building and appeared to have a long term effect.

Production is increasing in Canada but statistics up to the third quarter show that production was just 1% ahead of a year ago.

It was, however, 17% ahead of two years ago. This lags the US housing market, where starts are up 10% over a year ago and 33% above two years ago.

Exports drawn to usCanadian lumber exports have been

increasingly trending towards supplying the US.

Total lumber exports from Canada have increased and are currently trending at about 5% above year ago levels. However, lumber exports to areas outside of the US were down 8% for the year to October.

Lumber exports to China were marginally lower than a year ago, but were relatively stable.

Exports of logs to China, which make up over half of total exports from Canada, were higher than a year ago for the 12 month period.

Less exported to ChinaUS total log exports to China fell below

a year ago for the year to October. This followed a major reduction in exports to that destination in the third quarter, for which export volumes were down 21%, despite having been 19% higher during the first half.

There have also been significant decreases in exports to Japan and South Korea, which have contributed to the total export log supply out of the US falling 8% year-on-year for the year to October.

The largest drop-offs have come from the Pacific Northwest areas such as Portland, the Columbia-Snake River and Seattle, but Southern and Eastern regions are increasing output. Supply from Georgia was up 41% for the year and supply from San Francisco more than doubled.

0

10

20

30


Mill

ion

m³

US cumulative lumber Imports

5 yr ave 2014 2013 Source: GTIS

0 2 4 6 8

10 12 14 16


Mill

ion

m³

US cumulative log exports


0

3

6

9


Mill

ion

m³

Canada cumulative lumber exports to China


0 6

12 18 24 30


Mill

ion

m³

Canada cumulative lumber exports to US


0.5

0.7

0.8

1.0

1.1


mill

ion

star

ts (S

AA

R) US housing starts

5 yr ave 2014 2013 Source: US Census Bureau




PAGE 7

AUSTRALIA

RUSSIA

Sydney pulls up house prices

Ruble falls support exports

The rapid year-on-year growth that had been seen in Australia’s housing permits has started to ease, with the three month average to October up just 5% year-on-year. This is the slowest year-on-year growth for a three month period in two years.

House prices have been falling in most Australian cities but the overall median house price rose in the third quarter. Sydney house prices increased 3.8% in the third quarter while the seven other capitals were either flat or down for the quarter.

Interest rates have remained flat throughout the year at 2.5%, which has meant the exchange rate has fallen relative to the US dollar and the NZ dollar.

Australia increases importsAustralian lumber imports have increased

during 2014, and were up 6% for the year to October, driven by increases out of the EU. Although lumber supplied from NZ was up 2% year-on-year in October, the full year total was down 5% in October.

Together the EU and NZ have supplied 81% of Australia’s import lumber in 2014. The smaller suppliers are mixed, and unsurprisingly the largest decrease has been from the US where the domestic market is increasing, and Chile, from where supply to the US is increasing.

Australia’s mouldings imports are similar, where supply from NZ and Chile is down, but supply from the EU is expanding rapidly.

In 2013 NZ supply made up 40% of Australia’s imports but that has fallen to 35% in 2014, while at the same time, supply

from the EU has increased in share from 11% to 18%.

Exports defy China downturnDespite log market downturns in China,

exports of softwood logs from Australia have continued at rates well above a year ago.

The three month average of log exports to China to October was 16% above a year ago. There’s a similar trend in softwood lumber exports to China, which are up 47% for the year to October.

Supply of logs to China has continued to decrease from Russia, with supply down 11% year-on-year during 2014. However, there’s been greater imports of Russian sawn timber by value in China.

The total value of imports for the year to October was up 15%.

Log and lumber prices out of Russia are falling rapidly due to the weakening ruble against the US dollar.

Currently one ruble buys US$0.015, whereas in July it was almost double this at US$0.029.

There are expectations that the lowered

exchange rate will mean greater exports to China from Russia.

Oil price pressureFalling global oil prices has put a

significant strain on Russia’s economy which is highly weighted towards oil exports.

This is weighing heavily on Russian oil companies with high debt and it’s likely to push Russia towards recession.

This will mean lower production right across Russia’s industries and the forestry industry is unlikely to be immune.

+5% +6%housing permits

lumber imports

highlights

-11% -28% log supply to china

russian ruble

highlights

10

12

14

16

18

J F M A M J J A S O N D Thou

sand

app

r vd

SA

Australian building consents

5 yr ave 2014 2013 Source: ABS

0

20

40

60

Nov 12 Oct 13 Sep 14

000

m³

Australia lumber imports

NZ EU Other Source: GTIS

0.0

0.5

1.0

1.5

2.0

2.5


Mill

ion

m³

Aust. cumulative log exports


0.0 2.0 4.0 6.0 8.0

10.0 12.0


Mill

ion

m³

China imports of Russian logs





PAGE 8

DATA TABLES

CFR in-market log prices (US$/JASm³)

Latest Last month m/m change 6 months ago Year ago y/y change 2 years ago

KI 118 120 -1% 119 141 -16% 124

KS 125 127 -1% 131 147 -15% 131

A 131 132 -1% 137 153 -14% 135

P 180 167 7% 165 174 3% 173

Building activity


US 1080 1031 5% 1059 1067 1% 895

Australia 17062 17062 0% 14931 16491 3% 12540

000’s approved

NZ 703 654 8% 675 607 16% 577

Japan (wooden structured) 4618 4641 -1% 4551 5966 -23% 5138

000’s m²

Shipping costs from NZ (US$/JASm³)


China 30.0 31.5 -5% 36.1 34.6 -13% 32.0

South Korea 29.9 30.8 -3% 35.2 36.0 -17% 31.7

India 39.7 42.2 -6% 44.3 40.0 -1% 42.9

Forex


USD/NZD 0.7805 0.7891 -1% 0.8688 0.8217 -5% 0.8428

AUD/NZD 0.9456 0.9051 4% 0.9218 0.9064 4% 0.8016

Chinese imports from Russia (m³)


Logs 648797 624791 4% 829248 730857 -11% 804178

Lumber 418742 419799 0% 487505 569310 -26% 494528

NZ exports (m³)


Logs 1626085 1005095 62% 1628204 1635089 -1% 1360378

Lumber 137870 142136 -3% 131860 170831 -19% 178155

Source: GTIS

Log import volumes from NZ (m³)


China 601523 838744 -28% 1128087 1017552 -41% 597621

Japan 47287 39607 19% 79661 40392 17% 50885

South Korea 260723 185959 40% 229387 198455 31% 180166

Source: GTIS

Chinese imports from PNW (m³)


Logs 515913 543647 -5% 690953 623599 -17% 556751

Lumber 550379 579369 -5% 740717 756691 -27% 484309

Source: GTIS

Carbon NZ$/tonne


NZU 5.50 4.30 28% 4.00 3.85 43% 2.50

Disclaimer: This report is published by NZX Rural Limited (“NZX Agri”) for your information only. This report does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or financial product. No part of this publication may be redistributed or reproduced in any form or by any means or used to make any derivative work without written permission from NZX Agri. NZX Agri (including its group companies and each of their directors, officers, employees and contractors) shall not be liable (except the extent strictly required by law) for the use of the information contained in this report, however arising. This report is published with due care and attention, but NZX Agri and its group companies accept no liability in relation to the completeness, accuracy or timeliness of this report and its contents.

forestry market report november 2014 - farmersweekly.co.nz · the south korean won and the indian...

Documents