Monthly Report - December 2024
Price stability has been the order of the day over the last month for both export and domestic log sales. There is a lot happening internationally that may yet impact us in little old NZ in the new year, but as at mid-December I would say the combination of factors should see more price stability than has been a feature of our recent past.
As reported last month, all eyes are on that modicum of insanity they call Trump manaia and how the imposition of tariffs imposed on China will play out. So far, we have seen announcements around many products and commodities being hit within a 25% to 100% range. Wood products have thus far not made the list, but we realise our turn is coming.
Those of a sniggering disposition will be wondering how American consumers are going to react when they will have to pay a great deal more for their washing machines and solar panels. What the US policy makers seems to have missed during all their anti-China chest beating is how their impositions are going to drive US inflation in to the ionosphere.
The US tariff regime is predicted to reduce China GDP by a staggering 2%. This must have global impacts outside of the US, in particular countries like NZ who rely very heavily on Chinese economic activity.
In November, NZ supplied 95% of all softwood log deliveries to the China Eastern Seaboard, a record number. It is as much a function of where our competitors are at and to a lesser degree the timing of vessels in to the market.
China softwood log Inventory is hovering around 2.8 million cubic metres representing less than 2 months supply at the current daily consumption rate of around 50,000 cubic metres. Domestic prices in off port sales are generally stable.
CFR pricing levels remain stable at or around US$120 A grade basis and no one is talking change any time soon. It is certainly positive to see NZ exporters in the market not pushing price. I suspect many will be reeling from the events of early 2024 when pricing was pushed way too high and they forced a market collapse. I am reliably informed one or two are still nursing sore backsides from the response they received from some of the larger NZ Corporates.
The key messaging coming out of China is one of nervousness. The broader economic outlook does not look positive for Kiwi logs suggesting 2025 should be about maintaining the current prices levels and not rocking the boat. I repeat that which is more than ever glaringly obvious, it is time for NZ Forestry Inc to get out there and start looking for alternative markets.
It may not then be coincidental a NZ delegation of political and other leaders has headed to India for “trade talks.” Whilst it is a great pity there are no forestry leaders on the trade mission, we can only hope we rate a mention. Afterall the 2025 NZ log trade in to India is estimated to only be worth about NZ$300mil and I suspect finance minister needs that!
The current India market is largely stable albeit one very shonky India trader has had to place about 60,000 cubic metres in to bond because no one wants to buy the logs off him following a reveal all letter that circulated around NZ and Kandla. He is currently negotiating his way to the bottom to achieve sales with most hoping that will be the end of him.
Thankfully the market looks to be shrugging off what is going to be some cheap fibre for some and there is an expectation the current over supply will ease as seasonal consumption rates lift Q1 2025. For the moment, A grade for most of us is sitting around US$145 CFR basis. Netted back to NZ this is giving returns very slightly ahead of China comparatives.
As so it is folks, we see the end of what can only be described as a disastrous year, certainly the first half. Thankfully the latter months have seen general improvement. I extend best wishes for a Merry Christmas, a safe holiday break and all that can be good in 2025.
As always, please remember the thoroughly important message, “despite the challenges, it remains, as always, fundamentally important, the only way forward for climate, country and the planet, is to get out there and plant more trees”!
Allan Laurie.
Laurie Forestry.
