- In March import prices in China had picked up despite total log inventory still building to over 8 million m3 when including the significant volume also on vessels. These price increases defied economic sense as inventory was still high, and demand was uncertain. It appears this demand was driven purely by concerns about global log and sawn timber supply, as manufacturing and construction recommenced in China.
The same day the Covid-19 lockdown was announced in New Zealand, market prices for logs in China increased by +RMB150.
Russia usually harvests forests on the permafrost, but due to unseasonably warm weather has not been able to send machinery into forests. This has significantly reduced the supply of sawn lumber into China.
China was also receiving an increasing volume of spruce from European forests that had been damaged by storms and bark beetle. This volume was back-loaded in containers on rail. Due to a lack of consumer demand in Europe for Chinese products, there are very few back-loads of containers for this supply. This supply will likely recommence when consumer demand increases in Europe for Chinese products and back-loads are again available.
Log supply from South America had stopped when log prices in China fell to low levels and there was no indication of when supply could restart due to Covid restrictions.
During the first three months of the year (Q1 2020), China import volume of logs was just short of 12 million m3 which was down about 20% from last quarter of 2019 (Q4 2019) and down around 15% in comparison with the first quarter of 2019 (Q1 2019).
During May the CFR price for A grade New Zealand radiata pine jumped to US$128-130 per JASm3 on the back of concerns about global log and sawn-timber supply. As the log prices increased, some sawmills in China slowed down or stopped production as they could not operate profitably with the high cost of logs. The increase in the log price has exceeded any price increases in their finished products. Daily port offtake of log volume was deceptive as many mills were buying increased log volume at lower price levels to avoid the expected price increases.
Due to the lack of demand the CFR price for NZ’s A grade radiata pine has fallen to US$115-120 per JASm3. This decrease happened virtually within one week. The softwood log inventory in China ports is 4.5-4.8m m3. Daily port off-take of logs is in the 50-60,000 m3 range. While this does show considerable activity is happening in China, these volumes are well down on the same time last year when daily port off take was 80-90,000 m3.
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