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2021 has certainly started on a positive note for the NZ forestry industry with prices firming in the export sector, in fact close to the highest in the last 3 years. Prices have been on a strong run since November due to Chinese demand and a gap in supply.

New Zealand domestic demand and prices are also remaining strong. There are some signals from the North Island and Northern South Island, 2nd quarter negotiations are pressing for log price increases in Q2.

At the moment, we are seeing some significant sustained lift in international lumber prices. Chile, Canada and Europe are traditionally strong supply sources. Although Canada less so in the last year, as a combination of much lower harvest levels and US demand has reduced lumber exports.

All supply sources are struggling with a shortage of containers and container movements. European and Chilean processing outputs have also been constrained by COVID issues. Some of the lumber price increase is the consequence of a push forward on higher sea freight rates, some is just simply strong demand and short supply.

Since Christmas, international lumber prices are up 22 – 35%, depending who you talk to and which specific market is being quoted. For the moment most commentators are suggesting the increases are significant and look to be sustainable for the foreseeable.

On the export log side, New Zealand CFR prices (the log price landed in China in US$ per cubic metre) have continued to firm, although shipping cost increases have certainly taken the froth off the beer.

NZ exporters are witnessing some of the most rapid rises in sea freight cost ever seen. March has been an example where those who waited to secure vessels, hoping prices would go down, have seen a 20% increase in less than a month. Log exporting at present is certainly unusual. As a consequence, it is expected to see NZ at wharf gate prices drop in April if not certainly in May despite CFR prices climbing to close to the highest ever.

Despite some apparent challenges, the market fundamentals remain strong, certainly as far as China is concerned. In this market the key indicator is log consumption. Following Chinese New Year (CNY), consumption has kicked back up very quickly, as at mid-March running at 85,000 cubic metres per day.

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