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Log Market - June 2009

The domestic market is steady in its somewhat fragile state. Supply and demand for logs is more or less in balance at relatively low volumes as mills continue to adjust production to avoid large increases in inventory of finished product. The recent rises in the NZ$ will be further ill-affecting viability.

China continued to dominate export sales with large volumes heading to that market in May and June. Apart from some infrastructure limitations, the market seems to be coping with the increased volumes, as the NZ$70 billion Government infrastructure spend kicks in. Lanshan (featured in Wood Matters Issue 6 - China Trip Report is reported to have had four vessel steaming to its docks in early June. With limited capacity to discharge logs, the vessels had to wait in a queue to get serviced.

Whilst demand is still strong in China and price in US$ is lifting, adverse movements in foreign exchange and an unexpectedly large lift in ocean freight rates have lowered NZ$ at-wharf-gate prices by $3-$15/JAS m3. Ocean freight rates have moved from lows of early US$20s in March to early US$30s currently. Much of this has been driven by high levels of iron ore and steel imports into China, but more recently traders are describing a stand-off between ship owners and log traders relative to late June/July ship bookings. The ship owners are holding out for high fixture prices against log traders pushing for reductions in price.

The NZ Agrifax Combined Log Price Index, which measures returns from the whole forest, moved down by $2.30/tonne for June to $72.20/tonne.