Log Market - May 2009

There has been very little change in market conditions since last month.

The domestic timber market conditions continue to be soft with local processors going into survival mode, forced to cut production and minimise costs. Regional shortages of key log grades are emerging with pressure on forest owners to support domestic log supply in lieu of higher export returns. This strategy can make good sense for those seeking market access over extended periods as historically there are times when domestic log prices are stronger than export prices.

Continued high demand from China, increasing demand from India and signs of Korean buying are positive for the export log market. At-wharf-gate NZ$ prices, however, are up against the headwinds of an appreciating NZ$ and rising ocean freight rates (reported rates just over US$31/JAS m³).

The Agrifax overall log index increased by $0.50/tonne to $74.50/tonne in the May report. Overall expectations are for some weakening in price for June.