Russians Announce Log Tariff Delay and Log Market Comment

An important announcement in early September was Russia planning to delay the imposition of its final and steepest export log tariff increase until 2011. The threefold tariff increase was originally planned to be imposed in 2009, then later deferred until 2010. This latest deferral is reported to be due to the financial crisis ill-affecting the development of domestic processing facilities in Russia aimed at enabling it to add value to its enormous forestry industry. The announcement was met with relief from European Union paper makers, particularly those in Finland and Sweden, who have been highly reliant on Russian logs.

The announcement has had no noticeable impact on the Chinese log market. Demand for Radiata pine continues at high levels (around 4.0 million JAS m3 annualised) and prices have continued to firm. However, the appreciating kiwi $ continues to erode these price gains, with just small increases in at-wharf-gate prices. The Korean market has strengthened and is offering prices on par with China. This is a welcome development as it will take some volume pressure of China and provide a more diversified sales mix.

There has been little change in the domestic log market over the past month.

The NZX Agrifax Combined Log Price Index, which measures returns from the whole forest, lifted by NZ$1/tonne in September to $74/tonne (NZ$3/tonne below the same time last year).