Recent statistics confirm the continuing huge surge in log exports, mainly to China.

They also confirm a timber processing industry which is going backwards, with exports in the six months to June 2011 being 10% lower than last year and a stagnant local market. For the months of May/June timber exports were actually 22% lower than the year before. This is the biggest and sharpest decrease we have on record.

But right now, which is the time zone we actually live in, log exports have collapsed. Almost overnight prices have fallen by up to 30% and export ports at both ends are reportedly choked with logs.

As we write, the China log price has rebounded by about USD8 but the prospects for the remainder of the year look decidedly dim as China’s log sources switch away from New Zealand to Canada and the USA, Chinese sawmills gear up to cutting North American logs and the Chinese government looks to rein in the construction boom there

Most disturbing is the transfer of timber processing opportunities to China.

China reduced its purchases of processed timber from New Zealand by 22% in the four months to 30 June 2011 yet increased the purchase of raw logs from New Zealand by 58% in the same period. On price China paid 21% more for our logs in the March quarter 2011 than two years ago but dropped the price on our processed exports by 19% over the same period.

For the same reason Adidas doesn’t make footy jerseys here, our timber processing is being substituted by China which now takes 62% of our log exports and accounts for 79% of the growth.

This dependency is scary and when China pulls the rug from under our log exports as it is doing right now we are left like a dying man clutching at straws.

In three years domestic log prices have increased at three times the rate of framing prices and at about twice the rate we can get for our product in Australia.

Despite significant increases in processing efficiency the timber industry simply cannot survive that sort of cost inflation.

Categories: