The four months to June 2011 show a 15% drop in sales. That contraction is very sudden and historically, very large.
NZ Exports of Sawn Timber
Annualised it means that the cashflow from exports has dropped by $138 million. At the same time, we calculate, the total cost of purchasing logs to be cut for export, would have actually increased (due to price increases) despite less production. Given that other factors of production would have been inflating at an average of 5%, the shrinkage in cash flow would have well and truly wiped out operating margins.
While log export prices grew 22% over the last two years sawn timber export prices have fallen by 14% with the average price of exports to the US falling 21%.
Despite China being prepared to pay 22% more for our log exports it reduced the price paid to us for our sawn exports by 19%.
Regardless of exchange rate advantages, export sales to Australia are down 16% or $33million less in cash on an annualized basis.
The biggest hit however has been in the US market with sales down 26% and cashflow annualised down a whopping $50 million.
Between them US and Australia account for 60% of the contraction.
China, down 22% or $34million annualised accounts for another 25% of the contraction.
Some of the smaller Asian markets showed positive growth but this was swamped by losses in the bigger markets.