Housing lifts local log market to records
The demand for new houses and a booming horticulture industry has stoked demand for local logs, sending prices to record highs.
21 March 2017
Buoyant New Zealand activity has pushed up local log prices to new record highs.
The average price for roundwood logs used in the horticulture sector rose to $92 a tonne in March, up $2 from February's average price and at the highest level since AgriHQ began collecting the data in early 2002, according to AgriHQ's monthly survey of exporters, forest owners and saw millers.
Structural log prices also increased, with S3 logs hitting $114 a tonne, the highest since AgriHQ began collecting the data in early 1995, while S1 logs rose to $122 a tonne, the highest since mid-1994.
Record high net migration and low interest rates are putting pressure on the nation's housing market, driving up prices and stoking construction activity. A booming horticulture industry is also spurring investment activity in that sector, helping drive demand for roundwood.
"Orders were flowing into sawmills at a constant but rapid rate, mainly underpinned by the ever present housing construction sector, especially around Auckland," said AgriHQ analyst Reece Brick.
Demand remained firm in the pulp, pruned and roundwood markets.
"There's been little sign of any stagnation in the roundwood trade," Mr Brick said.
"Reports suggest many mills are running at or near their maximum capacity as orders keep coming in, and log supply is too tight to prevent any prices increases."
However, there was some concern about whether structural log prices might soften as inventory levels increased at North Island mills heading into winter when construction demand tended to slow.
Meanwhile, export prices for New Zealand logs softened by about $2 a tonne across the range of logs measured by AgriHQ.
The key factor behind weaker wharf-gate markets was the sudden increase in shipping rates rather than oil prices, Mr Brick said.
Forest products are New Zealand's third-largest commodity export group behind dairy and meat products.
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