New Zealand structural log prices have hit their highest level in more than two decades as local mills compete with the export market to meet demand from the domestic market.
The price for structural S1 logs lifted to $124 a tonne this month from $123 a tonne last month and $114 a tonne at the same time last year, reaching the highest price for the grade since April 1994, according to AgriHQ's monthly survey of exporters, forest owners and saw millers.
"The New Zealand domestic log market has slowly but consistently risen this year, and the past month was no different," analyst Reece Brick said.
The market remained skewed in favour of sellers rather than buyers, squeezing even more returns out of harvested logs, he said.
While strength in the local housing market is helping stoke demand, the main driver behind higher domestic prices was that export markets are draining supplies out of New Zealand, the report said.
"Domestic mills are in a tug-of-war with export log traders for unpruned logs and are facing the prospect of further hikes in log procurement costs," Mr Brick said.
"A large portion of mills are still paying below the export market for logs. Log suppliers are currently attempting to gauge mills' ability to absorb higher log prices.
"All signs suggest more increases are on the cards."
New Zealand exported 1,666,639 cubic metres of logs in April, up 3 per cent on March volumes and 21 percent higher than a year earlier. Some 72 percent of the volume was exported to China.
The value of log exports is expected to climb to $2.66 billion this year from $2.22b last year and reach $3.14b in 2021, according to the Ministry for Primary Industries.
Forest products are New Zealand's third-largest commodity export group behind dairy and meat products.