Steady future forecast for log and lumber exports

18 December 2002

The latest Ministry of Agriculture and Forestry forecasting report – Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) projects a strong increase in export volume for logs and lumber (sawn timber).

Looking out to 2005/06, the December 2002 report says increases in wood available for harvesting will push production up, with steady growth for both logs and lumber, although price increases for logs are expected to be soft.

The SONZAF report says the outlook for lumber export volumes is good in the early part of the forecast period, with continuing favourable market conditions in Australia and the US.

Looking at the current 2002/02 year, the report’s author, senior policy analyst John Eyre says the average price of export logs decreased by over 19 percent, coming off a seven-year high in 2000/01. Mr Eyre says, however, that a 24 percent jump in export volumes kept the overall value of log exports for the March 2002 year at around the same as the previous year.

Lumber export volumes for the year grew eight percent and prices remained steady.

Other factors observed in the 2001/02 year include:

  • The total production of roundwood from New Zealand’s planted production forests was 20.5 million cubic metres – up six percent from the previous year.
  • Logs and lumber (sawn timber) accounted for 70 percent of total production in roughly equal proportions.
  • Export volumes of logs for the March 2002 year were 7.38 million cubic metres – an increase of 24 percent on the previous year. Log exports were valued at $714 million – virtually the same as the previous year.
  • Lumber exports for the year were 1.64 million cubic metres – an increase of eight percent on the previous year.
  • The large export volume increase in logs was due to jumps in a few markets - export volumes to China increased by a massive 128 percent to 1.01 million cubic metres and South Korea jumped 44 percent to 4.26 million cubic metres. These two markets, plus Japan are by far the largest markets for New Zealand’s logs.
  • The US overtook Australia as New Zealand’s main market for lumber. Exports to the US increased 47 percent by value and 40 percent by volume over the previous year.
  • The annual average all-grades price for lumber exports remained almost the same as the previous year.

Forecasting through to 2005/06, Mr Eyre says future growth in log exports is based on economic growth in New Zealand’s main markets, particularly South Korea at five percent plus per year, and on an expanding Chinese market. There is also potential for greater expansion in the Indian market.

Likewise, export volume growth for lumber will be driven by economic growth in its target markets – Australia and the US. There may, however, be a possible softening of demand in Australian construction.

Mr Eyre says while the US and Australia are expected to remain the largest lumber markets for our product, there is potential for further volume growth in other markets – for example over the last year lumber exports to China grew by 44 percent, due largely to increased acceptance of radiata pine. "Efforts to move radiata pine into the Chinese construction sector could pay big dividends," he says.

Prices in US dollar terms for log exports are expected to remain flat for 2002/03, as more volume is exported, with price rises probably forgone so that volume can be promoted. Expanding markets are, however, forecast to provide opportunities for price increases in 2003/04 and beyond.

As with other primary sectors, a stronger New Zealand dollar is likely to influence prices.

In the longer term, the report says the increasing inventory of harvestable wood presents opportunities for value-added processing.

Trade access barriers faced by New Zealand exporters, particularly in Asian markets, are the main external constraints to further investment in log processing industries in New Zealand. A successful conclusion to the World Trade Organisation Doha Trade Round will help to lower such barriers.

There are also non-tariff barriers in importing countries such as taxes and prescriptive building codes and standards that make our product more expensive in these countries. In the longer term, effective marketing and promotion and possible bilateral trade discussions could resolve these issues.

For further information, please contact:

John Eyre, Senior Policy Analyst, MAF Policy

Contact MPI

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0800 00 83 33