Shipping costs continue to underpin the revival with weak oil prices coupled with strong competition in the shipping industry enough to ensure the lowest rates in at least a decade remain in force.
However, AgriHQ analyst Reece Brick warned that it does appear the bottom-end of these prices has been reached.
“The primary driver of a slight lift is the current crude oil price, which is around US$8/barrel higher than at the same point a month ago.”
Internationally, softer market conditions in China are manifesting themselves, although indications of demand going forward are mixed.
Logs exported to China experienced a faster decline between December and January than was the case a year ago (down 25%, compared to 20% in 2014-15).
Since then, there has been some evidence that the Chinese log market has performed well.
“Market activity has been decent, and prices have not fallen as much as was originally anticipated,” Brick said.
“Reported inventory levels in China have varied this month, with anywhere between 2.9 million and 3.6m cubic metres reported.
“Even with this spread, these volumes are well down on the 4m that was recorded at this point a year ago.”
Elsewhere, South Korea is offering more optimism than in recent months.
“There is some thinking that more activity will come out of South Korea as it moves into the warmer building-friendly months, which should in turn aid wharfgate returns,” Brick said.
“The market has been relatively subdued in recent months due to a much colder than usual winter.”
NZ’s market position in South Korea has also improved. Shipments from NZ were roughly three times the volumes from Canada and the United States combined in January.
NZ logs shipped into South Korea were up 24% on the same month last year.
Domestically, a record level of housing permits has bolstered structural log demand in NZ. With limited availability, structural logs are currently priced in line with last months’ finding – $109/tonne.
Despite the apparent underlying improvement in demand, there are some indications that foresters within NZ are still acting with caution following a period of low prices.
Forest harvest volumes declined in the fourth-quarter of 2015, a 3% drop from 2014. This drop was the first time in six years of growth in harvest volumes.
The full report can be read here.
