Congestion at ports from logs not being distributed, the extended closure of China’s sawmills and an influx of competing European spruce logs has created an inventory build-up prompting forest owners to stop harvesting, Forest Owners Association president Peter Weir says
“There are a lot of moving parts here.”
In response to the coronavirus outbreak the Chinese Government has extended the New Year holidays and urged people to stay at home, meaning people are not eating out, socialising or working, stopping demand for logs from sawmills.
The virus has also disrupted meat exports to China with New Zealand processors seeking extra cold storage as shipping is delayed because of congestion in Chinese ports and delays in distributing product.
Meat exporters are warning prices are likely to fall as demand weakens as people stay home to reduce the possibility of spreading the virus.
Association members are meeting this week to decide their response but Weir believes many will stop harvesting from Wednesday, laying off crews or sending them on extended leave until there is more clarity.
That will also affect logging truck drivers and ancillary services.
About half NZ’s logs are exported and more than 95% go to China.
Forest owners supplying the domestic market are not affected by events in China.
Traditionally, there is a build-up of imported logs around the time of the Chinese New Year but that is cleared in the subsequent month.
This year that wharf off-take will be delayed buts no one knows for how long because getting market intelligence out of China has been impossible as people are not working, Weir said.
“Logs have held their price until recently but now with the coronavirus we are not sure when domestic sawmilling will restart after the Chinese New Year.”
Ships are at anchor unable to unload, prompting the pause to harvesting, he said.
“The important thing is this is not Armageddon. This is not Australia with the bush fires. The trees are still out there. We are just waiting for the markets to recover.”
Compounding the uncertainty caused by coronavirus China has, in the last six months, been flooded by high-quality spruce harvested in Europe.
Successive dry winters and an influx of insects has been killing off spruce trees, prompting owners to proactively harvest before the insect challenge with those logs ending up in China.
One factor in exporters’ favour is a decline of about $10 a tonne in shipping rates.
