Monthly Reports - December 2022
A review of the domestic sawmilling scene very much confirms lumber sales are off the boil. In fact, most spoken to paint a picture of reduced sales and lumber prices now a common talking point for all the wrong reasons from a forest grower perspective.
Recent news of the Eaves Valley Sawmill in Nelson having a 1month plus shut down is another sign of a domestic lumber scene firmly coming off the boil. But direct competitors are quite happy there is effectively 1000+ cubic metres per day of 100 x 50 framing lumber not entering a now constrained NZ housing market.
As I suspected back in the middle of the year, when lumber usage in NZ looked like Christmas had come early, sawmill order books were dominated by some or the larger end users scatter gunning orders to see who could supply first.
As soon as new house starts began to slow, orders were being filled and what looked like a busy as for the foreseeable, changed in to an oops. Now some sawmills owners are sitting eagerly waiting for the new order phone to ring. Alas it looks like it might be time to consider more leisurely past times including giving the boat a hose down and see if it still works.
In China, relaxation announcements by the Government around 10th December of a change in COVID management strategy has bought more positivity to the market. An amazing turn of events with the China boss effectively bowing to the will of the people.
Folks, do not under estimate the impact of what happened there. For a country that lives under a rule absolute leadership structure, where the boss is the boss and not to be challenged, to see policy shifts based on a clearly unhappy populace is a major cultural shift. In my view this is another example of how cell phones can move mountains.
At the same time, the China Government has announced a staggering suite of economic stimulus packages with a focus on bad dept retirement. A, lets wipe the slate clean, stroke of the pen wiping close to NZ$650bil off finance sector overdrafts, signals a pretty significant shift in economic stimulus. Thus far, we don’t see infrastructure investment being announced, but most believe that will be a component of stage two.
The net consequence of these major changes has lifted the mood of the softwood market with most commentators suggesting the scene is set for a much more positive Q1 2023.
At present we are seeing daily usage rates across the eastern seaboard stick stubbornly around the 60,000 cubic metres per day. But I have commented to many, for a country that has had 11 of its largest cities under a strict COVID lockdown regime, that much lumber being consumed every day but Sunday is not too shabby.
Erstwhile shipping companies, the poor soles (not) continue to scour the planet to find cargoes which remain insufficient to allow them to be busy. This, combined with continuing reductions in oil prices is giving them little leverage at the daily hire rate negotiating table. The easing of shipping rates has slowed but remains sufficient to ensure NZ forest growers still get a reasonable price at the wharf gate NZ.
In China the air of positivity has seen CFR prices halt their recent slide with some commentator’s suggesting potential price increase for January/February sales. The key here will be to ensure shipping companies do not line up for a slice of the action.
Meanwhile the NZ dollar has responded to a weaker US$ keeping importers happier but exporters frowning. Rather strange don’t you think, that prices at the NZ fuel pump remain stubbornly high despite about an 8% tick up in exchange rate. Don’t worry folks, Jacinda will make the fuel companies toe the line (Joke).
To our many readers welcome to 2023. Don’t let the sods get you down. Living in Godzone is still a privilege.
As always People, please remember the thoroughly important message, “it remains, as always, fundamentally important, the only way forward for climate, country and the planet, is to get out there and plant more trees”!