Monthly Reports September
September 2022.
Further good lifts in at wharf gate log export prices have been the order of the day in September. As in August, the increases are primarily the function of reducing shipping cost rather than log price movements in the market.
Domestic sales remain strong and demand high with a small lift in construction sector activity as the days lengthen and get warmer. This is adding a sense of vibrancy as order books start to replenish following the winter blues. There is increasing talk of domestic log price movements as trucking companies and loggers move costs upward to cover Government extravagances, villa vie-inflation.
The fundamentals across the China market remain weak. Daily consumption across the Eastern seaboard is struggling to get above 60,000 cubic metres per day compared to 80,000 this time last year and 90,000 the year before.
Despite lower consumption, the overall inventory has dropped to about 4.4 mil cubic metres, down 500,000 cubic metres on last month. This is essentially a reflection of reduced deliveries from NZ which now comprise in excess of 70% of all softwood supply. This is about the only positive in the market with commentators suggesting we are in for reductions in sales prices for October contracts.
The reasons for a likely price drop rests with the difference between the value of NZ logs compared to wholesale prices in China. As at mid-September there was up to a US$10 per cubic metre gap meaning traders continue to print negative margins. Much of the reason for that is the weakening RMB China currency against the Green back as we trade all logs up to China in US$.
Traders have now been making trading losses for 5 months and right now the margin is wider than normal. Thus, there are clear signals of an imminent drop in CFR prices for NZ logs in October. CFR means the cost of logs including freight delivered to China in US$ per cubic metre.
Back in good old Kiwi land, our dollar value has hit a 10 year low against the Greenback with most commentators suggesting we will continue to travel the downhill journey for the foreseeable. This will help soften the blow for NZ Forest Owners as lower exchange rates adds value to exports.
Bottom line for NZ Forest owners means the current A grade market lead indicator sits at $115 – $125 per cubic across South Island ports, the variation being a function of port costs. This then puts us back into the top 80 percentile of the market of the last 2 years, unfortunately, it seems, unlikely to last.
As with all NZ commodities at the moment, market uncertainties prevail with demand all over the place and shipping companies providing no certainty as to future daily hire rates. During September, we have seen weekly US$3 – 4 per cubic meter moves netted back to daily hires.
Many NZ ports face major challenges, or at least it would seem, more than what used to be normal. Delayed arrivals, slow discharge rates, slow load rates and staff shortages are combining to see more ports heavily congested and vessels waiting to come in.
For those living near ports, that is why you will be seeing multiple vessels parked the mandatory 4 km+ off the coastline waiting their turn.
Our trucking companies rate a mention this month for all the wrong reasons. Whilst motorists many might complain about the number of trucks on our roads, there would be a lot more if there was anyone to drive them! In Canterbury, I know of 4 medium to large trucking companies looking for a total 49 drivers.
The lack of drivers also impacts port operations where we simply cannot get enough to take the logs from yards to ships side. Given we simply don’t have the teeth in Government leadership to make some Kiwi’s go get work, importing those that want to work would seem to be the only solution.
As always People, please remember the thoroughly important message, “It remains, as always, fundamentally important, no matter the challenges, the only way forward for climate, country and the planet, is to get out there and plant more trees”!
Allan Laurie.
Laurie Forestry.
