NZ Forestry ‘struck to our knees’ by weak post-Chinese New Year demand

The forestry sector is on its knees because orders from China have slowed as buyers wait for prices to hit rock bottom, a forestry consultant says.

New Zealand log inventories have piled up due to very weak demand from China in recent months, after a much more frugal Chinese New Year period than expected.

New Zealand exporters have been sending around 60,000 cubic-metres of logs to China each day since Christmas time, but China’s daily use is struggling to meet 40,000 cubic-metres – resulting in very high inventories.

Forestry consultant Allan Laurie said by mid-March there were no major sales contracts signed with Chinese buyers.

Laurie said the last three weeks have been very sobering for the industry – as the market took a significant downturn, while New Zealand stocks mounted.

“If you over-supply to such a degree, then you’re going to see impacts on price or the sawmill door closing because they just simply do not want any more wood, and that’s exactly what’s happened in China.”

Laurie said the writing was on the wall at the start of March when it became clear consumption rates following the Chinese New Year period were not lifting back up to levels the market had hoped for.

“We should have reacted sooner in New Zealand to curb production, but unfortunately we’re now masters of our own destiny,” he said.

“And sawmill owners in China have basically folded their arms and are now waiting to see where the price falls to before they’ll accept new orders.”

New Zealand forestry businesses and contractors were coming to a stand-still, while uncertainty around pricing and demand remained, he said.

“It’s catastrophic because, of course, we work for private forest owners and those owners want to be assured of a reasonable price and right now we can’t do that.”

Laurie said lots of suppliers, harvesters and transport companies were either parked up or in the process of parking up.

“One would hope that we might find solutions and maybe we’ve been struck to our knees hard enough this time that there would be at least some consensus or an industry resolution as to a go-forward plan that would be far better than what we have at the moment.”

He said the country’s 18 or so exporters should come together and sign collective supply agreements to constrain supply when demand was low – to help maintain prices.

According to the news on Radio New Zealand

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