6.1 Logs and Lumber
Logs
The production of logs not intended for domestic processing all go to export, and therefore the overseas demand for New Zealand logs (discussed below) drives production. Logs that are not exported are inputs to other processes and so not counted under log production.
There was a large volume increase in log exports for the year ended March 2002 mainly because of large increases in a few key markets. For example, Korea jumped 44% to 4.26 million cubic metres and China surged a massive 128% to 1.01 million cubic metres, both on the back of increased economic activity. The provisional result for the year to March 2003 shows growth of 9.5% to 8.08 million cubic metres. Growth in export volumes in out-years (2003/04 to 2007/08) is based on economic growth in our main markets, particularly Korea at more than 5% per year, and on an expanding China market.
The average all-grades log price (in NZD) for the year ending March 2002 fell sharply, coming off an unusually high price in 2001. The high 2000/01 price (the highest since 1996) was partly exchange rate fuelled and partly a correction after significant falls during the 1997/98 Asian crisis, as Asian consumption increased with the recovering economies. The provisional result for log export prices to March 2002/03 shows a further fall of 4.8%.
A large drop in log export prices is forecast for 2003/04, due to the appreciating exchange rate (+8% on the USD). This pulls down the out-year forecasts, which are built around year-on-year percentage changes. Prices in USD terms are expected to rise slightly (around 2-3% per annum), with export prices being depressed by the stronger NZD.
Lumber
Lumber production for the year ending March 2003 is provisionally estimated to be 11% up on the previous year, reflecting increased overseas demand for New Zealand lumber (see below). Out-year growth is based on modelling domestic consumption as a factor of population forecasts, plus export volumes.
An increase in lumber export volumes of 7.5% between 2000/01 and 2001/02 was influenced by a rise in exports to the US, which grew by 40% and China, up 44%, due largely to increased acceptance of radiata pine in both countries, particularly in the US market for mouldings. The provisional result for lumber export volumes in the year to March 2003 shows a further large increase driven by increases in some key markets. For example, in the December 2002 year (over the previous December year) volumes to the US increased 9%, Australia 19%, and China 51%; this compares with a 14% rise in total export volumes. Provisional result for March year 2003 is for 1.86 million cubic metres (up 13% on the previous March year). This growth demonstrates the increasing market acceptance of radiata pine lumber and improved market penetration.
Out-year volume growth is driven by economic growth in target markets, e.g. Australia at 3% to 4% per year and the US at over 3% per year. The higher start point at March 2003 (because of the increased estimated result for 2002/03) for year-on-year percentage changes also lifts export volume estimates.
Provisional results for the March 2003 year show lumber export prices falling slightly against the previous year, at $496 per cubic metre (average, all grades). Export prices are forecast to fall by 19% in 2003/04 due to a much stronger NZD. Over the outlook period, prices in USD for lumber are expected to rise in the range of 4 to 5% per year, but export price rises will be tempered by the strength of the NZD.
Contact for further information:
John Eyre
Phone: (04) 498 9827
Email: john.eyre@maf.govt.nz
