Log price collapse

China demand plummets, small contractors worst hit

China demand plummets, small contractors worst hit

File photo

Forestry and logging companies here are braced to “ride out the storm” as plummeting log prices hit Gisborne operators hard.

More than 31 percent has been wiped off the export price of A Grade logs to China in just the past three months.

Collapsing demand in China for New Zealand logs, combined with economic effect of the trade war between China and the United States have been pointed to as two of the main reasons behind the price fall.

In Gisborne the situation is further compounded by the ongoing “log jam” at Eastland Port.

Eastland Wood Council chief executive Kim Holland said the price fall was a concern for all, “particularly on the back of the weather challenges we have had in Gisborne over the past three months, with delays in getting ships into port and loaded”.

“Everyone is monitoring the situation, but we have probably been hardest hit here in Gisborne, with the impact felt across all sectors of the business. Companies have been faced with the challenge of having harvested logs but being unable to get them out in a timely way,” she said.

Companies and contractors were monitoring the situation day by day, and trying to ensure their contractors and crews continued to work, “either with restricted hours of operation or on quotas’.

“But in the case of small wood lots, the work has come to a halt,” Ms Holland said.

“The industry is commodity-based so subject to international market fluctuations, and at present there are a number of factors influencing the drop in log prices.

“For the past three years we have had a strong market, and on the back of maturing forests and an increase in harvesting, our region has seen strong growth.

“We now need to tighten our belts and prepare to ride this out, over the next three months.

Working to minimise the impact, 'ride out the storm'

“The forest industry recognises that our people are our biggest asset and communication is key, as we are all working to minimise and mitigate the impacts across the whole supply chain to keep people employed, and ride out the storm,” she said.

Eastland Port general manager Andrew Gaddum said the sudden drop in log prices had had no discernible effect on port operations at this stage.

“Any downstream effect will take some time to appear on the port but in time there will be an impact as current stocks are cleared.”

“As of today, our operations are more affected by the continuing disruptive ocean swells than anything else.

“We continue to suffer from the worst succession of swell events in many years,” Mr Gaddum said.

The NZ Herald today reported Forestry Minister Shane Jones saying the latest developments in the sector were “disruptive” and “tumultuous”.

Mr Jones said he planned to meet with industry leaders this week to “identify the things that the government can and can’t do”, the NZ Herald reported.

Speaking on Radio New Zealand, Forest Industry Contractors Association president Ross Davis said the problem in China reverberated down to rural New Zealand, and particularly smaller contractors.

“There are about 200 (small) contractors, with an average of four to six people in each crew, plus contractors to fix their machinery and sell them spare parts, so it has quite a big impact,” he told RNZ.

“The other effect is that there will be a lot of logging trucks parked up.

“Those guys have all got mortgages and bills to pay as well.”

Forestry and logging companies here are braced to “ride out the storm” as plummeting log prices hit Gisborne operators hard.

More than 31 percent has been wiped off the export price of A Grade logs to China in just the past three months.

Collapsing demand in China for New Zealand logs, combined with economic effect of the trade war between China and the United States have been pointed to as two of the main reasons behind the price fall.

In Gisborne the situation is further compounded by the ongoing “log jam” at Eastland Port.

Eastland Wood Council chief executive Kim Holland said the price fall was a concern for all, “particularly on the back of the weather challenges we have had in Gisborne over the past three months, with delays in getting ships into port and loaded”.

“Everyone is monitoring the situation, but we have probably been hardest hit here in Gisborne, with the impact felt across all sectors of the business. Companies have been faced with the challenge of having harvested logs but being unable to get them out in a timely way,” she said.

Companies and contractors were monitoring the situation day by day, and trying to ensure their contractors and crews continued to work, “either with restricted hours of operation or on quotas’.

“But in the case of small wood lots, the work has come to a halt,” Ms Holland said.

“The industry is commodity-based so subject to international market fluctuations, and at present there are a number of factors influencing the drop in log prices.

“For the past three years we have had a strong market, and on the back of maturing forests and an increase in harvesting, our region has seen strong growth.

“We now need to tighten our belts and prepare to ride this out, over the next three months.

Working to minimise the impact, 'ride out the storm'

“The forest industry recognises that our people are our biggest asset and communication is key, as we are all working to minimise and mitigate the impacts across the whole supply chain to keep people employed, and ride out the storm,” she said.

Eastland Port general manager Andrew Gaddum said the sudden drop in log prices had had no discernible effect on port operations at this stage.

“Any downstream effect will take some time to appear on the port but in time there will be an impact as current stocks are cleared.”

“As of today, our operations are more affected by the continuing disruptive ocean swells than anything else.

“We continue to suffer from the worst succession of swell events in many years,” Mr Gaddum said.

The NZ Herald today reported Forestry Minister Shane Jones saying the latest developments in the sector were “disruptive” and “tumultuous”.

Mr Jones said he planned to meet with industry leaders this week to “identify the things that the government can and can’t do”, the NZ Herald reported.

Speaking on Radio New Zealand, Forest Industry Contractors Association president Ross Davis said the problem in China reverberated down to rural New Zealand, and particularly smaller contractors.

“There are about 200 (small) contractors, with an average of four to six people in each crew, plus contractors to fix their machinery and sell them spare parts, so it has quite a big impact,” he told RNZ.

“The other effect is that there will be a lot of logging trucks parked up.

“Those guys have all got mortgages and bills to pay as well.”

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Angelica Perduta, Christchurch - 12 days ago
Why can't we have our own sawmills to turn the logs into beams for our own construction industry? It would save on all the shipping, employ more people and get houses built too.

Dein Ferris - 12 days ago
On the bright side, could save millions on port development and hundreds of thousands on roading. Not good for those working in the industry, but sadly a fact of life when your eggs are in a basket of which you have no control.

Leon Wood, Taupo - 11 days ago
I knew this was going to happen three months ago.

Andrew Moores - 11 days ago
Why not build kit homes with all these resources?

Meng Foon - 9 days ago
Gisborne does have a cluster of sawmills that add value to the log. We hope that they will be able to process more and create more jobs for our people. ECT is an investor in the wood cluster and the Government also putting in $19.5m is a great boost to the wood cluster.
Let's hope it works out as the wood industry is still driven by market forces.

Winston Moreton - 6 days ago
Easy to agree with ECT trustee Meng Foon on this one. Of course, making use of the logs locally is preferable to exporting them through the ECT-controlled port. Ironic that ECT should also be in support; but using household electricity money in what is a high risk investment does nothing to reduce the hardship caused by ECT's profiteering from power bills.

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