Log prices tumble in China: don’t panic, says Peters, but he concedes it is “concerning”

A sharp fall in  the  price  which Chinese importers  are paying  for  New Zealand logs could puncture the  boom in  the forestry  trade.  In  the year  to April, the value of log  exports to  China   rose  to  $2.5bn, or  $514M  higher than in the previous 12  months.

But  Deputy  PM Winston Peters   says  there’s  no need to  panic—even though the  fall  is  “concerning”.

Radio  NZ   reports the problem stems from logs sitting on the wharves at ports in China,  and not being despatched to construction projects inland.

The latest fall, which happened in a matter of weeks, brought log prices down by 15% on a take- it-or-leave-it basis demanded by Chinese log importers.

NZ Forest Owners’ Association chief executive officer David Rhodes blamed the problem on several things, such as European growers cutting down their trees early to avoid an encroaching pest, the spruce beetle, and sending the logs en masse to China before they were infected.

A background briefing given out by the forestry industry gave more details.

Along with the spruce beetle, an added impetus is China’s Belt and Road policy, which saw 30 trains leaving Chongqing each week laden with goods for Duisburg in Germany.  Rather than return to China empty, the wagons were being loaded with logs for the journey back across Russia to China.

Other  authorities   say  the trade  war  between  China and  the US  may be  affecting  the  log trade.  It has lowered the value of the Chinese currency, making imports more expensive,  and  battered business confidence in China.  As a result, logs are piling up on the docks in China and not moving to customers inland.  That has led importers to refuse to take any more, except at a discount.

Peters told Morning Report it was concerning that the trade war between the US and China was affecting the NZ export industry.

But he  sees   the fall in  the  log  price as  reinforcing  the  need to   add  more value  at  the  NZ  end  and to  diversity  the  kind of products  the forestry  industry  offers—“and you’re going to see  that coming”.

Peters  also   argues  the  dollar  has  moved in  NZ’s favour  since  the Labour-NZ  First  coalition took  office.

That  may not be much consolation   for   the estimated 1000 people  who could be left out of work by a collapse in the price of logs.

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