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.