Forestry Market Report March 2013

Transcription

1 Forestry Market Report March 213 In-Market Log Prices STEADY PRICES In-market log prices have remained at elevated levels this month, though have not moved up as steadily as in the months previous. This is unsurprising given the three week break over Chinese New Year. As usual port stocks have built up over the three week break, though they were building from a very low basis. Reports are that activity post-break has been good and off-take from the ports has been high. This activity has yet to settle down into a steady work rate, so it is still too early to tell whether the log consumption in China will be elevated this year. In terms of the demand for New Zealand logs the basis level of consumption is virtually unchanged though New Zealand is benefitting from a larger market share. Prices this month are above US$14/JAS for A-grade logs destined for China and have ranged as high as US$145/JAS. Prices this high are usually enough to attract wood from the Pacific North West which would often be given preference over New Zealand radiata as it is higher quality. However, in current market conditions this price may not move a significant higher volume of wood from Canada as the US housing recovery will provide strong competition. THIS MONTH IN-MARKET LOG PRICES Prices Steady EXPORT LOG MARKET More logs to China DOMESTIC LOG MARKET Increase in structural demand page 1 page 2 page 5 Bal2c Dry Index (1985 value = 1) Mar- 1 NZ Log Shipping Rate vs Bal2c Handysize Index Jul- 1 Nov- 1 Mar- 11 Jul- 11 Nov- 11 Mar- 12 Jul- 12 Nov- 12 Mar Shipping (US$/JAS) US$/JASm³ Mar- 1 Jul- 1 NZ Pinus Radiata Log Average In- Market Price Nov- 1 Mar- 11 Jul- 11 Nov- 11 Mar- 12 Jul- 12 Nov- 12 Mar NZD/USD rate BALTIC HANDYSIZE INDEX SHIPPING - CHINA Source: Agrifax/Bloomberg KS IN- MARKET KI IN- MARKET NZD - USD Source: Agrifax/Bloomberg Foreign Exchange and Shipping KIWI DOWN The Kiwi is weaker than a month after a series of negative data releases, currently sitting at US$ Most importantly is the drought weighing on the currency as estimates are made of the cost of drought reaching into the billions. The kiwi also fell recently as Chinese import data was weaker than expected. With regards to the shorter working month because of the Chinese New Year celebrations economists predicted a drop of 8.5%, though this turned out to be 15.2%. The president of the European Central Bank, Mario Draghi, has been more positive lately, prompting the Euro to rise against the kiwi. The reserve bank of New Zealand has stated again that the official cash rate will remain unchanged for the rest of 213 which added to the dollar s decline. The dollar has also fallen to below AUD$.8 this week which should aid the lumber trade into Australia. SHIPPING COSTS STILL LOW Shipping costs have bumped up slightly for the first time since September last year due to an increase of demand for ships worldwide. The Baltic dry index has risen by 1% in the last month, and the Handysize index is up by 12%. Much of the added demand is coming for grain carrying ships, which can also cross over into logging. This has resulted in higher prices for New Zealand logging exports to the Asian markets in some circumstances, but in general, daily hire rates have remained at the same low level. Ph 8 Ph l l Fax Fax l l info@nzxagrifax.co.nz l l Pg 1

2 Export Log Markets NEW ZEALAND EXPORTS New Zealand exports of around 9, m³ were good for January, as a result of the continued strong demand from China. There was 571,583 m³ exported to China in January, 85% higher than the 5 year average for January. Prices have continued to move slowly upwards. There was less movement from February to March as there has been a break for the Chinese New Year but at-wharf-gate prices for A-grade logs are up by around 1%. The New Zealand weighted average is now NZ$11/tonne, though prices out of Tauranga, where most of New Zealand s logs are exported from, have reached $118/tonne. In the last month New Zealand prices have been helped by shipping costs staying low and the dollar dropping by around 2 cents more than in-market prices. There are also reports of the dry weather aiding logging, though in some areas logging has been restricted due to fire risk. The weather may also have an effect on tonnes to volume conversion rates. CHINA China s demand for New Zealand wood continues to be strong and appears set to continue this year. The market fundamentals point towards more New Zealand wood being exported to China, competitors Russia, Canada and the US are supplying less, port stocks are low and overall consumption is remaining level within China. So rather than an increase of demand in China, it is a structural change that will see New Zealand get more of the market share, if the US housing recovery proves to be as predicted. After a slight slowdown in China s economic growth in 212 the International Monetary Fund is predicting GDP growth of 8.2% during 213. This should continue to support use of timber as the Chinese leadership looks to invest in infrastructure domestically to stimulate some of this growth. A-grade logs have been in high demand and are fetching up to $11/JAS at-wharf-gate in the North Island. The increase in demand last year for pruned export logs has continued and Thousands m³ NZ Pinus Radiata Log Exports Jan- 13 CHINA KOREA JAPAN INDIA WORLD CHINA - Coniferous Log Imports (Calendar Year) x 1m³ Total Imports 5 Year Average x 1m³ USA & Canada x 1m³ NZ & Australia x 1m³ Russia 5 year average year average year average Ph l Fax l info@nzxagrifax.co.nz l Pg 2

3 Export Log Markets cont export pruned prices are currently still at very high prices at around $145/tonne, higher than was seen during 212. PACIFIC NORTH WEST US log exports to China were larger than normal for January, though the total for 212 was well down on 211. This is likely a result of the strengthening of the domestic market for US logs as housing recovers. US exports to China were down 26% and total exports were down by 15%. This means that the proportion of US exports that go to China has dropped by 13% from 211 to 212, as a result of strengthening markets elsewhere. Canadian exports to China have, however, remained largely the same from 211 to 212. The US housing recovery only started to increase towards the end of 212 so it is possible that this effect is yet to have a large effect on exports and will be seen in the first half of 213. In British Columbia political pressures are likely to see export taxes raised on logs in an effort to rebalance the export log trade with domestic processing to create more jobs in Canada. Other Asian Markets 14 Japan 25 South Korea x 1m³ x 1m³ year average year average Market SHARE - Rolling Quarter Totals China Log Imports (3 month average) Jan mths 1 year 2 years Russia 14% 38% 4% 45% New Zealand 35% 34% 26% 28% USA/Canada 17% 2% 23% 2% South Korea Log Imports (3 month average) Jan-13 6 mths 1 year 2 years Russia 2% 2% 3% 3% New Zealand 64% 47% 61% 56% USA/Canada 29% 45% 3% 35% Domestic Log Market MORE STRUCTURAL DEMAND The domestic log market is looking towards contracts for the next quarter and increases in most log grades are expected. There are already signs of the increase as L35 prices around the country have been raised due to the high demand for A grade export logs to China. There is still strong demand for pulp wood in the central North Island, and it seems the closure of one of the Norske Skog paper machines will not have much effect on supply and price for pulp logs. Construction activity is improving both in New Zealand and in the US which will add to the local demand for wood fibre. This is likely to support price rises in structural and framing grade logs, and a price rise has already been seen by some in Canterbury. Appearance grade logs will be in higher demand to supply lumber to the US market, which continues to show rapid increases in lumber prices, though demand for New Zealand lumber is not yet increasing as rapidly as US domestic products. Ph l Fax l info@nzxagrifax.co.nz l Pg 3

4 Domestic Log Market cont Pruned Log Prices 11 1 Structural Log Prices NZD/tonne 11 9 NZD/tonne Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5 yr ave Source: Agrifax 5 yr ave Source: Agrifax Lumber Markets NO BIG INCREASE TO THE US Exports of lumber in January were about half of that in December, though this is normal for this time of year. The average drop off in the past 5 years has been 48%. Exports were, however, down by 21% on January last year. There were large drops in year-on-year exports going to South East Asia and China, despite China importing a January record of 1.2 million m³ of lumber. The largest increase of supply to China was originated from Canada. Canada supplied 559,327 m³ of lumber, which is more than double the January average from Canada. Exports to the US in January were very similar to January in 212. The increase in prices in the US as shown in the Crow s Construction Material Cost Index (CMCI) are not yet being matched by increases in imports of New Zealand lumber products. Exports are also still well below the 5 year average, and 212 total exports of lumber to the US was the lowest total exports since 1996, though just 1% lower than 211. Historically lumber exports to the US have followed the CMCI closely so a pick-up in exports could be expected, though new markets in Asia may lessen the amount of wood going to the US. The CMCI has increased 55% year-on-year, though for Radiata pine number 2 shop lumber, which a lot of New Zealand wood is sold as, the increase has been a more muted 9%. During late February and March the demand for finished clearwood goods in the US has strengthened. Due to increased construction activity in New Zealand the demand for structural and framing lumber is increased. In particular the Christchurch rebuild is demanding more lumber for housing construction. 1.6 Australian Mouldings Imports - NZ 6 USA Lumber Imports - NZ vs. Crow's Construc>on Materials Cost Index 45 x 1m³ x 1m³ year average year average CMCI 213 CMCI China Lumber Imports x 1m³ USA NZ Chile 5yr average Ph l Fax l info@nzxagrifax.co.nz l Pg 4

5 Building Activity NEW ZEALAND ACTIVITY STRONG January housing consents in New Zealand were up by 22.3% on January 212. This is a reflection of the increased demand for housing in Canterbury and Auckland. Canterbury housing is now in recovery from the earthquake and consents are increasing almost every month. House prices in these regions are also moving up quickly, with Christchurch average prices up 8% and Auckland prices up 9% in the year to February 213, building will be stimulated in these areas. NZ government is also looking at making changes to the resource management act that will make building cheaper and likely increase construction activity. The US housing market is also still increasing steadily and starts are up 23.6% from January 212 to January 213. Though they fell from December to January, building permits were up in January to a four and a half year record of 925, permits at an annualised rate which means optimism is still around for the building market. Australian building approvals fell 2.4% in January and despite being above January 212 are below expectations and are the second consecutive month of falls in building approvals. Japanese wooden structured building starts fell 14% in January after a strong 4th quarter to end 212. Starts usually fall in January and they are still currently 7% higher than the January 5 year average. x1m³ New Zealand Building Consents Issued by Floor Area 5 Year Average NZ Non- ResidenAal NZ ResidenAal NZ Total 212 Source: StaAsAcs NZ 16 Australian Dwelling Approvals US Housing 12 x x Year Average Source: ABS Starts 5 Yr Av Starts 213 Approvals 213 Approvals 212 Starts 212 Source: USCB Carbon Markets EUROPEAN CREDITS DOMINATE NEW ZEALAND MARKET Unit This Month Last Month 3 Months Ago 6 Months Ago 1 Year Ago New Zealand Units (NZ$/t CO²) European Union Allowance ( /t CO²) Carbon Emission Reduction ( /t CO²) Pricing taken around the 12th of the month (Source ICE. Point Carbon and Carbon News) FOREST OWNERS HOLD ON TO CREDITS NZU prices are currently maintaining their premium over CERs and ERUs as there are very little available for sale. Forestry owners are happy to hang on to credits taking a long term approach in the opinion that prices have to eventually trend back upwards. The only NZUs available are from forest owners swapping into less expensive credits to meet emissions liabilities at harvest. For NZUs, the only credit available for New Zealand emitters after 215, the most important factor in how prices move from here is how and when the auctioning process will occur. Due to the scant supply without large increases in the volume traded, there will be a large spike in prices if no auctioning takes place before 212 though it is very likely that supply from forestry would increase in that case. The government will control prices by auctioning off NZUs. Currently though there is no framework for the auctions to take place which is creating uncertainty about when they will occur and the quantities that will be available at auction. This makes long term forward contracts very difficult to quantify currently. Returns for forestry emissions and sequestrations are due at the end of this month, which will allow credits to be allocated for forest growers, or calculate the liabilities faced. The returns are compulsory for those registered in the emissions trading scheme. In European carbon trading schemes the European Parliament s industry committee voted to avoid taking a large portion of the credits available off the market to re-release them in years down the track when demand was higher. It is, however, looking to vote on a plan to consider limiting the carbon allowances for emitters and the potential for introducing a price floor for carbon. Ph l Fax l info@nzxagrifax.co.nz l Pg 5

6 Log Indicator and Summary INDICATOR STEADY The log price indicator remains at 9 this month as the break in activity in China has meant not much movement in export log prices. There have been almost no changes within the categories that make up the indicator the only significant change being a two point rise in the South Island unpruned category. This is due mostly to an increase in the price of structural logs in Canterbury and an L35 price movement will also have had an effect. The last month has seen export prices steady at high levels, low shipping costs and a slight drop in the exchange rate. This will be keeping exporters optimistic about the first half of 213 as indications appear to be that it will continue. Domestic log prices have been steady though slight rises in some areas has indicated that when prices are negotiated for the second quarter there will likely be an upward correction to match export prices. Data Table Latest Last month m/m change 6 months Year y/y change 2 years KI % % 144 KS % % 15 A % % CFR in-market log prices $US/JASm³ China 31 3 % % 4 South Korea 3 3 % % 41 India % % 73 Shipping $US/JASm³ from NZ US/NZD % %.7427 Forex US % % 566 Australia % % s approved NZ % % 312 Japan 4,93 4,78-14% 4,92 3,88 7% 3,889 s m² Building activity China 771,62 87,82-5% 733, , % 73,157 Japan 44,275 56,549-22% 73,647 53,131-17% 64,151 South Korea 227, ,931 16% 178,47 187,731 21% 167,433 Log import volumes from NZ m³ Logs 896,214 1,25,258-26% 1,39,63 733,598 22% 717,82 Lumber 91, ,319-49% 183, ,217-21% 85,379 NZ exports (m³) Logs 62, ,745 67% 46, ,6 129% 32,735 Lumber 639, ,49-1% 56, ,524 6% 611,68 Chinese imports from PNW (m³) Logs 723, ,179-21% 955, ,91-15% 1,48,942 Lumber 347,25 452,44-23% 514,819 38,555 12% 365,356 Chinese imports from Russia (m³) Report Editor: Ivan Luketina Phone: ; ivan.luketina@nzx.com This report is published by NZX Agrifax Limited (NZX Agrifax) for your information only. This report does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or financial product. No part of this publication may be redistributed or reproduced in any form or by any means or used to make any derivative work without written permission from NZX Agrifax. NZX Agrifax (including its group companies and each of their directors, officers, employees and contractors) shall not be liable (except the extent strictly required by law) for the use of the information contained in this report, however arising. This report is published with due care and attention, but NZX Agrifax and its group companies accepts no liability in relation to the completeness, accuracy or timeliness of this report and its contents. NZX Agrifax Limited(c) 211 Ph l Fax l info@nzxagrifax.co.nz l Pg 6