Sawmills in 'vicious cycle' as log prices soar

CATHERINE HARRIS
Last updated 05:00 07/02/2014

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Sawmillers say an export-led shortage of logs for the local market is hurting them and could potentially raise the price of building materials.

Timber Industry Federation director Kevin Hing said demand from China for New Zealand logs is so strong, local millers were finding it difficult to match the price and missing out on supply.

Members were watching logging trucks drive past their gates to the ports when they could not get enough logs themselves.

"I wouldn't say it's the cause of the demise of the sawmills that have closed over the last five or six years, but it is an issue."

Last year, New Zealand processed just under half the amount of logs it exported. It processed 7 million cubic metres of logs while 16 million cubic metres were sold overseas, 70 per cent to China.

Log prices are at a two-decade high, according to this week's ANZ Commodity Price index, jumping 25 to 30 per cent in the last two years.

Labour party leader David Cunliffe and other party MPs were planning to meet with Northland forestry representatives this week to "road-test" the party's forestry policy.

Party forestry spokesman Shane Jones said it was "madness that in a country with large pine forests, there is a shortage of logs".

"Those logs are exported to China to be processed cheaply and often imported back to New Zealand for the Christchurch rebuild. That is completely idiotic, especially when New Zealand sawmillers mostly pay the same price as overseas buyers."

However neither Jones nor Hing blamed local forest owners for taking advantage of good export prices. "We would never say all logs have to be processed onshore - we know it's not a viable proposal and we are not into regulating exports either," said Hing.

"But what we would like to see is some commitment from log owners to the local processing industry."

Wood Processors Association chief executive Jon Tanner said big forest owners were acting "perfectly rationally" in selling their logs to the highest bidder.

"The problem it creates for the local processors is, we're only getting short-term log contracts. We need to invest in our industry and in order to do the large-scale investment we need to do to become more competitive, we need to have longer term surity of log supply. So we're in a vicious cycle."

Despite the high log prices, Tanner said it did not appear to be raising the cost of timber, which had stayed fairly static for two decades.

But Martin Verry, owner of Rotorua's Red Stag Timber, said sawmills were unlikely to absorb the cost for much longer.

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"It's happening now," he said.

"When things were tighter in the building industry, the sawmills just had to absorb that because of competition and some went under . . . Now there's more demand, there's more ability to maintain margin and pass on log price increases."

Some 120 people were laid off after Rotorua's Tachikawa Forest Products sawmill went into receivership in October.

- Business

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