New Zealand Sees Surge in Demand for Pruned Logs Amid China Slump

New Zealand's forestry industry is experiencing a significant shift as international demand for pruned logs reaches an all-time high, driven by changing market dynamics and a decline in Chinese demand for unpruned logs, with forest owners and investors adapting to prioritize pruning and diversify income streams through carbon credits and timber sales. This description focuses on the primary topic of the shift in New Zealand's forestry industry, the main entities involved (forest owners, investors, and China), the context of changing market dynamics, and the significant actions and implications of prioritizing pruned logs and diversifying income streams. The description provides objective and relevant details that will guide the AI in creating an accurate visual representation of the article's content, such as images of forestry operations, logs, and trees, as well as potential graphics illustrating market trends and growth rates.

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Aqsa Younas Rana
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New Zealand Sees Surge in Demand for Pruned Logs Amid China Slump

New Zealand Sees Surge in Demand for Pruned Logs Amid China Slump

New Zealand's forestry industry is experiencing a significant shift as international demand for pruned logs reaches an all-time high, despite export log prices in China hitting an 8-year low. John Turkington, a seasoned forest manager with over 30 years of experience, has reported prices for pruned logs sitting firmly at $200 per tonne or higher, depending on the market.

Why this matters: The shift in demand for pruned logs has significant implications for New Zealand's forestry industry, highlighting the need for forest owners to adapt to changing market dynamics. This trend could also have a ripple effect on the country's economy, as the forestry industry is a significant contributor to New Zealand's GDP.

Turkington, owner of Manawatū-based John Turkington Forestry, believes that forest owners should prioritize pruning plantation forests due to the substantial price difference between pruned and unpruned logs. < i>"There's always been a market for pruned logs and there's been relative stability over an extended period of time. But if you go back the last three or four years, the price has increased and the differential between the pruned logs and the unpruned logs is getting greater," Turkington stated.

China, which had been a strong market for low-value, unpruned logs for 15 years, is no longer the case, with export log prices currently in the early $100's per tonne. "Things are fundamentally changed in my view, in China. And this is where we are going to be at," Turkington remarked. Many harvesting gangs in China are currently without work due to the low demand for unpruned logs.

In contrast, pruned logs are in high demand, with a stable growth area. The added value of pruned logs is that they are turned into products in New Zealand, creating a bonus for the local economy. Turkington acknowledges that sheep and beef farmers with wood lots may not have the funds to prune their trees, but suggests they could plant fewer trees and prioritize pruning.

Roger Dickie New Zealand Ltd, a company that has advocated for forestry investment for 50 years, is educating Kiwis about the benefits of forestry and carbon investment. The company has launched the Awatea Forest Fund, allowing New Zealanders to invest in forestry and carbon credits from as little as $20,000. The fund has delivered solid results, with annualized returns of 11.8% since inception.

"Forestry's storage of carbon, and the ability to measure that, gives us the opportunity in the fund to sell carbon as well as harvest forests. This makes for a dual income stream, another string to our bow – diversified income coming from the same investment," said Jeff Dickie, Director of Roger Dickie New Zealand Ltd. The fund aims to purchase other properties at favorable prices to reach a total of 5000ha, with a focus on diversifying income streams through carbon credits and timber sales.

New Zealand's plantation forests offer unmatched growth rates, developed timber infrastructure, and proximity to the fastest-growing economies, making them an attractive investment opportunity for foreign investors. The country is seen as one of the safest, politically-stable places to invest, with 70% of New Zealand's plantation trees in overseas ownership, according to the Ministry for Primary Industries (2013).

As log inventories pile up and orders from China slow, awaiting prices to hit rock bottom, the forestry sector must find new international markets to reduce its reliance on China. Several New Zealand sawmills producing housing timber are temporarily halting production due to the slowing construction sector. However, the surge in demand for pruned logs offers a glimmer of hope for the industry, with Turkington emphasizing the need for forest owners to adapt to the changing market dynamics.

Key Takeaways

  • International demand for pruned logs reaches all-time high, prices at $200/tonne or higher.
  • China's export log prices hit 8-year low, shifting demand to pruned logs.
  • Pruned logs create added value for local economy, turned into products in NZ.
  • Forestry investment opportunities emerge, with 11.8% annualized returns since inception.
  • NZ's forestry sector must adapt to changing market dynamics, diversify income streams.