New Zealand log exporters are bracing themselves for supply chain problems in China due to the outbreak of coronavirus. Some forest owners are already reducing their harvesting rate. Regrettably this will have an immediate effect on harvesting crew employment.
The New Zealand Forest Owners Association says that the extended Lunar New Year public holiday makes it difficult to know what is going to happen when sawmills in China restart. Association President Peter Weir says he understands that log ships continue to be unloaded, but he says we need to wait to determine what the offtake volume of logs might be after the traditional New Year break. There is industry concern that if the virus were to infect more people in coastal towns and cities then access to Chinese ports could be restricted with little warning.
China is by far the largest and most important market for New Zealand’s export logs and by value New Zealand earns half its export income from China. The coronavirus outbreak comes on top of new supplies of softwood into China, due to the salvage of insect and windstorm damaged spruce forests in Central and Eastern Europe. Warmer winters and longer summers have led to very high rates of spruce beetle infestation with large areas of forests being clear-felled and salvage logs railed and shipped to China.
In the coming year, exports of bushfire damaged pine logs from Australia also have the potential to increase the softwood supply to China. Peter Weir says, “We know from our embassy in Beijing that the Chinese central government authorities are doing an excellent job of both trying to protect people from the spread of coronavirus and at the same time ensuring economic activity is sustained. But nobody knows how long and widespread the coronavirus outbreak will be and what effect that will have on any medium-term trade.”
“We are most concerned about the effect on the harvesting workforce in many regions of New Zealand which depend on log exports. Forest owner capacity and circumstances vary hugely. Those owners who supply domestic sawmills will be largely unaffected, but the domestic market can only take less than half the current annual harvest and not all log grades.”
“Stockpiling logs is not a good option, because the logs deteriorate, especially at this time of the year, and unrestrained supply from here is a market threat. I should say that it is possible that the disruption will turn out to be brief, as it was in mid-2019. It is entirely possible that the Chinese timber processing and construction industry will return to normal and the inventory stored at ports will diminish over the next few months as it normally does.”
“In the meantime, we hope that our valued sawmilling industry customers, often small family businesses, in and around port cities in China, are not impacted by the virus. Peter Weir says the industry leadership is closely working with MPI and Te Uru Rākau, supported by the New Zealand embassy in Beijing on the rapidly evolving situation.
The CEO for the Forest Industry Contractors Association, Prue Younger is confirming that contractors being told to halt felling trees has come as a complete surprise. “The industry is reeling a bit as you would expect,” Prue Younger says. “Although market prices were on their way down again, the coronavirus impact has made this a very complex situation. It’s important that we’ll be working with forest owners daily and ascertain the extent of this fallout and how long our crews might expect to be out of work.”
“There are risks for everyone in this scenario and like all primary industries the ripples may be extensive.”
Source: FOA, FICA