Log prices firming in China and India. Domestic pruned log prices slip but demand remains strong for good quality

Log prices firming in China and India. Domestic pruned log prices slip but demand remains strong for good quality

By Peter Weblin*

Unpruned and pruned export log prices increased $2/JAS m3 and $4/JAS m3 respectively in October.

This confirms that pruned export log prices troughed last month having fallen up to $50/JAS m3 in the prior three months.

The expectation is a modest continued firming trend in export log prices for the foreseeable future.

The big drivers of CFR price (US$ price in destination port), exchange rate, and ocean freight costs were remarkably stable during the month, resulting in a modest increase in log prices ($2-$4/JAS m3).

Demand is steady and prices firmed slightly in China and India, and are stable in Korea and Japan.

The domestic market had price adjustments for fourth quarter supply (Oct-Dec 2016). Domestic log prices are typically set per quarter in contrast to export logs which are typically priced on a monthly basis. Pruned log prices fell on average $3/tonne with strong demand for good quality logs. Structural log demand remained firm with prices inching up $1/tonne on average. Domestic industrial and pulp log prices were steady.

Due to the welcome stability on the log market at present and heavy work demands on the editor, the October issue of the PF Olsen Log Market Report is shorter than usual. We include the usual metrics for your information but don’t have the fuller commentary.

To make up for this, next month’s Log Report will be more comprehensive and include intelligence gleaned from an upcoming in-market trip to China which includes visits to logistics and wood processing facilities.

PF Olsen Log Price Index to October 2016

The PF Olsen log price index is up marginally in October to $118. The index is now $31 higher than its 6-year low of $87 in July 2014 and $10 above the two-year average and $13 above the five-year average.

Log price index

Basis of Index: This Index is based on prices in the table below weighted in proportions that represent a broad average of log grades produced from a typical pruned forest with an approximate mix of 40% domestic and 60% export supply.

Indicative Average Current Log Prices - October

Log Grade $/tonne at mill $/JAS m3 at wharf
  Oct-16 Sep-16 Aug-16 Jul-16 Jun-16 Oct-16 Sep-16 Aug-16 Jul-16 Jun-16
Pruned (P40) 189 192 192 192 196 167 163 165 172 195
Structural (S30) 112 111 110 111 113          
Structural (S20) 102 101 100 99 98          
Export A           122 120 120 120 131
Export K           117 115 115 116 124
Export KI           104 102 102 102 112
Pulp 50 50 50 51 51          

Note: Actual prices will vary according to regional supply/demand balances, varying cost structures and grade variation. These prices should be used as a guide only.

This article is reproduced from PF Olsen's Wood Matters, with permission.

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