New Zealand Log Prices June 2014   In-market log prices continue to fall and are yet to find a floor in China. Inventories are still up at 4 million m³, and despite levels of off-take of between 40-60,000 m³ a day, the volumes being delivered are keeping the inventories very high. The average A-grade price surveyed by Agrifax is US$137/JAS, but prices being quoted currently go as low as US$125/JAS. The rate of consumption in China will start to clear inventories once imports slow down, but with so much in motion at the time of the price correction, it will be June/July stats when a reduction in volume is seen.There is resistance to further price drops, both from exporters and log buyers in China, as many have inventories that were bought at US$/160/JAS, but can now only be sold at a loss. Further price drops erode the margin further, but there are still logs committed to the export market with sellers wanting to drop the price in order to sell, while buyers are looking for bargains, which has the potential to drive the price down further.The drop in the export market has continued this month, with prices now down by more than $35/t at the wharf gate, a decline of more than 30%. This has meant the log price indicator is down 5 points, the third consecutive drop. A downturn in housing in China has meant tightening credit, and less demand for logs. As there is still yet to be any slowdown in deliveries of logs to China, inventories are still rising in the short term.There won’t be any consolidation in prices until it becomes clear that inventory levels can be reduced, and this means that the continued high deliveries will put downward pressure on the price. There are still high levels of off-takes from ports, and this means that once supply slows down, which should happen in June/July, inventories should start to clear.The effect on the domestic market is unlikely to be as drastic, as pruned and structural logs are still in reasonably high demand. If prices in these markets drop it will mean larger reductions in harvesting than will already occur, and this will lead to supply drying up. Prices of utility and industrial logs will drop with the export market.