India's log trade with New Zealand has stalled as New Zealand has implemented new rules banning the use of methyl bromide fumigation for exports, while India's regulations still stipulate that methyl bromide is still mandatory and no alternatives are proposed.
It is understood that before this, the log trade volume between Singapore and India had reached a peak of 1.7 million cubic meters per year, with a total trade volume of 250 million US dollars. Although the volume of log trade with India is much lower than that of China, and the amount of logs exported to South Korea is 2 million cubic metres per year, India's share of 1.7 million cubic metres is a significant market for New Zealand.
Earlier in October, the log trade between Singapore and India was slightly eased by the MPI when the MPI updated phytosanitary requirements for log exports to India, allowing logs in the hold to be fumigated upon arrival in India in lieu of pre-departure handling.
Shane Olsen, Plant Export Manager at the New Zealand Biosecurity Agency, said the temporary change provided an opportunity to revive New Zealand's log trade with India after New Zealand banned ship fumigation on January 1 this year.
New Zealand believes that although the provisional scheme is only valid until 31 October, it has given India enough time to consider alternative fumigation options for New Zealand logs to India. It also indicated that the resumption of log trade had been on the agenda of a recent trade mission to India and that some compromise was needed on how to deal with methyl bromide.
During the delegation's visit, the Minister for Trade and Export Growth, Damien O'Connor, pledged to work together to find a viable alternative that would allow logs to be imported from New Zealand.
In fact, the resumption of log trade between New Zealand and India is driven by changes in the requirements for log fumigation and the Chinese market. New Zealand timber traders believe the forestry industry is on the verge of its worst year in a while, and that demand and prices for logs in China have not been as good as they would have hoped for.
According to mainland customs data, in the first three quarters of this year, the total amount of New Zealand logs imported by the mainland was 3.78 million cubic meters (+12.67%), 5 million cubic meters (+5.21%) and 4.16 million cubic meters (-11.91%), respectively, which was the only quarter in which imports declined in the three quarters so far.
Overall, the amount and value of logs imported from New Zealand by the mainland began to decline in July. From July to August in the third quarter, the largest decline in New Zealand's log imports occurred in July, with a year-on-year decrease of 16.38% in volume and a 39.6% decrease in value.
In addition, in terms of average price, compared with the same period last year, the average arrival price of logs exported from New Zealand to the mainland showed a "watershed" in April. Subsequently, it fell below 800 yuan/cubic meter in August, and the price of 776 yuan/cubic meter became the lowest level this year (the average price of arrival at Hong Kong does not involve other costs such as freight, and is only for reference).
As a result, at prices so lower than in previous years, New Zealand timber traders see it difficult to make more profit from log exports to China. The resumption of log trade with India and the expansion of the Indian market have become a new direction for log exports.
However, while fumigation on ships or at destinations may boost New Zealand's log trade to India, some foresters believe that it is unlikely that it will enter the Indian market quickly. He said most exporters will take a wait-and-see approach to the Indian market and are unlikely to return to the previous level of 1.7 million cubic metres.
There are also forestry sector insiders who believe that exporting unfumigated logs to India remains a risky proposition and that there is uncertainty about the exact cost that exporters' log shipments may face when they arrive in India for fumigation.
New Zealand timber traders are concerned about the prospects of the Indian market, and with Chinese furniture production and construction accounting for a larger proportion of New Zealand's log use than in the past (90% of New Zealand's total log exports), the Chinese market remains a major market for New Zealand.
However, due to the current saturation of demand for softwood logs such as pine in the mainland market, it is expected that the price of New Zealand logs exported to the mainland will remain at a low level.