Why does New Zealand export sawn timber to some markets and logs to others?
Degree GrantorUniversity of Canterbury
Degree NameMaster of Forestry Science
New Zealand’s annual log harvest has increased rapidly from 2009 to 2017. This increase in harvest has been mostly exported as logs, rather than being processed in New Zealand into sawn timber and other products. Previous industry strategy studies have identified the need for the sawn timber processing sector to be internationally competitive, as it is both an important processing industry, and a supplier of residue to downstream manufacturers.
Studies that compare New Zealand’s export log and sawn timber markets have shown that most markets import either sawn timber or logs, but rarely an even mix of both. However, most export logs are processed into sawn timber or plywood at the destination. This research uses econometric analysis to identify the drivers of these differences in market behaviour.
A seven-country export demand panel model was used to analyse the effects that different variables had on demand for sawn timber and logs. Real GDP and real prices were used to explain demand for log and sawn timber imports from New Zealand. Variables for tariffs and tariff wedges (the difference between the tariff for a processed good and the tariff for its raw material), non-tariff barriers (NTB), competition effects, and local resources were used to test their effects on demand.
Tariff wedges and the local harvest of softwood timber were found to have a significant negative effect on demand for sawn timber, while only a softwood harvest was found to negatively affect demand for logs. The presence of tariff wedges was found to be negatively correlated with the sawn timber demand, but did not fully explain the difference in demand between logs and sawn timber. Research suggests that NTBs have a large impact, but they are difficult to measure and therefore analyse in this context. The existence of a softwood timber resource was found to be negatively correlated with demand for softwood imports. There was no significant negative effect found for competition effects.