Covid 19 Delta outbreak: Level 4 lockdown will set log export supply chain back 18 months

The latest Covid-19 level 4 lockdown will set an already disrupted New Zealand export supply chain back by 12 to 18 months, the Forest Owners Association says.

Association president Phil Taylor said the supply chain was already “chock-a-block” before the latest nationwide lockdown came into effect on August 17.

“The biggest concern is the disruption to the supply chain around international freight, and that will have some long-lasting legacy issues that will go beyond this current lockdown and will probably extend for the next 12 to 18 months, simply because it came at a time when the supply chain was really stretched,” he said.

“It [the latest lockdown] has really exacerbated the problem,” Taylor said.

“These are challenging times,” he told the Herald.

Like most industries, forestry effectively stopped when the country went into level 4.

“To try and free up the supply chain we had a lot of ships waiting for cargo and that was a conscious strategy, and so of course this has thrown a complete spanner in the works,” he said.

“It has caused some significant supply chain congestion and is going to lead to some significant additional costs – either for the ship owners or for the ship charterer, which are the forest owners.”

Under level 4, harvesting was not allowed, but there a few exemptions for seedling planting.

Another was around being able to deliver cargo from off-wharf storage to the port to load ships that had already been committed to, with chartered party agreements and contracts signed.

Given the current supply chain disruptions in international freight, the latest lockdown was a major challenge for the industry and wouldcontinue to be one if the whole country goes back into level 4 lockdown again, Taylor said.

“You can deal with a week or two-week shutdown okay but it becomes challenging if it goes any longer than that.

“There are only so many of these [lockdowns] that the industry can sustain before people start saying that this is just too difficult,” Taylor said.

Forestry can function at level 3, under strict protocols.

Under level 4 they were allowed to shift cargo that had been produced – logs that had been sitting in off-sitestorage or on skid sites in the forest – but forest owners were not allowed to harvest.

“The consequences of that have been and will be quite significant.”

Since the 2020 lockdown there was a strong lift in log prices but a correspondingly very significant increase in freight costs, which partially offset those strong prices.

Prices started to soften just before the latest lockdown while the cost of freight continued to go up, so margins were squeezed.

The latest level 4 lockdowns has created additional pressure on margins and has further constrained the supply chain.

Log prices spikedhigher last year in the aftermath of the first lockdown but prices were starting to softening just before New Zealand went in to level 4 this time.

Taylor said what while Covid is an important short-term issue for our industry, in the longer term, demand from the sector’s biggest customer – China – was the most critical one.

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