We are all aware of how forestry rises and falls and that the trends of export log prices are cyclical, but this next hump is one out of the norm which about now we know we are working up to a well-deserved festive break, a busy year and working to script and then expecting a drop in the market traditionally into the Chinese New Year.
Last year we had a 5 week lead up to COVID where our industry was well down on production with pricing and supply pressures before COVID hit the rest of the primary industries and other industry sectors. With a conscious and committed effort to prescribe protocols for the industry driven by the industry, forestry was able to get back to work at Alert Level 3 and this last lock down with the Delta CoVID variant has seen similar challenges, but we have all been better prepared to manage our way through it.
However, what is appearing to shape up, is a consequence of long-term challenges with CoVID and international activities that are forcing extreme outcomes on industries like ours so reliant on the Chinese market and overseas export. Contractors are being handed instructions on reducing production, indications of contracts not being renewed and longer than normal breaks over the festive season and this appears variable over the country whether options exist for domestic supply and whether the principal is a corporate owner, a forest management company or woodlot owners.
Reading the tea leaves we can all assume and back our assumptions through these downturns on what has been, what has transpired and what the long-term consequence can be however this is a big BUT we have never been here before where the China market, sea freight and international pressures of COVID are coming to roost. It has been building up with the pressures on sea freight and the rise in the cost nearly doubling over the last 12 months. It also is attributed to China and the beginning of economic pressures that are starting to show.
AgriHQ describe the unstable state of Evergrande, and other giant property development businesses are starting to put up red flags while the Chinese government is starting to put out fires in other industries. The power crisis they are facing now and the fuel shortages are all impacting on their economy.
FICA can see the urgency to promote some stability and ability to survive through these times and keep our business’ functioning until the other side of Xmas when we suspect it may come right. But we are also saying batten down the hatches, preserve your business, don’t overspend at this time, but more importantly work with you principal to come up with a sustainable plan that means you both work to mitigate any major consequences that will cancel contracts, that will mean contractors both for production and transport are forced to cut their workforce or business models. This will just lead to an unstable service provision when that trough starts changing direction.
We as an industry have come together to advise, to support and to make everyone aware of what lies ahead. Best we get you at the top of the cliff rather than the bottom and this is a honesty game, this is not what’s happen in the past, this is working together for sustainability of our industry. Let’s keep abreast in” real time” about what can be and what the supply chain consequences are, to all work together to mitigate the worst effect rather making the best of a bad situation when the horse has already bolted.