Marcus Musson - Forest 360
The law of averages is rarely wrong, especially when it comes to rain. If you’ve had a nice dry summer and autumn, you can generally brace yourself for a good old-fashioned whopping at some point during winter, and this year is no different.
While many parts have seen massive rainfall during July, the Nelson and Tasman regions were absolutely pasted and had the unfortunate double whammy with a significant wind event. This, on top of super saturated soils, has created a severe windthrow event reminiscent of the Gabrielle event that flattened forests around the Taupo region. While it’s too early to give accurate estimates of the damage, early comments are that it’s chunky and likely around 4,000ha.
What is important is that no matter how much wood is on the deck, it’s unlikely to have the same impact on increased export volumes as the Taupo salvage. There are a few reasons for this, including topography, logging crew availability, and port configuration. While the Taupo region was largely flat, Nelson/Tasman is steeper meaning more specialist machinery is required and that machinery is much harder to mobilise into the region due to the bit of water between the islands. In addition, the Nelson Port can only load vessels on one berth which limits the throughput for export logs and hence the volume that can be put through the entire system.
Deliveries into China from NZ have slowed in recent months as a result of winter and subdued prices and this is unlikely to pick up this side of summer – which currently seems as long way away. In-market inventories have been steadily reducing month on month since February and, even though Chinese uplift has reduced, inventories have continued to head south.
What is important to note is that China is in its low season for construction and therefore demand is subdued, however we are still seeing reductions in the inventory position of around 60,000m3 per month. At the current rate we will see inventory into the sub 3.0 million m3 range by year end which is getting into pucker territory for buyers, and buyer pucker is good for sellers.
The in-market sales price (CFR) has increased slightly from June into the $US111-113/m3 range, more due to the impact of the log futures market than real demand.
Shipping has settled down after a slight flurry following the US and Israel’s set-to with Iran and FOREX continues to hover around the $US0.60 mark. Combined, this has led to a slight increase in at wharf gate (AWG) prices in NZ for July with A grade around $115/m3 in Southern North Island ports. This AWG spot price level is unlikely to see anyone want to hit the go button on a short-term harvest. However, as inventory reduces and summer approaches, we will probably see a historic price uptick from September onwards.
Domestic markets continue to be decidedly average, with many domestic sawmills feeling the pinch of soft sales. The recent Cotality Cordell Construction Index points to construction costs having the strongest rise in almost two years with a growth rate of 0.6% in Q2 2025 and 2.7% annually. This will be as welcome as a Green Party budget for anyone looking at building or renovating and, with the combination of a reasonable volume of existing housing stock in the market and an OCR on pause, there may be some headwinds in terms of new builds.
Carbon had been flirting around the $60/NZU mark before falling away based on low demand and post auction jitters. Current spot prices are around $57.40/NZU, however there is some expectation of price firming throughout the remainder of the year (which it has done in 10 of the past 11 years) as emission returns have now been submitted and there will likely be very little additional supply in the run up to Christmas. The NZU stockpile reduced in line with expectations to a five-year low of 133.3 million NZU’s from 144.5 million 12 months ago.
The next six months will be interesting in the carbon space as a number of variables come into play. The Government will be making a decision (expected by the end of September) on the ETS unit settings and the key will be whether they decide to redistribute unsold auction volumes evenly across 2028 through 2030 or leave forward auction volumes unsold. At the same time the proposed forestry restrictions around whole farm planting are expected to be legislated by the end of October, further limiting the future availability of NZU’s. If you love a good gamble, then NZU’s might be a reasonable bet.
So, all in all, winter is never fun, and this winter’s already shown its hand by giving a few regions a proper bloody nose. This is nothing new, and we’ve proven to be a very resilient industry when faced with significant adverse conditions. Rest assured, it won’t be long until we dust off the stubbies and jandals and admire the few extra pounds we’ve amassed over the cooler months.
