The latest "Situation and Outlook for Primary Industries" report said it followed a 7% rise in the year to June 30, 2025, when revenue rebounded from supply disruptions and weak global demand over the previous two years.
Growth was expected to slow next year due to subdued construction activity overseas and ongoing trade uncertainty.
Demand in the medium and long term would depend on economic growth in key trading partners and initiatives such as the industry-led Export Growth Accelerator, which aimed to expand value-added wood products. Mill closures driven by high operating costs remained a concern, while some industry consolidation continued.
Log export volumes fell 3% in 2024-25, but a 4% rise in export prices, supported by lower shipping costs and a weaker New Zealand dollar, resulted in a slight increase in export revenue. Prices have since fallen from their peak in early 2025, but volumes remain steady. Over the forecast period, steady domestic supply was expected to sustain volumes but prices were expected to remain low as China’s construction sector remained weak. China’s removal of its ban on Australian logs added competitive pressure, potentially reducing Chinese demand for New Zealand logs.
Despite that, New Zealand had strengthened its market share for logs in China to more than 70%, even as total exports had declined 12% since 2021. That gain reflected reduced imports from Germany, where bark beetle damage and rising domestic demand had reduced available export volumes.
Chinese construction indicators remained negative for the first three quarters of 2025: real estate investment was down 13.9% and commercial housing fell 7.9% in value year on year.
China’s GDP growth of 5.2% over the same period, which was below pre-Covid levels, was supported by strong exports and high-tech manufacturing, while there was continued softness in construction and retail demand.
Exports to India had grown steadily since trade resumed in late 2023.
ANZ’s latest "Agri-Focus" report said residential consents issued jumped in September and October, indicating activity was picking up now that interest rates were at the bottom of their cycle.
An increase in sawn timber demand was set to be a direct consequence of that. About 70% of sawn timber production was for the domestic market so increased residential construction demand would be helpful.
Carbon prices had fallen 30% in the past two months, recently trading at $40/emissions unit (NZU) on the secondary market.
The sharpest drop was in early November and directly followed announced revisions to the New Zealand Emissions Trading Scheme (ETS) that were perceived by market participants as weakening the scheme, the report said.
ETS volume and price control settings would no longer be required to accord with New Zealand’s nationally determined contributions (NDCs) under the Paris Agreement. ETS settings must still accord with New Zealand’s domestic emissions budgets and 2050 target, but the market reaction suggested obligations under the Paris Agreement were seen as carrying more weight.
The final ETS auction of the year was held on December 3. The $68/NZU floor price was well above the spot price so no units were sold. The 6.0million units offered and unsold in 2025 would now be removed from the market. That would help the oversupply situation marginally, but with forestry credits still being generated, it would take some time to work through the existing stockpile.
In 2026, 5.2 million units would be offered across the quarterly auctions with a minimum price of $71/NZU.
Spot prices on the secondary market would have to lift by 77% if any of those auctions were to be successful, "which at this point was looking like a big ask", the "Agri-Focus" report said. — Allied Media
