New Zealand\u2019s forestry sector is under increasing strain as rising fuel prices and freight costs compress margins, disrupt harvesting activity and add pressure on domestic processing.<\/p>\n
Diesel prices have climbed sharply, reaching around NZ$2.34 per litre nationally, up significantly in recent weeks. The increase, linked to geopolitical tensions in the Middle East, has pushed fuel costs to the centre of the sector\u2019s economics. Forestry is highly exposed: producing one tonne of logs requires around 12 litres of diesel, with further consumption tied to transport from forest to port.<\/p>\n
The impact is most acute in higher-cost forests, particularly those located far from ports or on steep terrain, where transport distances and harvesting conditions amplify fuel use. Contractors report cost increases of around 25%, forcing operators to reassess harvesting plans and, in some cases, scale back or suspend activity.<\/p>\n
Freight costs have risen in parallel. Shipping rates to China have increased from around NZ$33 per cubic metre for March shipments to approximately NZ$45 for April, a rise of about 36% in a short period. The increase reflects higher bunker fuel prices and disruption to global shipping routes, significantly reducing export margins.<\/p>\n
China remains the dominant market for New Zealand logs, accounting for around 60% of supply. Following the Lunar New Year period, inventories at Chinese ports have stabilised at approximately 3.0 million cubic metres, with daily offtake holding at 55,000\u201360,000 cubic metres. Prices for A-grade logs have firmed to around US$125 per JASm\u00b3, up from pre-holiday levels, while log futures have risen by about 4.5% in recent weeks.<\/p>\n
However, the improvement in pricing is being offset by higher freight costs. Exporters are seeking further price increases to recover rising transport costs, though gains remain limited. China has also recorded a fourth consecutive decline in log imports, with volumes now around half of peak levels seen during the pandemic period.<\/p>\n
The supply side is already responding. Many forest owners are seeking increases in domestic log prices for the second quarter as higher harvesting and cartage costs erode margins. At the same time, harvesting activity has been reduced to around 80% of capacity in parts of the sector, while some smaller operators have temporarily suspended operations. Supply from New Zealand is expected to ease further from April as autumn conditions tighten harvesting windows and fewer working days reduce output.<\/p>\n
India, the second major export market, is showing increased volatility. A number of bulk pine log shipments have been deferred or cancelled due to rising freight costs and security concerns linked to tensions in the Middle East. Freight rates to India have increased more sharply than those to China, reducing competitiveness.<\/p>\n
CFR prices for A-grade logs in India are currently around US$142 per JASm\u00b3. At the same time, sawn timber prices in markets such as Gandhidham have increased by around 9\u201310%, reaching INR 631 per CFT for radiata pine. However, higher input costs, including fuel and freight, are limiting margin recovery, while demand for pallets and packaging has softened due to reduced export activity to the Middle East.<\/p>\n
Within New Zealand, the wood processing sector is also facing pressure. Rising costs and uncertainty over future pricing are affecting the viability of planned construction projects, making it more difficult for developers and builders to commit to new activity.<\/p>\n
The strain is evident at the industrial level. In Kait\u0101ia, Juken New Zealand is considering the sale or closure of its Northland Mill and Triboard facility. The company has cited declining demand in key export markets and rising operating costs, particularly energy, as factors behind the move.<\/p>\n
The mills, which produce sawn timber and engineered wood products, are among the largest employers in the town. The company is testing market interest through a potential sale or joint venture, with a tender process expected to run over several weeks.<\/p>\n
Local authorities have warned of the economic impact. The Far North District and Northland Regional councils are seeking support from central government, pointing to the scale of potential job losses and the limited alternative employment in the region. High power costs in the Far North have been identified as a key issue affecting the mills\u2019 viability.<\/p>\n
Union representatives say the workforce is highly specialised and not easily replaced, and warn that further losses would add to a series of closures across the sector in recent years, including operations in Ruapehu, Penrose, Kinleith and Nelson.<\/p>\n
The current pressure comes against a backdrop of broader disruption. Fuel price increases have lifted costs across the supply chain, while shipping rates remain elevated. A weaker New Zealand dollar has provided some support to export returns, but not enough to offset rising costs.<\/p>\n
At Wharf Gate prices increased modestly in March, with gains of around NZ$2 per JASm\u00b3 across most ports, supported by higher CFR prices in China. The PF Olsen Log Price Index rose to NZ$122, slightly above recent averages. However, freight costs are expected to remain the key determinant of pricing in the coming months.<\/p>\n
Ocean freight markets continue to reflect higher fuel costs. While most New Zealand log exports are carried on Handysize vessels not directly captured in the Baltic Dry Index, broader trends in shipping costs are feeding through to the sector.<\/p>\n
Across the Tasman, similar pressures are emerging. Timber transport operators in Australia are facing sharply higher fuel costs, with some reporting significant monthly increases and warning of financial strain.<\/p>","protected":false},"excerpt":{"rendered":"
New Zealand\u2019s forestry sector is under increasing strain as rising fuel prices and freight costs compress margins, disrupt harvesting activity and add pressure on domestic processing. Diesel prices have climbed sharply, reaching around NZ$2.34 per litre nationally, up significantly in … Continue reading