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Change of ownership of Covenant
Change of ownership of Covenant
You may have seen in the media recently that Covenant, the appointed Supervisor of the Greenplan forestry partnerships, is changing ownership.
https://www.nzherald.co.nz/.../U3G6OAZIYR6JAGDUTKAPTOPJOA/
Greenplan has been advised by Covenant that everything will continue as is with no changes to Covenant's day to day operations.
Articles regarding Forestry in NZ
Articles regarding Forestry in NZ
Tall Timber: NZ’s 20 biggest forestry owners revealed By Jamie Gray
Business Reporter NZ Herald 23 Jan 2025
New Zealand’s forestry sector might have a low profile, but it attracts some big international investors.
Near the top of the table is Canadian multinational insurance and financial services giant, Manulife.
Manulife, which has about C$1.3 trillion ($1.6t) in funds under management, is one of the world’s biggest fund managers.
The firm manages 208,500 hectares of plantation forests on behalf of three clients, with forests in Northland, Auckland,Waikato, Bay of Plenty, Horizons (Manawatu-Wanganui), and Hawke’s Bay regions. It also owns estates in its own right.
The NZ Forest Owners Association (NZFOA)has 84 members across a broad spectrum, including the big multinationals.
More than half the association’s membership have 1300 hectares or less in forestry, but it also represents Māori tribal interests such as Ngāi Tahu, the Crown, family trusts and farm foresters.
“We look after a pretty broad church, plus a diversity of management and ownership types,” association chief executiveElizabeth Heeg says.
Considering the role the sector plays in the export trade - exports for the June year totalled $5.75 billion - she agrees forestry has a low profile, except when things go wrong.
“New Zealand has some amazing points for forestry but we also have some challenges,” she says.
“The good points are that we are known for our sustainability, so it’s our ability to manage forests effectively, and with good environmental outcomes.”
A big part of that is the exotic plantation model, adopted over 100 years ago to help protect what was left of the indigenous forest estate.
Heeg says the industry has advantages over other countries, many of which are under pressure to preserve their native estates.
“We have also got the quality of the timber and know how quickly we can grow it.
“The big part of the drawcard as far as pension funds go is its sustainability,” she says.
“The fact that it is not associated with deforestation is a big plus for foreign investors.”
Why is it that forestry does not seem to get the same traction as, say, farming?
Heeg says it’s cultural.
“New Zealand identifies itself as a farming country and, to be fair for over 100 years we were clearing the bush to make way for farms, so it’s a cultural shift to identify ourselves as bush people, so to speak.
“I do think that that connection to farming could work well alongside forestry, but I don’t think forestry right now is included in the same sphere, necessarily, despite the fact that we have so many farm foresters out there who are growing a hectare or more of forests on their farm.
“If you go to a place like Rotorua, I think people understand pretty clearly what the value proposition is for forestry, but at the national level we don’t get the same kind of profile.”
From time to time, forestry attracts the wrong kind of publicity.
In October, meat processor Alliance Group shut its Smithfield plant in Timaru because of land-use change.
For “land-use change” read “forestry”, as it’s the expansion of trees that has pitched the forestry and pastoral sectors against each other.
“Unfortunately, we must face the reality of declining sheep processing numbers as a result of land-use change,” Alliance said at the time.
NZ Beef and Lamb has long lamented the loss of farmland to forestry, particularly for carbon farming.
The farmer-funded organisation commissioned Orme & Associates to update the number of farms sold with the intention to plant forestry since their last report in August 2023, which covered the period 2017 to the end of 2022.
They found that a further 51,291 hectares identified for afforestation had been sold since the end of 2022.
Heeg strongly refutes the idea that forestry is responsible for meat plant closures.
“I definitely do not think that forestry is responsible for that, and we can demonstrably prove that it’s not responsible for the closure of meat works.
“I don’t think that anybody disputes that there are real headwinds in the rural community right now.
“Our log prices are down and we have an exodus to Australia of some of our talented people, so a lot of the challenges that farmers are experiencing are the same challenges being faced by forestry.”
Heeg says her sector is still not experiencing the same level of afforestation seen in the 1990s but she concedes that land-use change is happening in rural communities.
“But I think it’s those farmers’ right to change their land use to something that is right economically.”
Forestry found itself in the gun for the damage done to communities from “slash” - stumps and unwanted wood that wiped outEast Coast bridges after Cyclone Gabrielle in 2023.
“The important thing that we as a forestry sector are trying to work with communities on is how we make sure that we have good practices, but also how we are going to deal with these increasingly intense storm events that are the result of climate change,” she says.
The sector also gets some flak from critics of carbon forestry - where growers plant pines purely for the purpose of carbon sequestration and carbon credits - nothing else.
Heeg says carbon forestry done well is an important tool in the kit for addressing the climate crisis.
She says that as a sector, one of the biggest problems facing forestry is price volatility.
As it stands, log prices can vary wildly depending on demand in its biggest market -China - which is struggling through a property slump.
Heeg says more domestic processing done onshore would go a long way towards taking price volatility out of the mix.
“With the decline in China, more of our industrial grade timber is going into energy production – pellets – and some firms are looking into creating an energy log.
“You want the timber to attract the highest value use that it can go for, so timber that used to go into making concrete boxing in China and used only once can now be used here for energy to decarbonise New Zealand businesses, then that’s probably amore efficient use.
“That’s the kind of conversation that we want to be having, because if you process the timber here in New Zealand you canalso process all the residues that can be used for other things as well.”
“The big driver for New Zealand is that we are the world’s biggest exporter of softwood logs.
“These [weather] events can help the industry take a look at itself and see if we are doing everything we can and doing things the right way and [whether there] can be room for improvement.”
The log market is more challenged these days because of a more subdued economy in China.
“I don’t expect things to rocket back to those record highs that we saw a few years ago, but those were abnormal times.
“That’s where having a domestic market as well is helpful, although they are having their own challenges, particularly from a costs perspective.”
Scott Downs, PF Olsen’s general manager sales and marketing, says forestry does not seem to get the airtime that pastoral farming does.
“I think it’s because it’s so diversified - there are so many different voices.
“There is the NZFOA but we certainly don’t have the political clout that the farming industry has.”
PF Olsen has 130 staff, plus thousands of contractors at various times of the year.
The experience overseas showed that multiple land uses worked best for the environment.
Downs says sawmills are struggling at the moment.
“The market is oversupplied with structural lumber so 40% of the structural sawmill capacity is not being used, so the saw mills are slowing down.”
And logs are trading at around $120 per JAS cubic metre at the wharf gate for A grade logs - satisfactory but well down from their peak.
For export logs the two-year rolling average has been trending down since 2021.
Future demand from China is the big issue, and it’s looking unlikely that prices will return to their recent highs of $140 plus perJAS metre.
Downs says that’s a good reason to get biofuel up and running.
About 40% of New Zealand logs are consumed domestically and 60% are exported.
Of the logs for domestic processing, the majority of this is used for construction purposes. Of the 60% exported, China takes the lion’s share to use mainly for construction and form work.
TOP 20
1) Kaingaroa Timberlands: 178,00 ha
The New Zealand Super Fund’s largest investment is Kaingaroa Timberlands, in which it has a 42% stake. Covering around178,000 hectares of planted forest, Kaingaroa is recognised as one of the world’s premier softwood plantations and is a majorsupplier of logs to the domestic and export markets. NZ Super’s investment partners in Kaingaroa include PSP Investments -one of Canada’s largest pension investment managers - and Kakano Investments, a collective of iwi groups which are also part-owners of the underlying land. The forest is managed by Timberlands, the ownership of which is broadly similar to the estate’s.
2) Manulife: 164,000 ha
Manulife Investment Management Forest Management MFM (NZ)—formerly Hancock Forest Management New Zealand - is part of the large Canadian multinational insurance and financial services company, Manulife. MFM NZ has holdings in its own right, and manages forests for others. If its owned and managed forests were taken together, Manulife would rival Timberlandsin size, being responsible for about 220,000 ha. It has investments in Taumata Plantations which has 121,000ha in productiveforest, and Tiaki Plantations, which has 13,000ha. Manulife also manages about 42,000ha for the Ontario Teachers PensionPlan -OTPP New Zealand Forest Investments - and Waonui Forest Investments. Manulife operates in more than 20 countries, with significant businesses in Canada, the U.S., Japan, China, and Hong Kong. In its latest annual report. Manulife says it is the world’s largest institutional manager of “natural” capital, consisting of nature-based assets such as timber and agriculture, withC$1 trillion ($1.2t) in assets under management.
3) Rayonier Matariki: 166,000 ha
New York Stock Exchange-listed Rayonier Inc established itself in New Zealand more than 25 years ago. Rayonier Matariki Forests is managed by Rayonier New Zealand, a subsidiary of Rayonier Inc, and is the third largest forestry company in NewZealand with approximately 120,000 ha of plantations on 166,000ha land base. Rayonier established itself in New Zealand in1988, after the Government announced the privatisation of the Forest Service, initially as a log export operation. It purchasedits first forest in 1991. The parent company is a leading timberland real estate investment trust (REIT). The company says it hasbecome the second-largest timber REIT with estates in the US and New Zealand totalling just over a million hectares. Rayonierwas founded in 1926 in Shelton, Washington and today is headquartered in Wildlight, Florida.
4) PF Olsen: 160,000 ha
PF Olsen does not own forests but manages 160,000ha for a wide range of different clients. In 2022, Quayside Holdings - the investment vehicle for the Bay of Plenty Regional Council - bought 44% of PF Olsen from private equity firm Direct Capital, which had been a shareholder for 11 years. PF Olsen has been around for more than 50 years. The company also has a largeoperation in Australia, managing 212,000 ha. PF Olsen plants about 40% of all new forestry in New Zealand. The companymanages the largest harvesting portfolio in New Zealand and Australia -2.4m tonnes and 2.7m tonnes, respectively - a year.
5) Taumata Plantations: 120,000ha
Taumata Plantations encompasses the former Carter Holt Harvey’s forest estates in the central North Island and Northland.About half its logs are absorbed by the domestic market. Taumata is 42% owned by Manulife. Australian (28%), UnitedKingdom (15%)US investors own the the rest. Taumata’s forests are all in the North Island - the largest being the Kinleith Forest in the Central North Island. Taumata Plantations is chaired by Murray Taggart, the former chair of Alliance Group -NewZealand’s biggest sheep meat exporter.
6) Ernslaw One: 95,000 ha
Ernslaw One is a vertically integrated softwood plantation company, growing and managing over 95,000ha of trees. Thecompany says it has the largest and most diverse asset base and is the biggest grower of Douglas-fir in New Zealand. Ernslaw One is part of the Oregon Group, which is owned by the Malaysia-based Tiong family, along with its subsidiary company and processing arm, Winstone Pulp International, which closed two mills in the Ruapehu District in October. The mills were involvedin lumber and pulp manufacturing.
7) NZ Carbon Farming: 65,000 ha
NZ Carbon Farming owns 65,000 ha of forest land in NZ designated as a permanent carbon forest activity and actively manages a further 45,000 ha on behalf of lease holders. NZ Carbon Farming, which has been going for over a decade, is the country’s biggest carbon farmer. The company - set up by Matt Walsh and Bruce Miller - plants trees for carbon credits. They are never harvested. The company says its ultimate goal is to allow the land to revert back into indigenous forest.
8) OneFortyOne: 63,000 ha
The company is a trans-Tasman operation - formed in 2012 following the acquisition of a 105-year lease of 80,000 hectares of plantation assets from the South Australian Government. The name OneFortyOne comes from the 141st meridian east line running between the South Australian and Victorian border. In 2018, OneFortyOne acquired Nelson Forests Limited and Kaituna Mill in New Zealand, with approval from the New Zealand Overseas Investment Office. The Nelson forest, first planted in 1927, is in its fourth rotation.
9) Ngai Tahu Forestry: 54,000ha
Ngai Tahu Forestry manages 54,000 ha of forests across North Canterbury, Otago and the West Coast. Ngāi Tahu Forestry was established in 2000 when Ngāi Tahu Holdings Corporation purchased land subject to Crown Forestry licences. The company harvests and supplies logs to various domestic and export markets. It is also involved in carbon forestry and ProseedNZ, which produces improved selective seeds to the forestry industry and nurseries throughout New Zealand and Australia.
10) Summit Forests: 50,000ha
Summit Forests, owned by Japan’s Sumitomo Corp, started its New Zealand operations in 2013. The estate is spread throughout Northland, the Coromandel, Whanganui, and the Gisborne and East Coast regions. In 2013, Summit purchased the former Juken New Zealand Ltd Forest estate (36,000 ha) in Northland.
11) Juken NZ:40,000 ha
Juken NZ has been involved in the New Zealand forestry and wood processing industries for the last 25 years. It makes wood products from selectively planted, managed and harvested radiata pine for local and export markets. Juken is a subsidiary ofJapan’s WoodOne Ltd, an international housing materials and componentry company. Juken NZ has three processing mills inNew Zealand along with 40,000 hectares of forest estates located in the North Island. The company intensively prunes ourforests in order to grow a high value clearwood resource for processing.
12) Port Blakely: 39,000 ha
Port Blakely Ltd., NZ Forestry, a division of American timber company Port Blakely, owns and manages forestland on the Southand North Islands. The company grows, harvests, and continually replants radiata pine and Douglas fir. Both woods are sold domestically in New Zealand and in log markets throughout Asia.
13) Roger Dickie: 38,000 ha
Roger Dickie NZ manages over $1 billion worth of New Zealand forestry assets and more than 38,000 hectares, for both global and local investors. The company has been going for over 50 years. The company offers syndicated ownership and shole asset ownership for private and institutional Investors.
14) Tasman Pine: 36,200 ha
Tasman Pine Forests, a Sumitomo Forestry subsidiary, has 36,200 ha of exotic plantations in the top of the South Island. The majority (97%)of the planted forest area is established in radiata pine with the balance in Douglas fir and some small areas of other exotic species including eucalyptus. Tasman manages the plantation estate to produce wood, which is utilised in both domestic and international markets for a range of end-uses including sawn timber, laminated veneer lumber (LVL), medium density fibreboard (MDF), posts and poles.
15) Pan Pac: 35,000ha
Pan Pac is the largest forestry grower in Hawke’s Bay. Most of the forests are next to the ranges, so they often border onDepartment of Conservation land. These are ex-state forests, and from north to south are: Mohaka, Esk, Kaweka and Gwavas.T angoio, the other substantial forest, is coastal and located around the Pan Pac mill and Waipatiki. Pan Pac is owned byJapan’s Oji Group, a global paper, pulp, packaging and forestry enterprise, with operations throughout Asia, North and South America, Europe and Oceania. Last year, Oji said it planned to permanently shut the Kinleith PM6 paper machine. In September, Oji said it would close its paper recycling mill at Penrose.
16) Aratu: 35,000 ha
Aratu is a forestry estate and asset management business based in the Gisborne District. Aratu manages 35,000 hectares of forestry plantation land across Te Tairāwhiti. In July 2019, Hikurangi Forest Farms was purchased by New Forests, an Australian-based, international and sustainable forestry investment manager, on behalf of its institutional investment clients.The company was renamed Aratu Forests.
17) Forest Management NZ:35,000 ha
Forest Management (NZ)is a family-owned and operated company. Established in 1974, the company manages more than 120forests with a cumulative net stocked area of 35,000 hectares. The species it manages are predominantly Pinus radiata however there is an increasing area of alternative species such as Douglas fir, Cypress, Redwood, Eucalyptus, Japanese Cedar and native trees being established.
18) Crown Forestry: 30,000 ha
Crown Forestry is part of the Ministry for Primary Industries (MPI). It has a commercial focus, managing a portfolio of theCrown’s forestry assets to achieve the best return from the forests and meet the Crown’s legal and contractual obligations.Crown Forestry is a direct participant in the New Zealand forest industry. It has a separate role to the policy, regulation, and service delivery roles carried out by MPI. Crown-owned forests and afforestation leases. The forest estate consists of 55forests with a total planted area of around 30,000 hectares. The forests are located throughout the North Island and in Otagoand Westland. In the case of Crown-owned land, the land (and sometimes trees) are transferred to successful claimant groups as part of Te Tiriti/Treaty of Waitangi settlements.
19) Wenita: 30,000 ha
Wenita is the largest producer of forest products in Otago supplying local and international markets. It has three main forests in Otago -Mt Allan, Berwick, and Otago Coast. Wenita was formed in 1990 to buy forest cutting rights from the Government. Wenita is 100% owned by Taieri Forests Limited, which is owned by three shareholders: New Forests (ANZFF2), Stichting Pensioen fonds ABP (APG)and Pension Protection Fund (PPF)Investment Holdings 1 Limited.
20) Forest Enterprises: 20,000ha
Masterton-based Forest Enterprises manages forestry investments for 6,500 mostly New Zealand investors, operating as a limited partnership. Forest Enterprises is New Zealand’s leading full service forest management and investment servicescompany. Since 1972, it has been helping people grow their wealth through affordable direct investments in some of NewZealand’s most exceptional radiata pine plantation forests. It manages the forests from establishment to harvest.
(Compiled from publicly available information).
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
Forestry: NZ’s third-largest export – where it all began By Jamie Gray
Business Reporter NZ Herald 30 Jan, 2025
Kaingaroa, managed by Timberlands, is New Zealand’s largest forest estate and a major log exporter. In part two of his series on the industry, Jamie Gray tracks its origins. Read part one on the top 20 companies here.
What started as an attempt to save New Zealand’s dwindling native forest estate has turned into the country’s third-largestexport.
Kaingaroa, the country’s largest single contiguous estate, is where it all began.
The asset – now managed by Timberlands – has a long and storied past.
The idea of a planted forest emerged in the late 1800s, when early governments could see the rapid rate of deforestation of native species meant the country would soon run out of soft wood for construction and infrastructure.
Once the plantation forestry idea was conceived, Kaingaroa later became an employment option during the Great Depression.
Back then, the estate was ahead of its time in terms of social licence and sustainability, Timberlands chief executive Ryan Cavanagh says.
After scouring the world for the right species, the powers that be settled on pinus radiata, or Monterey pine, establishing theestate in the early 1900s.
Most of the planting happened around World War I and into the 1920s, and Kaingaroa is now on its fourth rotation.
Timberlands has a stand of trees – conserved within the estate – that is now over 100 years old.
“We would not cut them down even if we could, because they are too big,” Cavanagh, a former McKinsey & Co and Rio Tintoexecutive, says.
Another reason for planting out the area in the Central North Island was the soil was deficient in cobalt – making it undesirablefor pastoral farming.
Kaingaroa, once part of the state’s Forestry Corp, became a corporate plaything in the 1990s and early 2000s.
Fletcher Forests, China’s Citic and Brierley Investments formed the Central North Island (CNI)partnership and bought theestate from the New Zealand government for $2.25 billion in 1996.
In that year, Fletcher Forests made a net loss of $749 million, mostly due to a $533m writedown of its investment in CNI.
The partnership went into receivership in 2001, and in 2003 the asset was sold to Harvard Management Company.
In 2006, the New Zealand Super Fund – the brainchild of a former finance minister, the late Sir Michael Cullen – bought 40% ofthe estate from Harvard.
In 2013, the Canadian Public Sector Investment (PSP)–one of Canada’s largest pension investment managers, with C$264.9b($320.9b) under management – bought some of Harvard’s stake, taking the split to 40% NZ Super, 30% Harvard and 30% PSP.
Today, the split is NZ Super Fund 42%, PSP 55.5% and Kokano, a collective of North Island iwi (Ngāti Rangitihi, Ngāti Whakaue Assets and Te Arawa River Iwi Limited Partnership, Ngāti Whare, Raukawa, Te Arawa Group Holdings Limited and Tūwharetoa) with 2.5%.
Covering around 190,000ha planted forest, Kaingaroa is widely recognised as one of the world’s premier softwood plantations and is a major supplier of logs to the domestic and export markets, producing 4.5m cubic metres of logs a year.
Cavanagh says the way Timberlands runs the estate differs from its peers.
First, it has a domestic forests policy –65% to 70% of the crop is for local use, with the balance going to exports.
“We are different to most large-scale operations in New Zealand, [which] export first.
“Because we have effectively 200,000ha of contiguous estate, pretty much all of our customers are on its periphery, so we get economy of scale by being very, very close to our customers,” he said.
The asset has several things running in its favour, the first being some 10,000km of an internal, non-public roading network.
“For a lot of our customers, we can actually travel from where the trees are cut down to the mill gate without going on to a public highway, so that’s a big benefit for us.”
It also means its trucks can carry much bigger payloads because they don’t go on public roads.
Cavanagh says Timberlands uses sustainable harvesting practices.
Decomposing wood and debris breaks down over five to eight years, releasing nutrients back into the soil at a time when the young trees need them.
The plan is to double the estate’s annual production from the current 4.5 million tonnes to nine million tonnes by 2060.
Land use
Cavanagh pushes back on the view forestry encroaches on valuable pastoral land.
“Holistically, I think there is enough land in New Zealand to satisfy needs, whether they are in forestry, whether they be pastoral.
“There is enough to go around for the various land uses,” he said.
“The whole ‘social licence to operate’ challenge comes around with negative sentiment about forestry in the media, and that’s because we have not told our story,” he says.
The Kaingaroa estate does not suffer the same climatic extremes as others because it’s landlocked and not exposed to sometimes damaging coastal weather extremes.
The fact Kaingaroa is planted out on a flat or rolling estate is another point in its favour, Cavanagh says.
“We just don’t have the same issues that they do with erosion-prone soils that they have, say, on the east coast.”
And because Timberland’s customers are so close to the resource, it doesn’t leave a lot of wood on the ground.
Pruning, which allows the tree to grow without knots, stopped in 2017 when it became uneconomic.
The practice was restarted last year when Timberlands came to a commercial arrangement with some of its core customers.
Cavanagh says there is a huge cost in pruning, which is not recouped until harvest time several years later.
Timberlands employs 150 full time staff and 1400 contractors, but he says there is work to do in attracting people into the industry.
Investment case
NZ Super is not the only big pension fund involved.
Manulife manages New Zealand forestry assets for the Ontario Teachers' Pension Plan (OTPP)–one of the largest pension plans in the world, with net assets worth C$255.8b ($313.53b).
What’s the attraction?
“For pension funds like us, we are inherently long-term investors, so forestry is uniquely positioned as an asset class given its obvious long-term horizon,” NZ Super director of direct investment Brendon Jones says.
“You also get the usual arguments around the benefits at a portfolio level – generally, the correlation with equities provides a level of inflation hedging which helps protect overall risk-return outcomes,” Jones says.
“Some of the more recent interest in the sector has been driven by climate change – the decarbonisation side of things and the wider carbon opportunity that is becoming more a part of the conversation, but it feels like it’s in the early stages of development.”
The Super Fund has been in forestry since 2005.
“We have been here for a long time primarily through the Kaingaroa asset, but also through a number of forest assets inAustralia, the US and Latin America.
“The thing with New Zealand forestry is that we have, at a macro level, a country that has developed a relatively stable economy.”
Investment in forestry in New Zealand is reasonably simple.
There is Overseas Investment Office regulation, but the special forestry test in 2018 provided a reasonable level of confidence for forestry investors to look here.
“The big driver for New Zealand is that we are the world’s biggest exporter of softwood logs.
“We have got some pretty good growth rates relative to the rest of the world, with our climate and rainfall.
“It’s a good place to grow trees – so we remain quite cost-competitive compared to the rest of the world.”
Jones says an investment in New Zealand forestry also provides a different exposure to end markets.
“In the US, most forest products are used domestically and some are exported with limited exports to Asia and China.
“Whereas the majority of our logs end up in China or Asia, so it’s a different exposure that you can get by investing in NewZealand forestry.”
Foresters typically pay 60-85c per seedling, depending on quality.
Twenty-plus years later, the gross value of logs from a pruned tree can be worth over $200 per tree.
The main investment premise behind forestry is it’s an asset that keeps growing, regardless of what’s happening on world financial markets.
“You have got your biological growth, which is the interesting thing about the asset class, and you get some benefits relative tosay equities and bonds,” Jones says.
“A stock market can go up or go down, but a tree continues to grow.
“There is an interesting dynamic here. I think for pension funds in particular because there is that long-term horizon, which makes it attractive.
“The new stuff is really about what the carbon opportunity is in some of these investments.”
Jones says the concept of “natural capital” has crept into the investment conversation over the last few years.
“It’s still nascent in some respects, but obviously when it comes to climate change mitigation, forestry globally is going to play a big role in that.
“It’s not a solution, but it does have a big role to play.”
Jones says Kaingaroa is recognised locally and globally as being a special forestry asset.
“It is its contiguous nature – one giant forest.
“A lot of forestry assets are probably a bit more sporadic or spaced out in terms of the portfolio.
“That scale enables you to do some different things with your contractors and your genetics that can really bring your costs down.”
“We are probably the lowest-cost forest in New Zealand from a production perspective, so that’s a big attraction for us and for a lot of others, and that’s the sale aspect that you can really leverage.”
The estate was left relatively unscathed by Cyclone Gabrielle.
“These [weather] events can help the industry take a look at itself and see if we are doing everything we can and doing things the right way, and [whether there] can be room for improvement.”
The log market is more challenged these days because of a more subdued economy in China.
“I don’t expect things to rocket back to those record highs that we saw a few years ago, but those were abnormal times.
“That’s where having a domestic market as well is helpful, although they are having their own challenges, particularly from a costs perspective.”
From humble beginnings, forestry has become New Zealand’s third-largest export after dairy and meat.
In the June 2024 year, exports of forestry products from New Zealand totalled $5.75b –57% of which was destined for China.
The Ministry for Primary Industries said forestry export revenue is expected to rebound 4% to $6b in the year to June 2025year, recovering from domestic supply-side disruptions and slow global demand over the previous two years.
Early signs of increased building activity in China could lead to higher demand for logs and some processed wood products, but overall global demand remains low for wood products. On the supply side, closure of some wood processing plants will lead to lower production capacity in the near term.
“Uncertainty remains due to the instability of global economic recovery, potential trade barriers, and continued high input costs,” the ministry said in its latest Situation Outlook.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in2011.
NZ log market steady despite Chinese New Year slowdown - By Marcus Musson
Director of Forest 360 · The Country · 1 Feb, 2025
Content brought to you by Forest 360
THREE KEY FACTS
Chinese New Year may extend sawmill shutdowns, with inventory nearing 4 million m3 post-holiday.
US President Donald Trump is considering tariffs that may affect China.
Domestic log demand is solid, with pruned log prices $70/tonne higher than unpruned.
Another New Year, another hole in the belt, another bunch of “get fit” and “sobriety” resolutions that probably won’t make it past the couch or fridge, and another year of anticipation on what might be around the corner for the commodity trades.
The past few years have certainly been ones to forget with massive inflation-related cost increases, erratic demand thanks to the Chinese construction implosion, and unforeseen weather events.
Hopefully, these will be buried in the past and 2025 will be one out of the box.
We all have hope, but unfortunately, reality generally gives us a quick backhand to shake us out of dreamland.
While 2025 has started well with increased At Wharf Gate (AWG)export returns, the underlying demand profile isn’t much different from last year.
January’s AWG prices are up a few dollars to around $128/m3 in southern North Island and northern South Island ports with$2-3 more in Tauranga and Marsden and up to $20/m3 less in Lyttelton and other southern ports.
These numbers will get the woodlot sector fired back into life, especially during the summer months, but these increases are purely driven by lower shipping and exchange rates, not demand.
The market does not need increased supply and any increase in supply will likely result in lower sales prices.
Chinese New Year holidays (CNY)started on January 29 this year and many sawmills had already closed as their work force returned to their home provinces.
This shutdown generally lasts four weeks and there is some expectation that this year the break may be slightly longer.
Off-port uplift in early January was around 65,000m3 per day and inventory is sitting at a shade under 2.9 million m3, an increase of approximately 200,000 m3 on the month prior.
It is likely that inventory will get close to 4 million m3 post CNY which is getting into pucker territory for exporters.
There is some sliver of good news with the Chinese construction sector reporting that residential house price declines have slowed with a 5.3% decline in December compared to 5.7% in November.
December marks the 18th consecutive month of price decreases and it is now widely expected that the bottom has been or is close to being found.
There’s still purportedly around $US1 trillion ($1.7 trillion) of stimulus to be thrown at the sector to try and get some traction but with around two years’ unsold housing stock in the system, it may not be until mid-2026 that we see some significant upward momentum.
An interesting development has been the inception of the Chinese log futures market in November last year.
The theory behind this is to use futures as a hedging tool to stabilise price and mitigate risk for buyers.
At present, there are around 3 million m3 under futures contracts with many due for delivery in late June.
This date is important as it coincides with a historic low log demand period in China and the hope is that this may bolster demand in that period.
While still in the early stages, the futures market appears to be trading above spot with positive sentiment.
All eyes will be on Trump for the next few weeks as the inauguration palaver subsides, and the Don gets into asserting his authority on the US situation.
It’s anyone’s guess as to what random decrees will come out, but tariffs are the one headline that will have both a direct and indirect impact on China and therefore New Zealand.
If the tariffs are implemented at the level Trump has threatened, there will be a reduction in demand for Chinese furniture which will flow into log demand.
Back home there are plenty of news reports outlining increased residential building activity as interest rates ease and the population continues to grow.
There is a general view that construction costs have stabilised and many people who have been sitting on approved building consents are now hitting the go button.
Domestic sawmills are all back into action and log demand is solid for both pruned and unpruned.
Pricing remains relatively flat from Q3 and Q4 and those with pruned forests will be very happy with their decision as pruned log prices continue to track around $70/tonne higher than their unpruned cousins, converting to around $8,000/ha at harvest.
Post-New Year carbon trading has been relatively stable with the current spot price at $63.90/NZU.
The next government auction is on March 19 and all eyes will be on whether there is a full or partial clearance.
At current spot levels, the return is still very attractive for anyone looking to retire low-productivity land.
So, things are looking good for the start of the year and export pricing should hold into February, however, things might get abit sticky post-CNY, depending on supply levels.
That might be a good time to kick the running shoes back under the couch and reach for the fridge again.
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