September has brought a mixed picture for the forestry sector, with seasonal weather disruptions affecting harvest activity in some regions while export log markets continue to show signs of resilience. Log prices remain remarkably stable, although elevated freight costs and ongoing uncertainty around the Emissions Trading Scheme (ETS) continue to influence sentiment across the industry.
Export Market Showing Signs of Improvement
China remains New Zealand's dominant export log market and there are some encouraging indicators emerging. China's manufacturing PMI improved from 49.2 to 49.8 during August, with both production and new orders returning to expansion territory. While activity remains slightly below growth levels overall, the trend suggests improving industrial confidence.
Log inventory at Chinese ports has fallen to approximately 2.38 million cubic metres, down around 90,000 cubic metres since July. Daily log offtake is currently around 60,000 cubic metres, indicating steady demand as China enters its traditional "Golden September" construction and purchasing period.
Market participants report cautious optimism in several key regions, with relatively low radiata pine inventories helping support prices. However, processors and traders continue to face tight margins, limiting their ability to absorb significant cost increases.
Freight Costs Continue to Challenge Returns
A significant issue for forest owners and contractors remains shipping costs. Freight rates are currently sitting around USD $46-$47 per cubic metre, approximately 50% higher than the same time last year. Ongoing instability in the Middle East, increased fuel costs and vessel availability continue to place upward pressure on ocean freight.
While exporters have attempted to achieve modest log price increases to offset higher freight charges, Chinese buyers have shown resistance, with many already operating on thin margins.
Domestic Market Remains Relatively Strong
The domestic processing market continues to provide some positive signals. Demand for framing and outdoor timber products remains solid, supported by residential construction activity. Building consents for the year ended July 2026 were up 21%, helping underpin demand for structural timber products.
Pruned log demand remains firm due to declining availability of pruned forests and sawmills expanding procurement areas to secure supply. However, some pruned timber markets, particularly in the United States, continue to experience softer demand and reduced returns due to higher shipping costs.
ETS Uncertainty Returns
The ETS has once again become a prominent election issue, with major political parties proposing significantly different approaches to carbon policy. This uncertainty has contributed to volatility in NZU prices, which recently fell below $50 per unit after dropping around 10% in a week.
The forestry sector will be watching post-election policy discussions closely, as future ETS settings will have a major influence on land use decisions, forest investment and overall confidence across the sector.
What Does This Mean for Contractors?
From a contractor perspective, the market remains relatively balanced. Export log prices have largely traded within a narrow range for more than a year, providing greater stability than many operators have experienced in recent times. While this stability is welcome, persistent cost pressures, particularly fuel and machinery operating costs, continue to challenge profitability.
Contractors should expect harvesting demand to remain generally steady heading into summer, supported by stable export prices, improving Chinese market fundamentals and ongoing domestic processing demand. However, freight costs, fuel prices and policy uncertainty remain key risks that could influence market conditions during the months ahead.
Bottom line: The market outlook remains cautiously positive. Export demand is showing gradual improvement, domestic timber demand remains healthy, and log inventories in China continue to reduce. While no major price uplift is currently expected, the sector appears to be entering the final quarter of 2026 on a more stable footing than many had anticipated earlier in the year
