Author: Roger Dickie

The New Zealand forestry market continued to show encouraging signs of stabilisation in April, with stronger export log pricing supported by improving consumption in China and lower overall inventory levels. While conditions remain below the highs of previous cycles, the market has improved noticeably from the difficult trading conditions seen earlier in 2026, providing greater confidence that the sector is moving into a more balanced and sustainable phase.

Export log prices strengthened during the month, with A-grade logs sold on a Cost and Freight (CFR) basis into China, trading around USD $127–129 per Japanese Agricultural Standard cubic metre (JASm³). Domestic log pricing in New Zealand also remained generally stable to slightly firmer, particularly in regions where mills continued to compete for supply, highlighting ongoing underlying demand across both export and domestic markets.

The primary driver behind the improvement was a reduction in softwood log inventory levels across China. Inventory cover has fallen significantly from the elevated levels experienced earlier this year as vessel arrivals slowed and daily consumption improved. Reduced supply from New Zealand due to weather disruptions and holiday shutdowns also helped rebalance the market during April, contributing to a healthier supply-demand dynamic.

Despite some ongoing challenges, underlying market conditions in China are showing gradual signs of improvement. Construction activity and residential housing development remain below long-term averages; however, industrial activity and packaging-related demand continue to demonstrate resilience, particularly through parts of the Yangtze River region where higher-quality fresh logs continue to attract strong interest.

China’s broader manufacturing sector also continues to show resilience, which is helping support industrial timber demand despite ongoing softness in the property market. This has created a more stable and balanced environment than earlier in the year, with buyers remaining active while continuing to manage pricing carefully.

While pricing improved through April, there is increasing market consensus that the sector may be transitioning toward a more sustainable pricing range following the sharp volatility experienced over recent periods. Exporters continue to manage rising harvesting, shipping, and operational costs in New Zealand, while Chinese buyers remain disciplined due to softer downstream demand and the approaching seasonal slowdown in construction activity.

As a result, overall market sentiment is best described as steadily improving but measured. The market has stabilised considerably compared with earlier this year, and participants are increasingly optimistic that lower inventory levels and more balanced supply conditions will continue to support pricing stability through the medium term.

Shipping costs also remain one of the largest influences on forestry profitability. Although fuel pricing eased slightly during April, freight rates remain elevated due to vessel availability, oil market volatility, and ongoing geopolitical tensions affecting global shipping markets. However, easing fuel costs and improving shipping efficiencies may provide some support to exporters if current trends continue.

Foreign exchange movements also continue to play an important role in exporter returns. The New Zealand dollar (NZD) strengthened modestly against the United States dollar (USD) during April and early May. A stronger New Zealand dollar reduces exporter returns when offshore revenue is converted back into local currency. Meanwhile, the Chinese yuan (CNY) has remained relatively stable against the United States dollar, supported by improving manufacturing activity and continued economic support measures within China.

Within New Zealand, domestic forestry conditions remain relatively steady, with processing businesses continuing to adapt to softer construction activity and rising operating costs. Some harvesting operations located further from ports or mills have slowed due to reduced profitability, while several domestic mills have increased short-term pricing to maintain supply security, reflecting continued competition for quality supply.

The sector also continues to navigate longer-term structural challenges, including pressure on domestic wood processing capacity, labour availability, and uncertainty about future investment in manufacturing infrastructure. At the same time, these challenges continue to create opportunities for future investment, operational improvements, and increased focus on domestic value-added processing.

Carbon pricing strengthened during April, with New Zealand Units (NZUs) continuing to recover from earlier lows. Improving carbon pricing has supported forestry asset values and further reinforced the sector’s strategic importance within New Zealand’s broader climate and land-use framework. The market is increasingly recognising the structural supply shortfall within the ETS, although longer-dated pricing still reflects some caution around future policy settings and market intervention. At RDNZ, we expect tightening market dynamics and growing recognition of constrained supply to place further upward pressure on carbon pricing over the near term.

From an investment perspective, the forestry market appears to be transitioning from an uncertain environment to a more stable, balanced trading period. Lower inventory levels in China and improved consumption have helped restore pricing stability, while resilient industrial demand and improving market fundamentals continue to support cautious optimism across the sector.

Current conditions continue to support harvesting and export activity, where operational efficiencies remain strong. Although near-term upside may remain measured due to ongoing freight costs and seasonal factors, the sector is now operating within a significantly more stable environment than earlier in the year, providing a stronger foundation for improved confidence and future recovery across the forestry industry.

What does the India Free Trade Agreement mean for Forestry investors in NZ?

The signing of the New Zealand–India Free Trade Agreement on 27 April 2026 represents a material tailwind for New Zealand forestry and, importantly, for Roger Dickie NZ (RDNZ) managed investments.

At its core, the agreement materially improves market access at a time when diversification and value uplift are critical to long-term returns.

More than 95% of New Zealand’s forestry and wood product exports will enter India tariff-free from day one, with nearly all remaining tariffs eliminated over the following seven years. This is a meaningful structural shift that reduces friction at the border and immediately improves the competitiveness of New Zealand timber & fibre in one of the world’s fastest-growing economies.

India already represents New Zealand’s largest wood export market by value within South Asia, with exports of $134 million in the year to June 2025. However, this agreement signals something more important than current trade flows: it materially expands the addressable market.

From a capital allocation perspective, this creates three clear tailwinds for forest owners.

First, margin expansion. Tariff removal flows directly through to improved netback returns, supporting higher returns over time.

Second, market diversification and size. India provides a credible alternative demand centre alongside China, reducing concentration risk and improving pricing resilience across cycles.

Third, value realisation. The agreement is expected to accelerate demand not only for logs but also for higher-value processed timber and engineered wood products. This aligns strongly with the sector’s long-term strategic direction, moving up the value chain rather than remaining volume-driven.

Equally important are the non-tariff benefits. Streamlined customs processes and clearer regulatory frameworks should reduce delays and improve delivery certainty, both critical factors for exporters operating in tight-margin environments. The agreement also opens the door for deeper collaboration in forestry research, education and sustainable practices, supporting productivity gains over time.

For Roger Dickie NZ investors, this reinforces the underlying investment thesis: well-located, well-managed forests with access to diversified export markets are increasingly valuable assets with a solid footing.

Improved access to India strengthens the full forestry value chain, from potentially higher timber prices through to processing and export infrastructure. That has flow-on benefits for regional New Zealand, where forestry underpins employment and economic activity, as well as for asset values and long-term cash flow stability.

Trade agreements of this scale are infrequent. This one positions New Zealand forestry and Roger Dickie NZ forestry investments, with a stronger foothold in a growth market at a time when global demand for sustainable building materials is accelerating.

While the agreement still requires domestic ratification, the direction of travel is clear. For investors, this is a structural positive: better market access, improved pricing dynamics, and increased optionality in how and where New Zealand timber is sold.

In short, this is a positive step forward for forest owners and enhances the long-term investment thesis and potential of New Zealand forestry assets.