It also means harvest activity increases in New Zealand, as more favourable weather allows higher productivity, supported by the expectation that prices will continue on a seasonal uplift.
This November might be slightly different, however.
There will still be vegans veganing and sketchy moustaches proudly worn, but the likelihood of a significant seasonal uplift in log prices this quarter looks rather dour.
While there have been some very marginal increases in At Wharf Gate (AWG) prices this month, it is mainly because of the NZ dollar (NZD) taking a bath against the US (and most other currencies), rather than increases in demand and sales price.
The A-grade short price at Southern North Island ports is around $125 per cubic metre (cu m), which has edged up by about a dollar month on month since August, continuing a very soft upward trajectory.
Shipping costs are back in the early US$30s/cu m after a short spike a fortnight ago, which was a result of tit-for-tat imposition of “special port fees” between the US and China.
These fees were placed on China-based vessels docking in the US by the US Government, which were closely followed by the Chinese Government reciprocating this for US-based ships docking in China.
Log inventories in China were up around 150,000cu m in October to 2.7 million cu m, with daily offtake in the 55-60,000cu m/day range.
October saw the Golden Week holiday in China, which stalled demand for a period; however, at the current run rate, supply and demand are finely balanced.
The Chinese manufacturing Purchasing Managers Index (PMI) vied with the New Zealand dollar over who could take the biggest bath in October, with a drop to 49.0, from 49.8 in September.
Anything under 50 indicates a contraction, and this has been the case since March this year.
The flipside is the non-manufacturing PMI, which covers services and construction, rose from 50.0 in September to 50.1 in October.
Historically, the non-manufacturing PMI would have been the one to look at because of the construction focus, but now that construction is not popular in China, the manufacturing PMI is more relevant, as this accounts for furniture making, which is overtaking construction in terms of log demand.
Thankfully, Presidents Xi and Trump have stopped throwing pencils at each other and agreed to concessions on both sides to de-escalate the trade scuffle.
This will be a relief to China-based furniture manufacturers, who were threatened with an additional 200% tariff in mid-October; however, it is unlikely to result in increased demand in the short term.
One thing for certain is that nothing’s for certain with Trump, and he is just as likely to change his mind next week.
New Zealand Units (NZUs) were a bit jealous of the NZD and PMI decline and decided to join the party after a surprise proposal by the Government to reform the Emissions Trading Scheme (ETS).
This proposal includes restricting the Climate Change Commission to a monitoring ability only and removing the requirement for the ETS to align with Paris Agreement targets.
Market commentators were generally united in the view that the continued fiddling with ETS settings (from successive Governments) has a significant impact on the scheme’s credibility.
Image / Forest360
Market reaction was swift, with the spot NZU market dropping around $10/NZU (20%) to $42/NZU before rebounding to $46.75 at the time of writing, effectively wiping out $1.6 billion of value from NZU holdings.
The use of the ETS as a tool to cut emissions is becoming more farcical by the day, and, with the Government’s pre-election promise of leaving the ETS alone obviously not being adhered to, the NZU price will likely stay subdued.
The next NZU auction is scheduled for December 3, but with the recent announcement, this is likely to be a non-event.
There are a few glowing embers for the domestic market, with builders indicating increased quoting activity in both commercial and residential sectors.
Cotality has recently released data showing property prices across New Zealand rose 0.2% in October, which is supported by Statistics NZ data pointing to September having the highest number of new dwelling consents since November 2022.
The September numbers show 3747 new residential consents were issued, which was a 27% increase on September 2024.
This has not yet resulted in a lift in sawlog prices; however, if this trend continues, we hope that some of the price reductions in Q4 will be reversed in Q1 2026.
The pressure is still on domestic pruned prices, with the cost of the US tariffs not being passed on to US consumers.
Many of the New Zealand sawmills that operate in the US clearwood market have had to absorb the tariff costs. Although some of this has been passed on to forest owners through reduced log prices, the majority will come directly off the sawmills’ bottom line.
So, with the focus now firmly on the slide into Christmas, it’s unlikely we’ll see anything remarkable in terms of increased log prices this side of the New Year.
With December and January being short production months, we’ll be looking at starting 2026 in a comfortable inventory position with lower supply levels, so there could be some upward pressure on the distant horizon.
In the meantime, groom the moustache, enjoy the tofu and start drafting your letters to Santa.