THREE KEY FACTS

* US President Donald Trump's tariffs on China have reached 145%.
* China’s demand for New Zealand logs is still strong, with off-port uplift in the order of 70,000cu m per day in late March.
* Currently, there is a temporary tariff exemption on New Zealand’s forest products.

With the current US/China tariff of 145% (pick a number for what it could be next week), it’s very likely that there will be a significant reduction in goods manufactured in China headed to the US – furniture included.

New Zealand-grown pinus radiata is very popular in the Chinese furniture industry due to its properties, as it can easily be sawn, dried, glued, laminated, painted and stained.

This sector has become more important to New Zealand as the construction sector continues to suffer, and demand for New Zealand radiata in construction has reduced significantly from 2021 onwards.

Having said that, China’s demand for New Zealand logs is still strong, with off-port uplift in the order of 70,000cu m (cubic metres) per day in late March.

On-port inventory remains a bit stubborn at a shade under 4 million cu m, however, this has reduced by 100,000cu m in the past few weeks.

March is historically a big supply month for New Zealand and this year was no different, with plenty of vessels on the water.

This supply, along with uncertainty in the market, has resulted in a downturn in buyer sentiment, with April cost and freight (CFR) prices dropping 8-10% based on March numbers.

This drop in sentiment has led to a reduction in at-wharf gate (AWG) prices across New Zealand of around $10/JAS (Japanese agricultural standard, a cubic-metre equivalent of log volume).
 

Generally, reductions are reasonably static across exporters, however, April has seen a significant spread across the board with reductions between $8 and $16/cu m, depending on the exporter and the port.

The effect of tariffs on bulk shipping rates will depend on reciprocal tariffs as the US only accounts for 2.3% of global dry bulk demand, however, it does account for 5.7% of dry bulk exports.

Forex has been playing the game if you’re an exporter with fluctuations between mid $US0.55 and $US0.57.

Every cent reduction in the New Zealand dollar to the US is around $3/cu m on the bottom line for AWG prices.

The Chinese log futures market hasn’t been terribly positive of late, either.

After trading mostly positively since its inception, pricing has dropped around 10% since the beginning of March, primarily due to negative market sentiment.

Carbon prices dropped off a cliff in early March, falling from $63/NZU to around $55/NZU by month end.

Market jitters are not helped by the likes of the Parliamentary Commissioner for the Environment, Simon Upton, suggesting that it was time to phase out forestry offsets for fossil fuel emissions.

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Source: nzherald.co.nz