Higher fuel and shipping costs are stripping up to $8 a tonne from forest owners. Photo / 123rf
Higher fuel and shipping costs are stripping up to $8 a tonne from forest owners. Photo / 123rf
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THE FACTS
Iran has effectively restricted the Strait of Hormuz as the Middle East conflict escalates.
Brent crude has risen sharply since the conflict began, as markets react to supply risks and oil flow disruptions out of the Middle East.
The conflict is also pushing up bunker fuel prices and shipping costs.
Autumn, the season with one foot in summer and the other in winter.
Unfortunately, most New Zealanders feel that the 2025-26 summer also had a foot (or maybe a foot and a half) in winter, with plenty of rainfall andbelow-average temperatures over most of the country.
Summer also tends to be the season when we get significant storm damage.
This is highlighted by the tragic slip at Mount Maunganui, the storm damage on the East Cape, which created around 11,000 slips in one event, and a recent windstorm that caused significant wind damage to forests in the Whanganui and Rangitīkei districts.
Let’s also not forget that the two cyclone sisters, Hale and Gabrielle, which wreaked so much havoc, were both in summer.
New Zealand’s summer camping holidays are becoming a case of more dice rolls than a craps table.
So here we are, heading into autumn feeling a bit ripped off, and then Donald Trump decides to go all out on Iran.
It’s no secret that the Iranian regime has been poking the grizzly for a while, and we all know the Trump ego is one bear that doesn’t like to be poked.
However, the adage that if you’re going to kick a tiger in the backside, you’d better have a good plan for its teeth has rung true for the Don as the Iranians shut down the Strait of Hormuz.
This hasn’t been ideal for world fuel prices, with around 20% of global supply going through the strait.
Oil prices have jumped about 30%, and we’re looking down the barrel of more than $3 a litre for diesel if the strait stays closed.
Those who jumped into EVs will be feeling smart as the rest of us have to forgo our morning latte in order to afford to get to work.
Industry, however, relies on diesel to keep the wheels of commerce turning, and any significant increase will feed back to the consumer in one form or another.
Unfortunately, forestry is a particularly fuel-heavy industry.
The rule of thumb is that it takes about four litres of diesel to turn trees into a tonne of logs and put them on a log truck. Assuming a 100km cartage distance, it costs another two litres to get them to the port or sawmill.
If you take the current increase in fuel of around $1 a litre, you’re looking at $6 a tonne straight off the forest owners’ bottom line ($8 a tonne if you’re 200km from markets). Thanks, Don.
Unfortunately, this scrap also affects bunker oil prices, meaning shipping costs are heading north, too.
Image / Forest 360
It’s well known that shipping companies are like the four horsemen of the apocalypse and will take any opportunity to increase prices.
Current vessel offerings to China are up at least US$10 a cubic metre (m3) on February numbers, and some are up as much as US$15/m3.
India charters are eye-watering in comparison, and many are throwing the boat in reverse and heading to different markets.
While March export prices have continued the longest flat run in memory, with A grade in the early to mid $120/m3 territory, April will likely be a different basket of apples.
The Chinese New Year holidays are over, and everyone is back at work with sawmills fired up and wood flowing through the system.
In-market log inventories grew as expected during early March and now sit at about 3.5 million cubic metres, which, with offtake heading back to the 55,000m3/day mark, gives approximately 60 days’ supply.
Although a reasonable chunk of this inventory is ageing, and there will be demand for fresh volume (especially from the furniture sector), this level makes it reasonably difficult to leverage any significant price increases, especially enough to cover the increases in shipping.
Having said that, uplift is expected to increase seasonally to 70,000m3/day into April, which will reduce the inventory reasonably quickly. The CFR price has also moved up a bit to about US$120/m3 in the past week.
Image / Forest 360
The domestic scene is looking a bit rosier, with January 2026 consents for new dwellings up 1.9%. For the year ended January, the actual number of new dwellings was up 9.3% on 2024.
Meanwhile, consent data from Stats NZ, which is a good predictor of future wood demand, shows five months in a row of consent growth that was greater than the previous month.
Unfortunately, the consent stats don’t seem to be manifesting into reality, with unpruned sawmillers still feeling the pinch.
Sales remain hard-won, and there is a feeling that many are holding off hitting the go button, given uncertainties around the Middle East and the looming New Zealand election.
Pruned sawmills are still walking uphill on struggle street as European and US demand for clearwood has stalled, and the tariffs hang heavy in the air.
NZU prices have bumbled along with poor demand and lower transactions.
The current spot price sits a shade over $44/NZU, which is not going to get anyone fizzy.
Once again, the election may come into play here with a potential change in Government and policy direction.
So, April is looking untidy and might be the month that we need to brush the rust off the steel undies and brace ourselves for an end to the longest run of export price stability in memory.
New Zealand supply will undoubtedly reduce in response to both reduced prices and increased fuel-related costs.
How long this sticky period lasts will depend entirely on how long and sharp the tiger’s teeth are. At this stage, they look quite pointy.
