The crack nobody wanted
Forestry operators called it the longest flat run of export price stability anyone could remember. Through late 2025 and into early 2026, New Zealand log prices held remarkably steady, giving regional economies that depend on the sector something close to certainty. That run is over.
The PF Olsen Log Price Index sat at $122/m3 through May 2026, a number that looks respectable until you look underneath it. CFR prices for A-grade logs slipped to NZ$126-127 per JASm3 in April, with exporters accepting cuts of about NZ$2 per JASm3. By May, Laurie Forestry identified a US$7/m3 shortfall at the log trader breakeven level, meaning Chinese traders were losing money on every New Zealand log they bought. That gap does not close gently.
The arithmetic of $4 diesel
The proximate trigger is fuel. The Middle East conflict drove diesel to $4 per litre for some forestry operators during the April peak. The maths is punishing and worth spelling out.
Forestry harvesting consumes roughly 4 litres of diesel per tonne of logs produced, with a further 2 litres needed to transport logs 100km to port. A $1/litre fuel increase therefore strips $6 to $8 per tonne straight off the bottom line, depending on distance from markets. When the margin on a log is already thin, that is not a cost increase. It is a reason to stop cutting.
And they did stop. Farm Forestry Association president Dougal Morrison reported a 30% reduction in log volumes by late April, citing port figures. By May, harvest volumes were running 20-25% below normal nationally. Peter Davies-Colley, director of Northland logging company Tree People, told 1News his firm had no felling booked after April because all clients halted work. “It doesn’t make sense for them to harvest,” he said, “on the day that high fuel prices means that their forest isn’t worth anything.”
China is buying less of everything that uses wood
The fuel shock alone would have been manageable if offshore demand were strong. It is not. Retail furniture sales in China fell 10.4% year-on-year in April, while construction and decoration materials dropped 13.8%. Softwood lumber imports into China collapsed 32.8% year-on-year to 967,000 cubic metres.
Here is the detail that tells you how weak demand really is. Log inventories on China’s Eastern Seaboard have actually fallen, from around 3.5 million m3 in early March to 2.6 million m3 by early May. Tighter inventory should push prices up. Instead, prices are still under pressure because end-market consumption has slipped below 60,000 m3 per day. The demand is not there to absorb even reduced supply.
Contractors are carrying the heaviest load
The human cost concentrates in the contractor base. The Forest Industry Contractors Association estimates $300 million in capital investment since 2013, mostly from family businesses running 2-3 crews with 10-30 employees. These operators cannot idle expensive machinery without ongoing fixed costs eating them alive.
Forest 360 director Marcus Musson warned in the NZ Herald that the stress extends beyond logging crews to sawmills forced to take shifts out due to lack of log availability. Laurie Forestry captured the dynamic bluntly in April: “Loggers and truckers look to be the ones digging the hardest, accepting rate increases to do work that do not cover diesel cost increases.”
A $6.28 billion sector losing altitude
This is not a niche commodity story. New Zealand forestry exports totalled $6.28 billion in the year to December 2025, with China receiving 55% of the total. The MPI’s June 2026 SOPI forecasts a 1% decline to $6.1 billion in the year to June 2026, followed by a further 2% drop in 2026-27. That is roughly $180 million in export revenue gone over two years, concentrated in regions where forestry is the dominant employer.
The one genuinely forward-looking positive is the India FTA. Laurie Forestry’s May report notes growing expectations that the agreement will remove US$6-7 per m3 in pre-FTA tariffs, a material saving when every dollar of margin counts. India’s long-term infrastructure demand is real. But the catch is obvious: if the contractor base contracts too severely this winter, the sector may not have the harvesting capacity to supply the Indian market when it opens up.
Laurie Forestry characterised the current harvest slowdown as “healthy for holding on to export prices”. That framing says everything. The sector’s pain is the only thing preventing a worse price outcome. Regional New Zealand is heading into winter relying on an export earner that can only hold its price by not producing.
Sources
- Forest 360: March 2026 market update (2026-03)
- Tridge Insights: Stable New Zealand log prices amid softening demand (2026-06-01)
- Wood Central: Weak China demand squeezes New Zealand log premiums (2026-04)
- 1News: Forestry cuts back amid fuel hikes from Middle East conflict (2026-04-29)
- Laurie Forestry: Monthly report May 2026 (2026-05)
- Laurie Forestry: Monthly report April 2026 (2026-04)
- Interest.co.nz: Forest owners need higher prices as harvesting costs jump (2026-03-31)
- NZ Herald: Fuel price shock and tariffs threaten to end log export price stability (2026-03)
- Canopy (MPI): Annual forestry exports (2025-12)
- MPI: Situation and Outlook for Primary Industries June 2026 (2026-06)