Carter Holt Harvey’s plywood mill closure marks the fourth major NZ mill in 12 months, as economic slowdown and US tariffs hit the wood sector.

Struggles of the New Zealand economy continue to weigh on the domestic wood processing sector. Yet another processing site is set to seize operations – Carter Holt Harvey’s (CHH) Tokoroa plywood mill – marking the fourth major mill closure in the past 12 months.

Falling interest rates through last year and the start of this year were hoped to revitalise the construction sector, but this has been more than undermined by general economic troubles, reflected in Q2 GDP change of -0.9%, much worse than the market forecast of -0.3%.

Mills are also facing pressure from overseas trade wars. The US investigation into wood imports was recently concluded, with a 10% tariff on imported timber last week, alongside a 25% tariff on various wood furniture and cabinets. Timber was previously being allowed into the US tariff free. By value, the US is New Zealand’s largest export buyer of sawn timber, with a 32% market share in the past 12 months.

Domestic log pricing has mainly moved into Q3 at a near-stable level, where a good level of log supply has been balanced out by mildly firmer wharfgate log prices versus three months ago. Domestic market dynamics are softly changing through the central North Island and areas that feed into it, as the Kinleith paper mill closure has reduced pulp log demand, while it’s expected that structural logs will be more sought after as CHH consolidate structural timber production into their Kawerau plant following the closure of their Eves Valley plant near Nelson.

Another period of relative stability was welcomed for export log sales last month. There was some minor downside on CFR (in market) prices into China, which was unexpected going into the month. But this hasn’t been due to a fundamental change in the market, rather a temporary slowdown due to buyers having more difficulties securing Letters of Credit, which is expected to be temporary. The outlook for the rest of the year remains mildly positive. The ongoing favourable exchange rate plus steady shipping costs worked to keep prices at the NZ wharfgate near steady last month, although shipping costs were rising through the back half of September.

Carbon markets have been near steady recently. The third quarterly Government auction for the year went as expected – zero units sold with not a single person signing up to participate. Secondary markets have mostly ranged between $56.50/NZU and NZ$58/NZU over the past four weeks.

Source: farmersweekly.co.nz