New Zealand / Industry Insights
Increasing Exports And Domestic Price Rises Supports Forestry
by Allen Allday
Mar 14 2019

The Forestry and Logging Industry in New Zealand has experienced strong revenue growth due to increasing exports and domestic price rises over the past five years. Domestic demand for the industry has grown significantly due to increased domestic housing construction and ongoing rebuild efforts following the 2011 and smaller 2016 Christchurch earthquakes. Growth in timber prices and harvesting rates are expected to increase industry revenue by 4.0% in 2018-19, to $6.9 billion. Revenue has increased at an annualised 6.5% over the past five years. High export levels have also contributed to this growth in the industry. Exports account for just over 50% of industry revenue.

“Increasing house construction activity has boosted demand for building timber over the period. Strong demand from the Auckland housing market and earthquake reconstruction efforts in Canterbury have primarily increased house construction activity. Meanwhile, strong demand in China, South Korea and India has boosted industry exports” said IBISWorld Senior Industry Analyst Allen Allday. 

The Forestry and Logging Industry in New Zealand is made up of operators who provide logging services for forest owners or on plantations they own themselves. The vast majority of timber produced in New Zealand comes from forest plantations. Very few examples of native forest logging take place due to numerous conservation protections and regulations, making it very difficult to access exemption permits. In plantations, the lag from planting to maturity for tree types most commonly used is around 30 years. This lag leads to an industry heavily influenced by fluctuating levels of supply. Government deregulation of plantations, along with growth in the price of wood, lead to significant increases in numbers of trees planted in the 1990s. As well as primary harvestings, smaller amounts of timber can be collected during thinning activities, which remove smaller trees to allow larger trees to thrive. Thinning takes place over the maturation cycle, usually at 13, 21 and 28 years of age for Radiata Pines, which make up the majority of plantations. In some cases, early primary harvests have taken place to meet demand, and this is expected to constrain industry supply for some operators in the future.

New forestry and planting levels have fallen over the past five years.  This poses a threat to industry growth, as a decrease in the availability of trees will decrease future harvest rates. The time lag until plantations reach maturity can exacerbate this threat, as industry operators must anticipate demand levels over long time-frames and use this in their current decision making. Industry operators must make sure that early harvests are avoided where possible, and harvesting and planting is managed carefully and sustainably to ensure supply for future periods. Despite these threats, the industry is expected to continue to grow strongly over the next five years, mainly due to increased supply and rising demand both domestically and from export markets. The price of wood is also expected to grow, further driving revenue growth. Industry revenue is forecast to increase at an annualised 6.1% over the five years through 2023-24, to $9.3 billion.