Recent reports from the New Zealand Forest Owners Association confirm that the COVID-19 outbreak in China is having a major impact on supply chain logistics and has resulted in a near halt to the NZ-China log trade. China is the largest export market for New Zealand generally and for New Zealand forest products in particular; it accounts for a massive 80% of NZ log exports. It is a critical customer for industrial-grade logs which are not suitable for domestic NZ construction and local sawmills.

In addition to revenue shortfalls, USD-denominated investors will be impacted by the falling New Zealand dollar, down more than 7% for the YTD and closing on Friday Feb 28 at 0.6252, a level not seen since the global financial crisis.

New Zealand has been the premier worldwide forestry investment geography over the current economic cycle and has greatly benefited from a stable domestic economy, well-managed plantation investments and a booming China. With China accounting for the lion’s share of all New Zealand log exports, forest owners will be challenged in the short term to expand secondary and tertiary markets in Asia such as South Korea, Japan and India and to retain critical logging crews during this slowdown.

With its world-class natural and human resources, the long-term outlook for New Zealand forestry remains positive. The most tenacious, creative and well-capitalized teams managing these resources will persevere and be well-positioned when markets eventually stabilize.