FM Group Newsletter

Log Market Update

The Chinese market is showing signs of stabilisation. For the first time since March 2025, manufacturing activity has expanded a positive indicator as we move into the New Lunar Year. While this has fostered a degree of cautious optimism, it has not yet resulted in a USD price gain. Since November, prices have decreased by $5 USD.

Key market drivers since October include:

• Foreign Exchange: The depreciation of the NZD (dropping from an average of $0.61 to $0.58) has provided some relief. However, the Yuan has also weakened against the USD, offsetting some of these gains.

• Ocean Freight: We have seen freight costs soften. North Island rates are currently approximately $26 USD, with South Island rates between $30 - $31 USD. This represents a $2 - $4 USD reduction depending on the port configuration.

• Net Impact: The favourable movements in FX and ocean freight have effectively offset the $5 USD drop in sales price.

China is maturing as a market, with a distinct shift toward 5.9m lengths for improved conversion and tradability. Demand for lower grades (K, KI, and Pulp) is softening, while interest in A-grade (5.9m) and Douglas fir remains robust. Moving forward, securing sales for lower grades will likely require bundling them with a high percentage of A-grade and 5.9m lengths.

Notably, FM Group has successfully fixed prices on Douglas fir through the end of March, indicating that Chinese customers are willing to pay a premium for quality.

Global supply remains constrained as North American shipments fall short of forecasts, with only six vessels arriving from the US and Canada in December. European spruce volumes are limited by both a resurgence of insect infestations and the need to satisfy strong domestic European demand. This tightening supply, coupled with a healthy contraction in Chinese inventory to 4.5 million m3, is encouraging.

There is significantly tighter control on margins throughout the supply chain. Buyers are avoiding speculative purchases, and financiers are enforcing strict capital return requirements, prioritising immediate margins over long-term "catch-up" deals.

FM Group continues to supply the Korean market. Despite the price corrections in November, we are seeing steady demand for A-grade logs with preferred longer lengths. While the scope of this market remains limited, we have committed to a deck cargo from Timaru, combined with Nelson volumes, for late February. Korean prices tend to be more stable than Chinese; furthermore, the absence of fumigation requirements provides a distinct cost advantage.

We are monitoring the pending Free Trade Agreement for potential market shifts. While 2 - 3 vessels are scheduled for India and prices are stable, rising supply remains a risk. Freight costs and India’s low demand for pruned logs continue to make China a more viable option. Currently, larger NZ owners are absorbing these costs to prioritise market development, maintaining long-term optimism for this significant trade partner.

ETS - Carbon Price Update

The Emissions Trading Scheme (ETS) is a market-based policy tool designed to reduce greenhouse gas emissions by putting a price on pollution. Participants are required to buy carbon credits (NZUs) to offset their emissions. Each NZU equates to 1 tonne of carbon dioxide.

Recently, NZU prices have been trading below $40 per NZU. This has traded slightly downwards since our last newsletter, with an increase in selling pressure being seen in the market again.

At current prices, the carbon price is still significantly lower than the Government ETS auction floor price for 2026 of $71 per NZU.

Downwards market pressure has resulted from negative sentiment following the Government’s announcement in late 2025 and has been combined with increased sales volume.

2026 is the first year of a new Mandatory Emissions Return Period (MERP). At the start of each MERP, forestry ETS participants are required to file final emissions returns to claim NZUs for the previous period. This is resulting in additional supply entering the market as forest owners look to convert NZUs to cash. However, periods of price volatility are not uncommon within the ETS and we are noting that many forestry sellers are reluctant to sell at current prices.

Price movements during 2026 will be impacted by selling pressure alongside government decisions. The upcoming election and climate policies/promises will also be watched carefully for any signals being sent.

Resource Management Act Reform

The NZ Government is replacing the Resource Management Act with two new Acts with a view to making it simpler and cheaper for landowners to do things on their properties. The two bills are:

• The Planning Bill – establishes a framework for planning and regulating the use, development and enjoyment of land

• The Natural Environment Bill – establishes a framework for the use, protection and enhancement of the natural environment.

The new system will be designed to have much more input from Central Government, which will provide for more consistency in rules across the country. Clear purposes, goals and national standards will be set at government level, and these have to be used to develop new, combined regional plans. There will be 1 plan per region (17 in total across NZ), and each plan will have district planning rules and regional environmental rules in it. This has been called the ‘funnel’ approach.

There will be less red tape as rules will be more standardised across the country, and more activities will be able to be undertaken as permitted activities (not requiring consent). If required, consents will be issued under the Planning Bill, and permits will be issued under the Natural Environment Bill to undertake activities. As more activities will be permitted, there will be an increased focus on councils doing compliance monitoring.

When developing the standards that will govern the development of the plans, the effects of the activity on human health and ecosystem health will be taken into consideration (including protecting human health and ecosystems from natural hazards). Environmental limits will be set by government for air, freshwater, coastal water, land and soil, and activities must not degrade the environment below these limits.

One new consideration under the Acts is that councils must provide relief to landowners if new planning rules impact their property. For example, getting compensation in some form (rebates, monetary compensation, land-offsets, etc) if an outstanding natural landscape is placed over their property.

There are still a lot of unknowns about the proposed legislation. The type and number of standards have not been outlined, and it is not known what activities will be included under the standards, e.g. will there still be a standard for forestry as there is now?

There is also no guidance on how the two Bills interact with each other. Outstanding natural landscapes will come under The Planning Bill, but forestry activities will come under The Natural Environment Bill. So there could be a case where a forestry activity will need both a permit and a consent under each Bill to operate.

It is proposed that the new Acts will be enacted around May this year, and the first draft of standards will be released by the end of the year. The next set of standards will be completed in 2027, new council planning rules have to be completed by early 2028, and the regional environment rules will be completed by the end of 2028. The new system will be completely in place by 2030.

If you have any questions on the proposed bills, please give Sarah a call on 027 275 4251.

Northland Office

Forest Management Group is excited to announce that we have established an office in Whangarei to service the Northland region and its clients. This will be led by Matt Pederson who has extensive experience in the region and is a well respected forester and community member.

Services offered will be all things “forestry” from establishment and silviculture, ETS and consulting and harvesting, marketing and management. This is an exciting development for the Group and will add more scale to the North Island business unit.

Harvesting of the first woodlot has already commenced and there are multiple opportunities to explore in the region.

For any enquires around the Northland area, please contact Matt on 021 549 956 or email mattp@forestmanagement.co.nz

Ride the Wilderness

There is nothing like a bit of in-house competition to motivate staff to achieve their goals!

Over Labour Weekend, a crew from FM Group lined up for the iconic Ride the Wilderness, with race options for all. Early enthusiasm was high - 13 FM Group staff were keen - but as training plans met reality, 8 quietly disappeared, leaving the usual hardy bunch: Pat, Adrian, Bridget, Dom, and Corban.

Race day delivered. Dom decided that 125km wasn’t hard enough so he challenged himself to complete the race with zero training - fool or legend, your call.

Pat was short of his goal by 20 seconds, his race time was 5hrs 20 seconds, an effort guaranteed to keep him hungry for next year.

Adrian clocked 5hrs 9 mins, reportedly looking like he hadn’t just ridden 125km, then went to a concert that night - the ultimate endurance test.

Corban smashed his race, beating his goal time by 15 minutes.

Bridget quickly realised she was incapable of not talking for six hours, whether the other competitors (unable to get away) enjoyed her company remains unknown.

All told, a great day out with strong rides, lots of banter, and plenty of great stories.