Forest360 NZ market update - November 2024Friday 15 Nov 2024
Interesting times. Trump’s in, and resoundingly with the senate, electoral college and populist votes. It looks like Elon is going to take the knife to as many government jobs as he can, tariffs will skyrocket, and democrats are top of the list in googling ‘how to move to New Zealand’. Those that understand the US economy and politics and, don’t pay much attention to media, will understand that there needed to be some major structural economic and social change if the US is to remain as a viable superpower, and this may be what is needed – only time will tell. What does this mean for our forest industry? China is our largest purchaser of logs, and it has been pretty well documented that the main sector our logs have previously been used in – construction – is about as popular as Rieko Ioane at the Sexton dinner table. Exports of logs to China in 2023 totalled 18 million cubic metres, and 2024 is looking to be slightly under that. Luckily, China has a massive wood-based furniture industry accounting for around 39% of total global furniture production, making it the largest in the world. In addition, exports of wood furniture from China have risen 24% in the first 7 months of 2024 – great news, then along came the Don. The US accounts for around 27% of the furniture exports out of China, which totalled $20 billion in 2023. The current tariff for Chinese furniture into the US is 5.4%. A report commissioned by the US National Retail Federation explored the impacts of proposed tariff increases on demand in the US. Trump hasn’t set any definitive tariff as yet, but the expected range for furniture is between 32.8% and 54.3% which the report predicted to result in a reduction in demand for Chinese manufactured product of between 73% and 87% respectively. If we assume the mid-point of 80% is likely, this will result in a total demand reduction of around 350 million pieces of furniture, a $16 billion drop in revenue and an overall 20% drop in total Chinese furniture exports, which is all a bit untidy. NZ radiata is a favoured product for the Chinese furniture industry due to its versatility and availability and as such, a reasonable volume of our log exports is utilised in this sector, therefore any reduction in demand for Chinese furniture products is going to directly impact us. What does the quantum of this impact look like? We won’t know until the tariffs have been set, but it’s very likely we will feel the impact in the medium term in the way of reduced supply volumes from NZ. More >> Source & image credit: Forest360  | ||
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