NZ's fourth-largest export earner and its primary tool for meeting climate targets. Two systems in tension: production forestry for timber and carbon forestry for credits.
New Zealand's plantation forests cover 1.82 million hectares — 91% radiata pine. A small global player (1.1% of world trade), but a major regional employer with 42,000+ jobs.
Harvest volumes down 10.4% since 2019 (from 36.5M to 33.1M m³). China's property crisis and weak NZ domestic building activity are squeezing the sector. Several mills closed in 2024.
NZ's Emissions Trading Scheme lets forest owners earn carbon credits (NZUs) as trees grow. One NZU = one tonne of CO₂. But the market is struggling with oversupply and policy uncertainty.
NZUs trading ~40% below the $68 auction floor price. Government auctions consistently failing to clear. Market oversupplied with ~169M NZUs in private accounts. Forestry participants holding units rather than selling at current prices. Government cut 2025-29 auction volumes from 45M to 21M NZUs to address surplus.
Major restrictions on farm-to-forest conversions came into effect 31 October 2025, limiting how much productive farmland can be converted to exotic forestry in the ETS.
Policy driven by rural community concerns about "carbon farming" displacing sheep and beef farmers. Federated Farmers "Save Our Sheep" campaign blamed forestry for flock decline (70M in 1982 → 25M today). Industry counters that forestry area is less than it was in 2002 when sheep were already at 38M. Most ETS forest (88%) is on marginal LUC 6-8 land already unsuited to intensive farming.
China dominates — taking ~60% of NZ's harvest as raw logs. The weak Chinese property market is the sector's biggest headwind.
China's softwood log imports halved from ~50M m³ (2021) to ~25M m³ (2024). NZ's market share grew from 40% to 70% — a larger slice of a shrinking pie. Property sector contracted 11.2% YoY in H1 2025.
Global roundwood demand projected to rise 6.4% (2025-30). International prices expected to increase ~9% by 2030. But NZ faces high harvest volumes this decade as 1990s plantings mature, putting pressure on prices without corresponding demand recovery.
80% of NZ was once forested — now just 24% remains as native bush. Growing interest in native restoration for biodiversity, but economics favour exotics.
Māori own ~30% of NZ's plantation forestry ($4.3B in assets), expected to grow to 40%+ as Treaty settlements complete. ~40% of the forestry workforce is Māori. New policy restrictions on exotic forestry have particular implications for Māori land development options.
MPI forecasts forestry export revenue rising to $6.3B in 2024-25 (+9%), then $6.4B in 2025-26. But the sector faces structural challenges on multiple fronts.