New Zealand is navigating a complex landscape of financial challenges, shifting global trade dynamics and subdued demand – particularly in the construction sector – with “sticky” inflation in key operational areas. The country is also experiencing a relatively weak exchange rate. The prolonged impact of these elements is being felt by many of New Zealand’s leading steel industry participants, who admitted as much in their 2025 half year results. The continuation of these conditions was recently cited by several companies as necessitating price increases, among them Vulcan Steel, Fletcher EasySteel, Asmuss, United Steel, Steel & Tube and Pacific Steel. Usually, the level of steel market activity is best shown by the volume of building consents. Unfortunately, in the year to the end of February 2025, the number of new homes consented dropped by 7.4%. Within that one-year period, consents on multi-unit homes dropped by 15.0% while consents on standalone homes enjoyed a slight rise of 2.3%. 

Meanwhile, over the year to the end of January 2025, the total value of non-residential consents dropped by 9.7%, with the approved building area decreasing by 15.4%. Notwithstanding, according to Forsyth Barr Investment Services, activity is expected to rebound in the second half of this year. A few factors are at play. First, New Zealand’s infrastructure and construction sectors witnessed some key events during March. Most notable were the Infrastructure Investment Summit in Auckland and legislative changes affecting project approvals, aiming to streamline decision-making processes, and reduce delays associated with traditional consenting methods. The convergence of the Infrastructure Investment Summit and the Fast-Track Approvals Act suggests a concerted effort to accelerate project approvals to boost New Zealand’s infrastructure development, and to increase government-led investment, while growing demand for construction materials such as steel, stainless steel and aluminium.

Another bright spot was the BusinessNZ PMI result in February which recorded continued expansion by the manufacturing sector. February´s PMI rate of 53.9 compared favourably with January´s 51.7. This was noted as a sustained improvement by BNZ’s senior economist, Doug Steel, who said: “It is one of several indicators that suggests the broader economy is turning for the better. Indeed, it indicates the pickup may be a bit faster than we are currently forecasting”. Elsewhere, Rio Tinto has announced its NZSA Tiwai Point aluminium smelter’s operator has approached power generators to seek more renewable energy to re-open the smelter’s closed fourth potline. This would assist in bringing more renewable energy online to meet growing demand for what is being recognised globally as its high-grade green aluminium.

New Zealand’s agricultural commodity prices have also enjoyed notable growth in the first quarter of 2025, as reflected in the ANZ World Commodity Price Index, which rose by 3.0% month-over-month. The Index said this increase was driven by higher returns across various sectors, including dairy, meat and forestry, signalling a robust demand for agricultural products, even though global shipping prices remained mixed. Despite farm input prices being forecast to move sideways to slightly higher, the improvement in agricultural commodity prices is expected to have a positive impact on investment for the sector and therefore the demand for steel and stainless steel products. This is especially so, given that a payout above $10 per kilogram of milk solids would mark the first time in 25 years that New Zealand’s dairy industry has had two consecutive high payout years. According to Farmers Weekly, this would generate approximately $2.95 billion of additional revenue for New Zealand’s dairy industry compared to the average payout over the past five years.

On the economic front, New Zealand’s interest rates remained stable as the Reserve Bank of New Zealand held the Official Cash Rate (OCR) steady, offering some certainty to the construction sector. The industry will be looking for a rebound this year, especially after the latest fourth-quarter GDP data showed a stronger-than-expected 0.7% growth, surpassing both the central bank’s 0.3% forecast and analysts’ 0.4% expectation. However, not all industries saw growth. Kiwibank chief economist, Jarrod Kerr, noted that while this marks the first step in the economy’s recovery, with early signs of improvement, significant weaknesses remain: particularly in the construction sector. This finding is backed up by the RLB Crane Index which has reported a steady decline in active cranes since 2023; a trend likely to bottom out this year. Meanwhile, the Westpac economist, Michael Gordon, predicts the Reserve Bank will cut the OCR twice in 2025, bottoming at 3.25%.   However, while lower interest rates are generally positive for the construction sector, elevated global economic uncertainty remains. Only time will tell whether this weighs on business investment decisions in the months to come.