The New Zealand steel industry enters the winter months, its least active period, still shadowed by a prolonged downturn in construction and manufacturing. However, early indicators suggest a tentative recovery may be emerging. Construction remains the industry’s primary demand driver, though activity across residential and commercial segments continues to be tepid. That said, Otago and Taranaki defied the trend, recording annual home consent growth of 31% and 23% respectively in April, according to Stats NZ. This suggests regional green shoots, where healthy commodity prices are giving reason for optimism. Infrastructure is set to take centre stage through the latter half of 2025. Government pipeline forecasts show $11.6 billion of investment planned for this year; led by transport, water and social infrastructure. NZ Infrastructure Commission figures show the fast-track approvals framework and identification of 149 priority projects are beginning to restore forward visibility for contractors and suppliers.

So, despite business confidence remaining low, sentiment appears to be turning. According to the BDO Business Wellbeing Index for May, just 49% of construction leaders felt positive about current performance, which is still a record low, but the outlook improved across most business metrics. In general, lower interest rates, easing inflation and softer construction costs are improving project feasibility. Cost inflation in the residential sector has slowed to 1.2% annually; while non-residential costs have stabilised at 1.7%. Still, caution dominates. Insolvencies remain elevated, with liquidations among construction companies up 37% year-on-year, accounting for nearly one-third of all business failures, according to BRANZ & Centrix Insolvency Data. Smaller operators remain vulnerable to payment delays and limited finance access. BRANZ reports that many firms are pricing work at marginal profitability to maintain continuity. This is an unsustainable trend.

The Reserve Bank of New Zealand’s decision in late May to lower its Official Cash Rate (OCR) to 3.25% will likely have given support to a broader recovery. All eyes will now be on its next OCR decision date: July 9. Meanwhile, mortgage rates are easing and stronger commodity prices (particularly in dairy) are buoying regional investment confidence. ASB Commodities Weekly reports that Fonterra has maintained a robust $10/kg Milk Solid payout for the current and upcoming seasons, which could support demand for rural infrastructure and steel / stainless steel-based assets. In a further positive sign for the steel industry, New Zealand’s GDP rose 0.8% in the March 2025 quarter, rebounding from a flat December and exceeding forecasts of only a 0.3% rise. The construction sector expanded 2.6%, buoyed by infrastructure and non-residential activity. Manufacturing output also lifted, driven by increased production of machinery and equipment, a segment closely aligned with steel use. These results follow five consecutive quarters of flat or negative growth. While annual GDP growth remains modest at 0.3%, the ASB FX Update says the recent figures add weight to the view that the economy is slowly regaining momentum.

Currency remains a key pressure point. The NZD traded around USD 0.59-0.61 during June. This was modestly weaker than the mid‑2024 levels. The depreciation pushed up the cost of imported steel and building materials. With imports typically priced in USD, the foreign exchange environment continues to pressure margins across the supply chain. Shipping conditions into New Zealand have been generally stable, though not without friction. Carriers have implemented significant capacity cuts – via blank sailings and vessel downsizing – to manage overcapacity. The Freightos Baltic Index says this has contributed to recent container equipment shortages in Asia, leading to longer lead times on some routes. In response, carriers issued general rate increases in mid-June, lifting spot freight rates from China to New Zealand by around USD 300 per TEU. Although rates remain well below pandemic-era highs, further peak season surcharges are expected. This takes into account the escalating geopolitical tensions in the Middle East which have already extended global vessel transit times and driven up oil prices. With the situation continuing to evolve, upward pressure on freight costs and inflation presents as a risk, underscoring the need to plan for sustained volatility.

In aluminium, a welcome development is the early ramp-up of Rio Tinto’s Tiwai Point smelter. Thanks to rising hydro lake levels and energy confidence, full capacity is expected by August, two months ahead of schedule. As one of the world’s lowest carbon aluminium producers, Tiwai’s boost is a timely lift for the metal’s ecosystem, with 90% of output exported globally. Meanwhile, Fletcher Building’s restructure continues to draw industry attention. The firm is integrating its NZ and Australian operations into two new trans-Tasman divisions called: Light Building Products and Heavy Building Materials (including steel and concrete operations). CEO Andrew Reding recently stated the group had seen “no significant improvement in market conditions” and noted “market volumes continue to be challenging”. However, in a June RNZ report, Fletcher said its asset divestment program had generated “strong interest”, with proceeds expected to support debt reduction and future returns.

In summary: despite recent challenges, the tone across the sector remains cautious but not without optimism. While recovery is likely to be gradual through 2025, a mix of stabilising domestic conditions, increased public sector stimulus and a more favourable cost environment may provide the footing needed to turn fragile sentiment into renewed activity. For a more detailed sector and pricing outlook, readers can refer to the latest Steel & Tube Procurement Update – June 2025.