Post: NCT General Manager Update

March 7, 2026

NCT General Manager Update

The Exchange Rate and its real impact on NCT

Few variables shape the fortunes of South African export industries as powerfully — or as unpredictably — as the exchange rate. For NCT and its growers, the strength or weakness of the South African rand (ZAR) against the US dollar (USD) influences member income, competitiveness, mill performance, shipping costs, and the sustainability of our value-chain.

The Rand as our Revenue Multiplier

Every tonne of woodchips we sell internationally is priced in US dollars. That dollar value must then be converted back into rands — and this is where the exchange rate becomes critical. When the rand is stronger, for example around R15.90/USD, exporters receive fewer rands per dollar earned. When the rand is weaker, such as above R18/USD in earlier periods, exporters receive significantly more rands for the same dollar price. A shift of even 50 cents can change the outcome of an export cycle; a shift of one rand can translate into tens of millions of rands gained — or lost.

Global forces are driving exchange-rate valotility

The recent combination of a strong rand and a weaker US dollar show a combining of global and domestic forces that have tilted currency dynamics in the Rand’s favour. First, US dollar softness has emerged as investors grow cautious about US trade policy and reduced risk appetite, leading to sustained downward pressure on the greenback. Trump’s approach has made markets nervous. Second, improving domestic conditions in South Africa, including fiscal consolidation, a primary budget surplus, and credit-rating stabilisation or upgrades, have bolstered investor confidence and supported rand strength through late 2025 and early 2026. This has been supported by strong commodity prices, especially gold, silver and platinum. Third, shifting global monetary conditions—including expectations of US Federal Reserve rate cuts and South Africa’s clearer inflation path—have narrowed the interest-rate gap between the two countries, encouraging capital inflows into rand-denominated assets and reinforcing ZAR appreciation. Together, these three drivers explain why USD/ZAR has recently traded near the R15.90–R16.00 range, despite South Africa’s structural constraints, creating a currency environment that is simultaneously externally favourable yet operationally challenging for exporters.

What this means for NCT’s export business

Exchange-rate movements directly influence the rand value of every vessel we ship — regardless of whether USD prices rise, fall, or remain stable. The impact on revenue on both wattle and gum is very severe. This revenue gap is not caused by falling USD prices, weak demand, logistics failures, or poor performance, not because of poor marketing, not because quality changed, but simply because the rand strengthened.

The broader strategic effect on NCT into 2026 and beyond

Exchange-rate forecasts for 2026 indicate volatility but a likely stabilisation around R16.00–R16.50/ USD. It seems likely gradually to push towards R17/USD beyond that. This range now forms a crucial part of NCT’s planning and pricing models. NCT competes directly with suppliers from Australia, Vietnam, and Latin America.

The strength of the rand erodes our global competitiveness, and with markets under stress, some of our competitors have already adjusted wood chip prices downward — reducing the scope for recovery through a potential USD price increase. Australian companies lost substantial market share in the past two years by adopting a stance that made them uncompetitive, but they have now adjusted their approach.

Facing the current market and FX scenarios, NCT must consider the cost of members’ timber and identify what the Co-operative can reasonably afford to pay while preserving a sustainable business model. This will lead to a reduction in log prices across all species, a decision communicated to members prior to this publication. Although NCT must reduce Mill Delivered Prices (MDPs) in the current environment, our commitment remains clear: when conditions improve — whether through a weaker rand, stronger demand, or higher USD chip prices — NCT will prioritise recovering these prices for members.

Managing FX Risk: How NCT navigates uncertainty

To protect the Co-operative and its membership base, NCT continues to employ a balanced approach. We use long-term customer relationships and contract structures; conservative capital expenditure plans; and we strive to ensure optimum operational efficiencies on farms, depots and mills. We also continuously monitor economic trends and commentary by global analysts, their models and analyse endless risk scenarios. We use a conservative hedging strategy that allows us to participate if the rand weakens but allows us to protect our carefully structured budget levels as the rand strengthens. This strategy has gone a long way in cushioning the rapid strengthening of the rand this time around.

What members should take away

People often say NCT must adopt a business model that is independent of the impact of the exchange rate. The exchange rate is not only a macroeconomic indicator – it is a direct determinant of grower income. As we move into 2026, the rand remains stronger than recent years, compressing export revenues; domestic costs continue to rise independently of FX; USD chip pricing is constrained by weak Asian pulp and paper markets and competitor concessions; and NCT’s responsibility is to remain sustainable, equitable, and competitive – even when market conditions tighten sharply.

Some argue that NCT should operate independently of exchange-rate impacts or use a business model that is not sensitive to exchange-rate impacts but for an exporter, is a core part of the business model. What we can do is deliberately build FX volatility into our strategic and operational decisions to protect the Co-operative through both strong-rand and weak-rand cycles. That said, what NCT must further do is continue to adapt our strategic and operational decisions around competitiveness, diversification and tactical positioning in readiness for the next economic up cycle.

Despite current pressures, NCT remains committed to its members: when the environment improves, the Co-operative will move swiftly to restore MDPs and return value to growers. With prudent management and unity across the value chain, the Co-operative will navigate these conditions and be ready to capitalise on them.

Source: NCT