WoodWeek – 19 July 2017

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Greetings from your WoodWeek news team. In a recent market summary, an industry commentator noted that no country in the world exports a higher percentage of its harvested conifer timber in unprocessed form than New Zealand. Although the share has declined over the past three years, as domestic demand from sawmillers has climbed, log export volumes accounted for 52% of the total harvest in 2016. This, of course is well-known to people across our industry and is championed as a key to market diversity by the owners of the assets. It also fails to get any traction with political parties vying for your vote in the upcoming election in New Zealand.

Meanwhile, the export lift has been more dramatic for logs from Australia. Since 2013, Australia’s exports of softwood logs have surged by 146% to a shipped volume of 3.7 million m3 in 2016. The main driver for this development is an increasing wood demand in China, the destination for more than 95% of Australia’s softwood log exports.

Moving on to more surprising news … most of you probably thought you'd never live to see the day, but indeed it has arrived! Someone in mainstream media has published a good news story on loggers! Feast your eyes on this - maybe even print a copy, frame it and take it 'straight to the poolroom'.

“Imagine a building made of sky,” says Bruce King, a Californian architect and author of a new book entitled “The New Carbon Architecture”, due to be released soon. And we are already. Leading developers in Australia and Canada are leading the way with timber buildings for midrise construction. The wood-based designs are better, faster and more user-friendly than those made of traditional materials. A conference coming soon to Rotorua will update people across the building design and construction sector on wood’s commercial advantages.

Keynote speakers from Canada and Australia will deliver presentations on how this vision is already becoming a reality in their countries, at a national conference in Rotorua on 28th September. Entitled “Advantages of Timber in Midrise Construction,” this second annual conference continues to attract architects, developers, engineers, specifiers, plus building officials and owners.

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Logs exports outnumber lumber

Global Timber and Wood Products Market Update according to a report from Wood Resources Quarterly, the total value of logs exported from New Zealand in the 1Q/17 was almost three times as high as the value of exported lumber.

Over 50% of the timber harvest in New Zealand is being exported in log form. However, some sawmills in the country have taken advantage of the growing demand for softwood lumber in the US the past few years, with the total export value having gone 37% from 2012 to 2016, reports the Wood Resource Quarterly.

According to their analysis (in US dollar terms) New Zealand’s log exports have fallen for two consecutive quarters and were at 3.8 million m3 in the 1Q/17, down 12% from the two-year high in the 3Q/16. China continues to be the major destination for the radiata pine logs, accounting for 70% of the shipments during the first three months of 2017, followed by South Korea (16%), India (9%) and Japan (4%) says WRQ's Hakan Ekstrom.

No country in the world exports a higher percentage of its harvested conifer timber in unprocessed form than New Zealand. Although the share has declined over the past three years, the log export volume accounted for 52% of the total harvest in 2016. There has long been a debate about how the country could expand domestic processing of forest products and increase exports of lumber and other further processed forest products.

The good news is that lumber production has gone up by about ten percent over the past three years. The “less good” news is that there has not yet been any major progress in the expansion of lumber sales to the international arena. Quite to the contrary, New Zealand lumber export volumes were 15% lower in 2016 than in 2013.

The exported logs from New Zealand value was just over 1.6 billion US dollars in 2016, which was almost three times as much as the price for softwood lumber. The total export value for lumber fluctuated within a fairly narrow range over the past seven years, ranging between 570 million US dollars and 660 million dollars, reports WRQ.

The biggest shift in market export sales in the past few years (by value) has been that the US has overtaken Australia as the number one destination for pine lumber produced in New Zealand. In terms of value, New Zealand is the second largest overseas lumber supplier to the US, behind Chile, but ahead of lumber exporters from Europe.

Shipments from New Zealand have gone up 37% over just the past four years and during the first five months of 2017, the upward trends continued with another 16% increase from the same period in 2016.

With lumber demand expected to continue to improve in the US market, there continue to be opportunities for overseas lumber producers to expand their sales to North America in the coming years.

More >>

Source: Wood Resources Quarterly

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Good news story on loggers

Most of you probably thought you'd never live to see the day, but indeed it has arrived ... someone in mainstream media has published a good news story on loggers! Feast your eyes on this ... maybe even print a copy, frame it and take it 'straight to the poolroom'.

Working in the forestry industry without politics

Setting the political issues aside, the logging industry can be viewed in a completely different light.

Whanganui-based Hickford Logging is just an eight-man band at the coalface harvesting a 250-hectare pine forest in the steep hills inland from Maxwell, yet an entire community feasts off their labour.

The expected 30-month harvest began in November last year with Dave Hickford and his crew working in conjunction with the Forest Management New Zealand (FMNZ) team to formulate a harvest plan.

Once up and running the small crew hit top gear felling, stacking and preparing a stockpile of 10-12 truck and trailer loads a day for transport to Port Taranaki in New Plymouth where the logs are shipped to various international markets throughout the world.

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Architect: Build out of sunshine

“Imagine a building made of sky” - says Bruce King, a Californian architect and author of a new book entitled “The New Carbon Architecture”, due to be released soon. And we are already. Leading developers in Australia and Canada are leading the way with timber buildings for midrise construction. The wood-based designs are better, faster and more user-friendly than those made of traditional materials.

Keynote speakers from Canada and Australia will deliver presentations, on how this vision is already becoming a reality in their countries, at a national conference in Rotorua on 28th September. Entitled “Advantages of Timber in Midrise Construction” this second annual conference continues to attract architects, developers, engineers, specifiers, plus building officials and owners.

Conference organiser, John Stulen says “Australian companies are moving ahead of their New Zealand counterparts in commercial building. Their key advantages coming from using engineered wood. This emerging trend in new commercial buildings is not just economical but also environmentally friendly. Their building occupiers love the exposed wood interiors for their new offices and apartments. It’s now clear that wood structures are giving industry leaders an edge over traditional materials in many ways.”

Expanding on the use of wood – basically a natural material made from King’s book explains, that the built environment can switch from being a problem to a solution - much nicer places to occupy that just happen to pull carbon out of the air.

That is what building out of wood and natural materials essentially is: Carbon, water and sunlight.

Bruce King has written a new book, coming out in the fall, called The New Carbon Architecture, with the subhead Building Out of Sky. By this he means building out of materials that come from the sky-- carbon from the CO2 in the air, sunlight and water -- which, through the process of photosynthesis, are turned into plants that we can turn into building materials.

“For the first time in history, we can build pretty much anything out of carbon that we coaxed from the air. All of these emerging technologies - and more - arrive in tandem with the growing understanding that the so-called embodied carbon of building materials matters a great deal more than anyone thought in the fight to halt and reverse climate change”, says King.

Thinking globally but acting locally, Stulen explains the inspiration for this conference came from Rotorua’s mayor Steve Chadwick when she championed the council’s ‘Wood-First’ policy. The conference is set to be part of a week of events on wood technology coming to the city in September, including the FIEA WoodTECH 2017, a two-day conference and trade expo. Stulen said they have also partnered several key national wood industry groups to make this happen.

He adds, “Rotorua’s economy is built on wood. Adding value by engineering the resource for commercial building is a ‘win-win’ for everyone in the supply chain. Thanks to the mayor’s vision and enthusiasm this wood-first conference series was born. So, the Rotorua Lakes Council is a natural partner for us.”

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China: Game changer for Australia

International consultants, Margules Groome issued a wake-up call for sawmillers in Australia recently, highlighting the growth of log exports to China. Here's what they had to say in the recent client newsletter:

GAME CHANGER CHINA - Is the Australian softwood sawmill industry prepared for what lies ahead?

Since 2013, Australia’s exports of so wood logs have surged by 146% to a shipped volume of 3.7 million m3 in 2016 (Fig. 1). The main driver for this development is an increasing wood demand in China, the destination for more than 95% of Australia’s so wood log exports. We believe that this development is here to stay given that China has banned all logging of domestic natural forests despite its growing demand for timber.

Given the relatively tight so wood log supply and demand balance in Australia, this trend will have significant ramifications for the domestic industry structure. It has potential to be a major game-changer that local players should prepare for.

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Engineered wood conference to follow WoodTECH

As an added bonus for people attending our FIEA WoodTECH 2017 conference in Rotorua, a one-day conference - "Changing Perceptions of Engineered Timber in Construction" will be run on the day after the WoodTECH 2017 conference, on Thursday 28 September.

This 2nd annual engineered timber conference is showcasing the use of mass timber in mid-rise construction both in NZ and internationally. The value of wood will be explored from different angles, including both emotive and economic responses to engineered timber buildings.

International speakers will share their experiences and learnings from overseas. Topics will include architectural, engineering and construction aspects of engineered timber buildings. This event is being hosted by a collaboration of local, regional and central government organisations with support from the Timber Design Society. Further details on the event will follow in next week’s issue.

So, for your travel plans to Rotorua you can capitalise on the extra day on offer. For further information and registrations for the event, please click here.



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Putting plantation water use into context

Satellites put plantation water use into context- Forest plantation managers can better understand water use and the potential impact of different forest management approaches by integrating satellite based water consumption estimates, according to research co-funded by the FWPA.

Being able to accurately measure how much water is used by all land-uses, including plantations, is vital for the forest industry to lead an ‘evidence-based’ informed debate about forestry water use. Such research can help state and federal regulators to understand the nuances and complexities of ‘normal’ water use across catchments containing multiple land-uses.

In this FWPA co-funded project, researchers from CSIRO Land and Water determined water usage across two large study sites that include forestry plantations in NSW (covering over 27,000 square kilometres) and the Green Triangle region of Victoria and South Australia (covering over 32,000 square kilometres).

The researchers “blended” low frequency/high-resolution Landsat data with high frequency/low resolution MODIS data. The “blended” high frequency/high-resolution satellite data was used as input to an algorithm that accurately estimated actual evapotranspiration (AET) across the study sites for all land-uses.

At both study sites, the research found that although forestry plantations had high relative rates of AET, due to their smaller area, the impact of forestry plantations at the catchment scale was less than other land uses like agriculture and native vegetation, which used greater volumes of water. Since forestry plantations are planted in higher rainfall parts of the catchment, the study found putting AET rates in a hydrologic context to be important for the interpretation of results.

When accounting for rainfall (P) variability (reporting water use as AET/P), forest plantations were found to be low water users at the NSW site. There was also a high variability of water use across the forestry plantations, suggesting that forestry plantation water use needs to be considered on a site-by-site basis and within the hydrological context of the catchments they are operating in.

Integrating satellite-based estimates of actual evapotranspiration with forestry management and planning information should help plantation managers to better understand water use efficiency; surface water and groundwater usage; and how different forest management actions impact on water use.

To download the FWPA project report, click here

Source: FWPA R&D Works

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Commission: Sino-Forest defrauded investors

Timber company Sino-Forest and several of its top executives defrauded investors, misled investigators and "engaged in deceitful or dishonest conduct,' the Ontario Securities Commission ruled in one of Canada's largest corporate fraud cases.

In a nearly 300-page decision released last Friday, the regulator said the company and former CEO Allen Chan, as well as Albert Ip, Alfred Hung and George Ho defrauded investors by overstating the now defunct company's timber assets and revenue.

Allegations of fraud against Simon Yeung were dismissed, but the regulator concluded he misled staff during their investigation.

The investigation into Sino-Forest was triggered in 2011 when short seller Carson Block of Muddy Waters Research published a scathing report accusing the company of exaggerating its assets and fabricating sales transactions in what amounted to "a multibillion-dollar Ponzi scheme.'

Established in 1994, Sino-Forest was once the most valuable forestry company listed on the Toronto Stock Exchange. Although it was based in Ontario, the company conducted most of its business in China until it collapsed in 2012. The decision by the OSC follows the settlement of several lawsuits by investors in connection with the case.

In 2015, several Canadian banks and other financial institutions that helped the company raise millions on the financial markets agreed to a $32.5-million settlement in a class-action lawsuit filed by investors who lost money.

More >>

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Other reporting:

Canadian Securities Commisson rules Sino-Forest defrauded investors, misled investigators - Failed forestry company Sino-Forest Corp and several former executives “engaged in deceitful or dishonest conduct” in connection with the company’s timber assets and revenue that “they knew constituted fraud” and violated securities law, the Ontario Securities Commission (OSC) ruled last week in Canada.

These executives include former chairman and chief executive Allen Chan as well as Albert Ip, Alfred CT Hung and George Ho. The commission dismissed the fraud allegation against Simon Yeung. In its decision, however, the OSC said all five of the former executives had misled investigators.

The ruling capped what had become the longest hearing ever held by the commission. The Sino-Forest story, however, is far from over for the investors who lost billions in the company after its 2011 collapse. A followup hearing to determine appropriate sanctions won’t take place for at least a month. Even then, it is not yet clear how the sanctions will be effectively enforced upon former executives halfway around the world – or how long it will take money that regulators dredge up to finally reach investors.

The roots of the Sino-Forest mystery - The OSC is a signatory to a global, cross-border memorandum of understanding of securities regulators – one that includes the Securities and Futures Commission in Hong Kong, where Sino-Forest’s executive office was based, and the China Securities Regulatory Commission. The Ontario regulator’s website, however, says that “the recovery of monetary sanctions in many proceedings is limited because respondents may have no assets or limited assets, may no longer reside in Ontario, or cannot be found.”

A spokesperson for the provincial regulator declined to comment on the effectiveness of global sanction enforcement, but called the decision “an important milestone in a complex, multijurisdictional case.” York University law professor and corporate governance expert Richard Leblanc warns that, at best, this decision over the once-$6-billion company will still leave investors in a holding pattern.

“It’s very difficult to collect from someone who is outside of Canada,” he said. Being a signatory to the International Organization of Securities Commission’s Memorandum of Understanding, however, should significantly help the OSC to enforce its sanctions, he said. But it’ll take time.

“You’re now six years out – this could take another two, three, four years for investors to be compensated for their loss,” Prof. Leblanc said. He called the case an egregious example of a too-slow provincial regulator: “It was clearly a fraud; the regulators should have been more expeditious and should have acted earlier.”

More >>

Source: Huffington Post and The Globe and Mail

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Drones: Forest establishment solution?

Deforestation and forest degradation make up 17 per cent of the world's carbon emissions — more than the entire world's transportation sector, according to the United Nations. Burned or cleared forests release their stored carbon dioxide into the atmosphere, and land restoration experts say technology must play a big part in addressing the problem.

Dr Susan Graham has helped build a drone system that can scan the land, identify ideal places to grow trees, and then fire germinated seeds into the soil. Drones can plant in areas previously impossible to reach, like steep hills.

The planet loses 15 billion trees every year and much of it is cleared for farmland to feed the world's booming population, but it's feared this could be exacerbating climate change. "Although we plant about 9 billion trees every year, that leaves a net loss of 6 billion trees," Dr Graham said. "The rate of replanting is just too slow."

Now based in Oxford in the United Kingdom, she is working with an international team including an ex-NASA engineer who worked on the search for life on Mars. Their company, BioCarbon Engineering, is backed by one of the world's largest drone makers. Bulldozers and tractors can clear land rapidly — and replanting efforts haven't caught up. Dr Graham is hoping to change that with a system that plants at "10 times the rate of hand planting and at 20 per cent of the cost", she said.

BioCarbon Engineering's CEO Lauren Fletcher said the drone could currently carry 150 seed pods at a time. "We're firing at one a second, which means a pair of operators will be able to plant nearly 100,000 trees per day — 60 teams like this will get us to a billion trees a year," he said.

Mr Fletcher worked at NASA for two decades on projects including the International Space Station and with robotic technologies used in the exploration of Mars. "I worked specifically on the intersection between biology and engineering on the life- sciences programs on the Space Station, so this has given me a lot of knowledge of how you take smart, cutting-edge engineering systems and apply it to a biological system," he said.

The firing drone follows a pre-set planting pattern determined from an algorithm, which uses information from a separate scanning drone. To work out the best possible place to plant, the team uses the drone to map the area, looking to create a 3D model of the land. "The data gets downloaded and we've developed the algorithms that use that data to make smart decisions about exactly where to plant and how to manage that ecosystem," Dr Graham said.

The team has tested its drone technology around the world and was recently in Dungog, in the New South Wales Hunter region. This involved trialling their seed- spreading drone to rehabilitate land once used by coal mines. This drone — while not as efficient as the firing drone — spreads seeds over a far wider area.

"Coal mines have an enormous amount of land that they need to restore, both on the active mine site, once they've recreated a land form, as well as their offset areas ... around the mines," Dr Graham said. "We've had quite a lot of interest in Australia and they see such a benefit in terms of saving cost, saving time, and being able to do a better job of restoring their ecosystems, and getting data to actually show what they've done."

"The way we plant trees today is very similar to how we planted them hundreds of years ago," she said. "So there's major room for innovation in increasing the success rate of tree planting and also in improving the maintenance and monitoring of the restored land."

Source: ABC News
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History of investor interest in timber sector

At WoodWeek, we first heard of investor interest in Sino-Forest, in North America, in December 2008. At the time investment publication MoneyWeek included the company in an editorial piece on timber investments being boasted as 'growing profits in a crisis'. In a feature piece entitled 'The best ways to buy into the sector' Sino-Forest was detailed as follows:

Toronto-listed Sino-forest (TSX:TRE) owns more than 312,000 hectares of timberland across the Chinese provinces. Unlike other forest owners in China, Sino’s pines were left largely undamaged by the snowstorms earlier this year. With little debt on its book, and trading on a forward p/e of 5.8, it is an excellent play on China’s efforts to foster its own timber industry.

Source: MoneyWeek issue 19 December 2008 newsletter

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Other picks did better:

Had investors reading that MoneyWeek article in late 2008 decided to instead go with a better-known share featured in that newsletter, like Rayonier, they would have been much better served by their investment. The stock then troughed at USD9.35 in March 2009 but rose to over $60 by May 2013. It is recently trading at $28.31.

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Jobs


... and finally ... so, you think its cold out?

Okay ... it’s been a very cold winter so far ... not to mention unprecedented snow in places you've never seen it before. Brrrrr... but it’s time to put it into perspective...

Here's the Canadian temperature scale (an oldie but a goodie):

The Canadian temperature scale and its associated effects
(in both Fahrenheit and Celsius)

+70 deg F (21 deg C) - Texans turn on the heat and unpack the thermal underwear. People in Canada go swimming in the lakes.

+60 deg F (16 deg C) - North Carolinians try to turn on the heat. People in Canada plant gardens.

+50 deg F (10 deg C) - Californians shiver uncontrollably. People in Canada sunbathe.

+40 deg F (4 deg C) - Italian & English cars won't start. People in Canada still drive with the windows down.

+32 deg F (0 deg C) - Distilled water freezes. Lake Superior's water gets thicker. People in Canada enjoy a BBQ outdoors in shorts and jandals.

+20 deg F (-7 deg C) - Floridians don coats, thermal underwear, gloves, and woolly hats. People in Canada throw on a flannel shirt.

+15 deg F (-9 deg C) - Philadelphia landlords finally turn up the heat. People in Canada have the last cookout before it gets cold.

0 deg F (-18 deg C) - People in Miami all die... Canadians lick the flagpole.

20 below (-29 deg C) - Californians fly away to Mexico. People in Canada get out their winter coats.

40 below (-40 deg C) - Hollywood disintegrates. The Girl Scouts in Canada are selling cookies door to door.

60 below (-51 deg C) - Polar bears begin to evacuate the Arctic. Canadian Boy Scouts postpone "Winter Survival" classes until it gets cold enough.

80 below (-62 deg C) - Mount St Helens freezes. People in Canada rent some videos.

100 below (-73 deg C) - Santa Claus abandons the North Pole. Canadians get frustrated because they can't thaw the beer keg, eh.

297 below (-183 deg C) - Microbial life no longer survives on dairy products. Cows in Canada complain about farmers with cold hands.

460 below (-273 deg C) - ALL atomic motion stops (absolute zero in the Kelvin scale). People in Canada start saying, "Eh, Cold 'nuff for ya?"

500 below (-296 deg C) - Hell freezes over. The Toronto Maple Leafs win the Stanley Cup.



That's all for this week's wood news.

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John Stulen
Editor
PO Box 1230
Building X91, Scion Campus, 99 Sala Street
Rotorua, New Zealand
Tel: +64 27 275 8011
Web: www.woodweek.com

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