WoodWeek 27 September 2017
No surprises that the peak is being driven by China. Log imports into China were just short of 2.9 million tonne for July, the highest level since April 2014. Imports from New Zealand lifted most, making up 37 per cent of their log imports for July according to AgriHQ.
Moving up the value chain, a visiting Canadian building expert is urging us to make better use of natural timber to construct more high-rise buildings. Karla Fraser, a senior project manager at Urban One Builders in Vancouver, is in New Zealand as the guest keynote speaker for our “Changing Perceptions” conference in Rotorua tomorrow. She led the project team onsite for the construction of Tallwood House at Brock Commons at UBC – now the tallest timber building in the world. To register see: www.cpetc2017.com.
Meanwhile, in Australia, their Prime Minister, who can now see the forest for the trees, as it were, continues to espouse a new National Forest Industries Plan. It’s a “growth engine’ as he put it recently, adding “it is an industry that is as ancient as mankind itself, but as new and as modern as the latest engineers and science.”
He was excited by the new carbon-positive building growth, such as XLam’s new cross-laminated timber plant near Wodonga, the first of its kind in Australia.
Mr Turnbull said the Forest Industry Advisory Council’s vision outlined how to transform the “simple yet profound - expand into the bio-economy to triple your value by 2050”. “Or put another way, ‘the right trees in the right place at the right scale’,” he said.
Finally, a recent industry survey by Scion’s Value Chain Optimisation team shows how businesses are reporting being affected by different factors that influence transport efficiency. In the forestry distribution chain, infrastructure and driver availability concerns are evidently the main disruptors.
This week we have for you:
NZ structural log prices still risingNZ structural log prices advance to 23-year high as mills compete with export demand - New Zealand structural log prices edged up to the highest level in more than two decades as mills compete with the export market to secure supply for the local construction market.
The price for structural S1 logs lifted to $128 a tonne this month, from $127 a tonne last month, and is sitting 11 percent above last year's level and 21 percent higher than the five-year average, according to AgriHQ's monthly survey of exporters, forest owners and saw millers. The S1 structural log price is at its highest level since April 1994.
Demand for New Zealand logs is strong in China, New Zealand's largest log market, with in-market prices for unpruned logs at their highest level since mid- 2014 and pruned log prices just shy of their last peak in mid-2016, AgriHQ said. China has clamped down on harvesting of its own forests and reduced tariffs on imported logs. It imported 2,894,326 tonne of logs in July, the highest level since April 2014, with New Zealand recording the largest lift, making up 37 percent of imports in the month, ahead of the 35 share it typically holds, AgriHQ said.
"As far as the market is concerned, any potential downward movement in values will have to be driven by wharfgate values," said AgriHQ analyst Reece Brick. "Mills are ruing the on-going strength of the export market, forcing them to meet these values or find themselves short on supply."
Some mills have paid premiums above the main contract market to secure supplies from the spot market, Brick said, noting that the current price for structural S1 logs is about $3 a tonne more than the wharfgate price A-grade logs.
Still, Brick said further upward movement in prices is less likely as domestic pruned log supply moved into balance over recent weeks and export interest remains short of the level experienced in early 2016.
He noted residential construction activity is slowing in Canterbury as the bulk of the earthquake rebuild reaches completion, while talk of stagnating house prices has slowed building from property investors.
"Whether this is a temporary state brought about by winter or an indication of a longer-term trend will become more obvious over the next month or two," Brick said. "Other areas have displayed a little more resilience, though it does appear that construction has come back from its peak through Auckland and the central North Island."
Forest products are New Zealand's third-largest commodity export behind dairy and meat products.
BusinessDesk via Scoop News
NZ urged to build more high rises using woodA visiting Canadian building expert is urging New Zealand to make better use of its natural timber to construct more high-rise buildings using wood.
Karla Fraser, a senior project manager at Urban One Builders in Vancouver, is in New Zealand for a conference in Rotorua later this week.
She worked on the Tallwood House at Brock Commons in Vancouver, the tallest timber building in the world, which opened in July.
It is an 18-storey building housing students at the University of British Columbia.
She said a fear of building high-rises with wood had meant the idea had been slow to take off. There had been concerns about moisture levels in the wood, and fire risk.
Ms Fraser said a lot of work went into the design and testing of the building and fears had been assuaged.
She said it made sense to use wood, particularly in countries with an abundance of timber like Canada and New Zealand.
"There is definitely a benefit to be able to grow a product you are using to build."
She said in the case of Tallwood House it was about 5 percent more expensive to build than a conventional concrete building.
Ms Fraser said construction using mainly timber was environmentally friendly.
"At Tallwood we had a lot less waste than we have off regular projects we work on."
Source: Radio NZ and Innovatek
Australia's PM on forest industry planA STRATEGIC plan to help inject longer term certainty and sustainability to boost the $23 billion forest industry’s economic output - especially in the regions - has been revealed by Prime Minister Malcolm Turnbull.
Mr Turnbull announced the National Forest Industries Plan would be pursued by his government to ensure the forestry industry was a “growth engine” for regional Australia.
He endorsed the strategy during his speech at the recent Australian Forest Products Association (AFPA) gala dinner held at Parliament House in Canberra. “Now we understand that you have long lead times, you need long term certainty and so it’s vital that governments get the policy settings right,” Mr Turnbull said before about 500 guests including forest industry heavyweights at the event.
“So tonight I’m very pleased to announce that (Assistant Agriculture and Water Resources Minister) Anne Ruston will help us develop a new government plan that will underpin growth in the renewable timber and wood-fibre industry.
“Anne’s work and our new government plan will give you the vision and certainty you need.
“We’re committed to developing this industry as a growth engine for regional Australia.”
Senator Ruston said if you were given the challenge of inventing the ultimate renewable, recyclable, carbon positive thing, “I’d bet you’d invent a tree”.
“The modern face of forest products is engineers and chemists – just ask the guys at Visy and Australian Paper,” she said. “Everyone is realising just how great forestry is and the huge role is can and should play in Australia’s future."
“The decisions of the Victorian government regarding the renewal of the Central Highlands and East Gippsland Regional forest Agreements are critical for the future of forestry in that state.
“Probably the greatest challenge facing our industry is investment in new plantations.”
Source: Farm online
Forest technology - mobility eats everythingIn just 10 years the 'smartphone' has become an essential part of our working and personal lives. We hear and see a lot of hype about the 'next big thing' in mobile devices, however, in reality, all we seem to get are incremental upgrades and new form factors.
Everything is just about to change! This is the topical subject for this region’s after-dinner presentations for the upcoming ForestTECH 2017 series.
The presenter, Randall Cameron, Managing Director Australia for Mobile Mentor will be providing an educational and entertaining look into the mobile innovations that are literally just around the corner. The company has increasingly been working alongside a number of major forestry companies in this region developing some very smart mobile apps and solutions.
Randall will be providing some entertaining insights into important questions like;
- Do you want a smart contact lens with a built in digital screen?
- Maybe a real-world use case for VR, AR and mixed reality?
- How about a voice-to-voice language translator run in real-time?
- Or do you just want a smart digital assistant that doesn't break as soon as you lose data connection!
There has been a lot of promises over the years. What’s reality and what is going to change how you run your own lives – and business – over the next few years.
The ForestTECH 2017 series will run in Rotorua, New Zealand on 15-16 November and then again in Melbourne, Australia, on 21-22 November. Full details on the programme can be found on the event website, www.foresttech.events.
Log and lumber market update - PF OlsenExport Log Market – Prices for export logs delivered to New Zealand ports in September did the exact opposite from the previous month and increased an average of $4/m3 from August prices. This increase was due to the weakening of the NZD against the USD. There were slight increases in the CFR sale prices but these were offset by slight increases in shipping freight costs. Local demand for lumber continues to drop significantly in Christchurch but increase in the Otago Lakes region.
Demand for lumber in Auckland is still strong, but mill staff report demand growth from Hamilton and Tauranga regions is down on last year. Due to the increase in export prices the PF Olsen Log Price Index for September has increased two dollars and is now at $125. The average sale price is $16 per tonne above the three-year average.
Domestic Lumber Market – Domestic lumber demand is flat. The demand from Christchurch is dropping significantly, but there is an increase in the Otago Lakes area driven by building in Queenstown and Wanaka. There has been a cooling in the development of medium to high rise apartments as banks require a high percentage of pre-sales before lending, but buyers don’t want to place deposits if the build isn’t confirmed.
The rest of New Zealand is flat with some mills reporting their sales into the areas of Hamilton and Tauranga down on last year. These areas are still growing but the rate of growth has slowed. Most mills are concerned about log prices with the continued high export log prices against which their prices are often bench marked. This may put upwards pressure on domestic log prices in Q4 as log prices for Q3 are locked in.
Source: PF Olsen Wood Matters
Southland concerns over forestry NESEnvironment Southland has expressed concern that forestry operators will be allowed to operate at lower environmental standards than others, under new government rules.
A report to an Environment Southland meeting on Wednesday says a national environmental standard for plantation forestry was enacted in July and will come into force next May.
The national standard covers all activities relating to plantation forestry including earthworks, river crossings and mechanical land preparation.
Councils such as Environment Southland are not permitted to set rules more stringent than the national standards, except in limited circumstances, a report to Environment Southland councillors, written by senior policy planner Tanith Robb, says.
"The regulations are more lenient than many of the rules in the proposed Southland Water and Land Plan.
"As such, forestry operators will be able to operate at lower environmental standards than other resource users in Southland," Robb says.
The national environmental standards for forestry were passed despite Environment Southland earlier expressing concerns they could undermine its ability to manage the environmental effects of plantation forestry in the region.
The national standards would allow small wetlands to be disturbed, including by building a river crossing over a wetland under .25 of a hectare - whereas under the proposed Southland Water and Land Plan it would be a non-complying activity.
Among other differences, the national standards also say mechanical land preparation must not occur within 5m of a river less than 3m wide, or a wetland larger than .25 hectare. Whereas, depending on the slope, the proposed Southland Water and Land Plan may have required a 20m setback and no mechanical cultivation on slopes greater than 20 degrees.
Land sustainability officers currently work with forestry operators to increase awareness about environmental effects, but the national standards eliminates the need for such conversations, Robb says.
Source: Stuff news
What's holding things up in the bush?A recent industry survey (see table for outcome below) formed part of the Value Chain Optimisation team’s most recent log price outlook and shows how businesses are reporting being affected by different factors that influence transport efficiency.
Around 54 participants completed this part of the survey. Infrastructure and driver availability concerns are evidently the main disruptors in our forestry distribution chains.
In addition the commentary was mainly focused around solutions to infrastructure problems, the outlook from participants was quite positive. Particular mention was also made of harvesting capacity as well as congestion on and around the various ports.
The VCO team in Scion are happy to entertain conversations to see where researchers could work in this space to help alleviate some of the problems. If you have any thoughts regarding the outcome of the survey we are keen to hear them.
OMF carbon market updateThe New Zealand carbon market has sprung back into life in the last few weeks as the election drew near. Its now become a binary event where the carbon market could potentially double in size (over time) with the election of a Labour government. NZUs have rallied from below $16.50 a tonne to the high for the year at $18.35 a tonne.
Major owners remain absent and settings continue to unwind under the current governments ETS pathway. The one for two setting is nearly halfway through its unwinding process moving to a surrender requirement of 33 million tonnes next year and 40 million tonnes in 2019.
National have also stated that the $25 CAP will go at some point and it’s just a matter of how – either taken away or raised. Labour have said they would phase in agriculture to the ETS - ten percent initially which would add four million tonnes of demand per annum.
The reality of all this is that carbon will continue to grind higher under National as we move towards the start of Paris in 2021 or it will move dramatically higher under Labour as they move to considerably strengthen the scheme.
Our view is to keep buying carbon and whilst we make no money telling owners of NZUs (who don’t need the cash and are prepared to take the risk) to continue to hold on to carbon. There are estimates for carbon prices next decade to be between $30 and $130 a tonne.
Our view, taking into account there are risks in all of these things, is that forestry sits in a very good position in the next 10 to 20 years. Carbon is no longer just an annual dividend setting inside your forest with your main aim and game being to harvest. Carbon could now possibly be the only thing you grow trees for where you see marginal land as fit for no other purpose and the predicted high carbon price makes permanent forestry a worthwhile investment.
Buy carbon, hold carbon, grow carbon.
Source: Nigel Brunel, Director - Financial Markets, OMF
China log import volumes and prices upLog imports up 8% in the first half of year - China’s log imports in the first half of 2017 totalled 25.89 million cubic metres valued at US$4.535 billion, a year on year increase of 8.3% in volume and 14% in value. The average price for imported logs was US$175 per cubic metre, a year on year increase of 6%.
Of total log imports, softwood log imports rose 8.6% to 17.51 million cubic metres, accounting for 68% of the national total. The average price for imported softwood logs was US$130 per cubic metre, up 9% on the same period of 2016.
Hardwood log imports grew 7.6% to 8.38 million cubic metres (32% of the national total log imports). The average price for imported hardwood logs in the first half of 2017 was US$269 per cubic metre, up 3% on the same period of 2016. Of total hardwood log imports, tropical log imports were 4.43 million cubic metres valued at US$1.278 billion, up 7% in volume but down 2% in value on the same period of 2016.
New Zealand and Russia main sources of logs - New Zealand was the main log supplier to China in the first half of 2017 accounting for 24% of total log imports.
Imports from New Zealand totalled 6.2 million cubic metres in the first half of 2017, a year on year increase of 10%.
The second ranked supplier of logs was Russia at 5.87 million cubic metres, accounting for about 23% of the national total. In the first half of 2017 a year on year decrease of 1% was recorded for log imports from Russia.
Average prices for imported logs from New Zealand rose 10%, average prices for imported logs from Russia grew 7% in the first half of 2017.
Source: ITTO TTM Report
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