WoodWeek – 19 May 2021

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Greetings from your WoodWeek news team. Our lead story this week will please local log exporters, as Russia confirms it plans for a log export ban. The Russian government is not considering lifting the ban on the export of logs, which will enter into force in 2022.

Carbon Forestry Conference registration numbers are getting close to record levels. We strongly recommend you register now before this event sells out. The pace of discussion on carbon forestry is growing. This week's budget will should reflect input from the Climate Commission on their recommendations to Government for action. Click here to register yourself or your team for our conference before time runs out.

Also in this week's news is a reminder from our carbon market experts on how our local carbon credit market pales into insignificance in the wider world. To quote the Carbon Markets team: "There has been lots of recent press over what an attractive commodity carbon has been to hold lately. Admittedly, much of the excitement has been about EUAs, where prices jumped over a new record breaking €55 (almost NZD$93) yesterday, as reported recently by Carbon-Pulse."

"Many analysts attribute much of the upswing to increased investor interest, with Bloomberg highlighting a speculator driven rally, pointing to heavy interest in call options and some betting that EU carbon prices will double by year end."

"Recently, as EUA prices pushed on, key EU officials, including European climate chief Timmermans, cautioned against market intervention, perhaps renewing investor courage and even adding further impetus to the run. As in New Zealand, carbon prices in the EU need to be much higher to deliver on targets."


This week's SnapSTAT charts the market swing-o- meter for a range of our primary industry exports. Thanks to our sponsors of this feature: the great team at Chainsaw & Outdoor Power (COP) and Oregon.

In the Bay of Plenty the economic development agency, Toi EDA has commented on the Whakatane mill closure issue in its latest news. "Forestry is the backbone of the Eastern Bay economy. With extensive forestry plantations (largely on Māori owned land), pulp and paper mills, and timber processing all leveraging our natural abundance of fertile soils, geothermal energy, and highly capable heavy engineering expertise, we are feeling the impact of significant challenges for the entire sector. The announcement of the Norske Skog strategic review and the possible closure of the Whakatāne Board Mill has sent shockwaves through our region. Our national wood processing assets are now aging and have not seen significant modernisation investment for quite some time."

Finally, this week we have a bit of history. Being a boomer, when a story popped up entitled "Radiata - Prince of Pines" and the date was 1994, I didn't immediately think of it as being 'history' per say. But, clearly doing the sums shows it was over 26 years ago. Indeed, a whole rotation for a pine forest, so it really is history. It's from a credible source too, NZ Geographic, so read and enjoy!

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Russia confirms log export ban from 2022

Russia confirms log exports ban in 2022 - The Russian government is not considering lifting the ban on the export of logs, which will enter into force in 2022, RIA news cited Deputy Prime Minister Yuri Trutnev.

“The government of the Russian Federation has made a decision to gradually increase export duties”, said Yuri Trutnev. - This year, the duty is 80%. Next year, the ban on the export of logs comes into force. This is done in order to create jobs in the forestry industry, to build processing plants."

He noted that the government is not considering any issues related to the abolition of protective duties. “We proceed from the assumption that the export of logs will be prohibited next year,” said Yuri Trutnev.

The state-owned company for the export of logs is being considered as one of the measures for the transition period, he added.

Russia is one of the world’s largest wood exporters. In 2020, Russian exports of softwood logs fell by 18.8% y-o-y to 6,9 million m3, while the average price dropped 3.8% to $76.0 per m3.

Soruce: Lesprom


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Uncertainty hangs over Whakatane mill future

Forestry and the Whakatāne Board Mill Forestry is the backbone of the Eastern Bay economy. With extensive forestry plantations (largely on Māori owned land), pulp and paper mills, and timber processing all leveraging our natural abundance of fertile soils, geothermal energy, and highly capable heavy engineering expertise, we are feeling the impact of significant challenges for the entire sector. The announcement of the Norske Skog strategic review and the possible closure of the Whakatāne Board Mill has sent shockwaves through our region. Our national wood processing assets are now aging and have not seen significant modernisation investment for quite some time. This is best seen today with the shortages of timber available to sustain the current domestic construction demand.

When multinationals look at our region as an investment option in this capital-intensive industry there are several reasons that the Eastern Bay was historically chosen as one of the preferred global locations. However, those historical advantages are being challenged as developing nations are leveraging their own advantages and carbon sequestering via forestry plantations is becoming the norm. With the proximity to end consumer markets interest free loans, highly distorted log prices, subsidised energy, and affordable labour markets, many countries are becoming more attractive to the multinational investor.

According to David Turner, of Kawerau based Sequal Lumber, the fact that there is an ongoing differential between the wholesale price of logs and the retail price of logs, where the retail price is up to $20 dollars lower than the wholesale market price, shows that there is a market failing. This undermines our ability to compete on the international stage. We are being encouraged through our market structures to export logs in their lowest value form, which is putting pressure on log prices and exposes our country and plantation owners to significant market volatility. This is fine while log prices are high, but we will face even further challenges when the global markets fall.

On 23rd February 2021, Swiss owners, SIG announced the possible closure of the Whakatāne Board Mill proving a significant blow to our local economy. Since then, Toi EDA has been actively working alongside local and government partners to find a solution. The SIG Mill employs 213 staff and we are acutely aware of the importance of this employer in our region. For the latest news and Toi EDA's support role click here >>



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PF Olsen: Export Log Market Update

AWG log prices - The AWG prices for export logs increased by about $2 per JASm3 in most North Island ports. Some more intense competition in a couple of South Island ports lead to more significant increases of $5-$6 per JASm3.

China - The CFR prices for New Zealand pine logs in China increased approximately 20 USD over the last month. The price for A grade logs in late April is now around 178 USD per JASm3. Log sellers have started to notice some buyer reluctance at these record high prices. However, there is nothing to suggest that prices will drop, other than history. Log demand is healthy with supply still somewhat constrained, and stock levels are declining downwards. Prices for spruce logs also increased over the month but seem to have reached the point where buyers are quite reluctant to buy.
Softwood log inventory has trended downwards to 4.2m m3 and daily port off- take had increased from 70k last month to 120k earlier this month and is now back to about 100k.

The ban on Australian logs has continued and the volume of logs arriving from Europe has remained at about the 1m mark per month which is down from the peak of 1.5m per month. New Zealand had a high level of log production in March with 23 work-days and good weather. Many ports set records for log volume throughput. Log volumes from New Zealand will reduce as we enter the winter season.

India – The log market in Kandla was improving, and logs were in short supply in Tuticorin before the latest wave of Covid-19 started to engulf India. The log and sawn timber markets are in chaos as port and sawmill workers return to their hometowns, and many workers and owners infected with Covid-19. Lockdowns in Delhi and Maharashtra have also reduced log demand in Kandla. This is now a humanitarian crisis rather than a market crisis.

Log demand in India is usually very high at this time of the year, but currently there is utter confusion. The people of India have always been extremely resilient and incredibly resourceful, and our thoughts and prayers are with them as they struggle through this pandemic. I look forward to being able to comment on the log market in India with some normalcy, as it will mean the Indian people have returned to work and life is as normal as possible after this tragic event.

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ISO log scaling robots powering up fast

10 MILLION! … ISO Limited has hit the 10 million cubic metre mark of processed log volume through our ROBOTIC SCALING MACHINES. This collaboration with Robotics Plus Ltd has changed the industry with its clear #safety and #productivity advantages

That's over 330,000 trucks with NO scalers on ramps. "The robotic scaler measuring process eliminates exposure to hazards and moves those people into a safer environment," - Paul Cameron, CEO of ISO Limited.

ISO has now implemented 13 RSMs across five ports in NZ with more to come. We thank all our staff, ports and customers that worked with us to make this safety initiative a reality and look forward to the way they revolutionize the industry at EVERY ISO port in the future.

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SnapSTAT - Primary industry price trends







Source: ANZ NZ Agri Focus



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Regional council seeking carbon forest clarification

Otago Regional Councillors have resolved to lobby central government regarding concerns about the potential hazards and risks to the environment associated with carbon forests.

Following concerns raised by the public, and a site visit, Councillors and iwi representatives on the Strategy and Planning Committee discussed tree planting for carbon sequestration (carbon forests) during a meeting last week.

“Unlike plantation forestry, carbon forests are planted and left in perpetuity,” Councillor Kevin Malcolm said. “As forestry for carbon sequestration is currently a permitted activity in the Otago region, there’s not the same level of maintenance and hazard management expected for forests planted for harvest. This can lead to pest problems, depleted river flow in water-short catchments, and increased fuel loads for bush fires. National policy has created unintended consequences that will have potentially dire environmental consequences.”

“Both Regional and Territorial Authorities need central government support to urgently resolve these issues. Locally, we have a particular concern about activities in the Kakanui catchment and in the Waitaki district.”

The Committee resolved to lobby central government to intervene in these matters and to ensure sufficient standards are in place to manage the land use change, impacts and risks associated with carbon forests.

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Carbon Match Market Update

Get Moving, It's a Big World – There has been lots of recent press over what an attractive commodity carbon has been to hold lately. Admittedly, much of the excitement has been about EUAs, where prices jumped over a new record breaking €55 (almost NZD$93) yesterday, as reported recently by Carbon-Pulse.

Many analysts attribute much of the upswing to increased investor interest, with Bloomberg highlighting a speculator driven rally, pointing to heavy interest in call options and some betting that EU carbon prices will double by year end.

Recently, as EUA prices pushed on, key EU officials, including European climate chief Timmermans, cautioned against market intervention, perhaps renewing investor courage and even adding further impetus to the run. As in New Zealand, carbon prices in the EU need to be much higher to deliver on targets.

Back home here, this should be a reminder to all NZ compliance buyers that a multi-pronged approach remains important. Waiting for the next auction to procure carbon in the hope of another deep discount is not a good strategy. (A reminder that there is currently a consultation under way to lift the price corridor within which the Government can be a seller going forward.)

It also fails to acknowledge a tough reality for those with obligations under the NZ ETS. The options for NZ ETS compliance are soon to be very limited, in this inward looking, domestic compliance market now long cut off from international solutions. The cap is real, even if on an annual basis, ETS supply-demand deficits are not projected to manifest until the end of the current Government's term.

Reforms pushed through last year mean that any Government will face a requirement to back any extra units sold under the cost containment reserve with "real" emissions reductions as soon as is practicable at the end of each emissions budget period.

While nobody can stop you holding international carbon credits, they are not an option for NZ ETS compliance and, for the private sector at least, may not ever be an option.

So, you can grow NZUs. Slowly. The hard way. Join the ranks of longstanding production and established carbon foresters, lining up to bid on suitable carbon forestry land with rising carbon prices impounding. You could bite the bullet and buy today on what is a proven 10-year-old secondary market. Perhaps you prefer to back yourself to tighten your belt in time. (It's never worked for me.)

Or you can try your luck at the quarterly Government auctions. Why not, it's a useful source of fresh supply. But just don't mistake a somewhat isolated looking, domestically focused market, for a closed one.

There is plenty of international interest in what we are doing here. And the pie is small. Is this really the time to be quibbling over 10 cents on an NZ$37+ credit?

NZUs - bid $37.10, offered $37.20 on Carbon Match - every weekday 10am - 5pm.



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A bit of history: Radiata: Prince of Pines

(NZ Geographic (1994) Radiata - Prince of Pines - With a shuddering jolt, a 30-year-old radiata pine bites the dust in Kinleith Forest, part of New Zealand’s largest plantation forest region-the vast volcanic plateau between Rotorua and Taupo. Pinus radiata, once an obscure botanical oddity clinging to existence on the California coast, has become New Zealand’s great timber tree, covering 1.3 million hectares of land and forming the basis of a billion-dollar-a-year export industry.

I’M STANDING IN the South Kaingaroa forest beside a rough-looking bloke with a chainsaw, watching him drop trees. Three or four tonnes of timber hits the deck like a giant drumstick, producing the crack of a huge whip and an ankle-shaking shock. Impressive, but there is only a few seconds’ silence before Shane Yeele’s saw screams into the next trunk.

These trees would have been no more than saplings when I last swung an axe in a pine forest. Things look the same, but the pace in 1993 is hard out. Down on the cleared flat—the skid— where the trees are sorted, stacked and loaded on to trucks, the scene is hectic. The loader- driver has been working since before dawn. Money, money, money. New Zealand has struck green gold, and the pressure is on to turn those trees into logs for export, timber for a thousand uses, pulp for the paper mills, chips for the particle board.

Along the edge of the block which Alan Sinton and his gang are cutting out is a border of yellow plastic tape, running from tree to tree. Beyond lies a zone of peace.

“We’re not allowed to cut past that line,” says Alan. “There’s a big tree in there, tallest tree in the forest they reckon.”

We go looking for tree No. 73. Dense blackberry, koromiko, black-fruited five-finger, bracken fern and old tree ferns surround grey-barked trunks which draw the eye up and into the distant canopy. It smells delicious, the sharp top note of pine needles given body by the musty bass of decaying litter.

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Source: New Zealand Geographic (Reprint)


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... and finally ... Golfers on their game ...

Golfers on their game ... it's no joke

After a particularly poor game of golf, a popular club member skipped the clubhouse and started to go home. As he was walking to the parking lot to get his car, a policeman stopped him and asked, "Did you tee off on the sixteenth hole about twenty minutes ago?"
"Yes," the golfer responded.
"Did you happen to hook your ball so that it went over the trees and off the course?"
"Yes, I did. How did you know?" he asked.

"Well," said the policeman very seriously, "Your ball flew out onto the highway and crashed through a driver's windshield. The car went out of control, crashing into five other cars and a fire truck. The fire truck couldn't make it to the fire, and the building burned down.

So, what are you going to do about it?"
The golfer thought it over carefully and responded... "I think I'll close my stance a little bit, tighten my grip and lower my right thumb."




See you again next week.
John Stulen
Editor

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