Recovery: Foresters urged to manage harvest

Wednesday 25 Mar 2020

Forest owners need to work closely with the rest of the sector to restore production in a way that is sustainable for contracting crews and the markets logs are destined for, the Forest Industry Contractors Association says.

Ports around the country have reported more stable log volumes heading to China in recent weeks and several are hoping to see further improvements during the next two months. Fonterra, Briscoe Group and Mainfreight this week also reported improving capacity and demand in China.

Forestry Industry Contractors Association chief executive Prue Younger said two large forest owners had indicated they could be back to full production in about a month. While that was an encouraging signal, she said it would also be a challenge, given the number of workers already lost from the country’s forestry crews and the potential to “inadvertently flood the market again.”

“That would be incredibly disappointing,” she told BusinessDesk.

Forestry, tourism and aviation have been the sectors hit hardest by the coronavirus pandemic. China’s economy, the largest user of New Zealand logs, virtually shutdown in January as the government restricted travel to contain the virus.

The economy there is picking up again, but only slowly, and may struggle to get back to pre-virus levels given the global markets it supplies are also now slowing as they contend with the pandemic.

Northport, one of the country’s largest forestry terminals, last week said its log cargoes were down about 40 percent on budget. Earlier this week, Eastland said its log volumes were down about 30 percent and that it was hoping to see a pick-up during the next two months.

Younger said contractors have no control of harvest decisions and forest owners are competing with one another. But she said the parties need to work together to lift volumes in a manageable way.

“We’ve got to learn some lessons out of this.” Younger said her industry was five to six weeks ahead of the rest of the economy in terms of the hit it had taken from coronavirus. About 30 percent of its workers are not working and many have left the industry and taken their skills elsewhere.

Others, who could have benefited from the “amazing” recruitment drive currently underway in horticulture, have instead waited for a pick-up in harvesting. She said about 20 percent of her members have indicated they may take-up the wage subsidy scheme offered by the government this week; those not working will need to lean on the tax- breaks being offered.

Younger said some contractors currently have no income but are carrying high debt on heavy equipment they have invested in. Banks had been “exceptionally good” in shifting loans to interest-only – and in some cases no interest – but that is becoming more of an issue as the downturn continues.

“The financial institutions can’t say `no payments’ for ever.”

Don Carson, communications manager for the Forest Owners Association, said there are signs that China’s economy is recovering and that competing flows of salvaged European spruce into China may have also slowed. But he said log inventories in China are high and it would take all of the country’s industrial systems to come together to draw them down.

While it might be possible to restore production to previous levels, he said that would take time, given the need to book contractors, trucking and vessels. Even then, prices are unlikely to be back to where they had been, he said.

“While that inventory draws down, you wouldn’t be expecting the prices that you were getting before.”

Source: BusinessDesk

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