WoodWeek 27 January 2021
To the markets where we have our biggest market heading into a different period with log supplies from other countries down slightly for a range of reasons. Also, it appears this Chinese New Year could be different from the usual holiday break as indications are that far fewer workers will travel for their usual annual holiday which may see log inventories build less than usual for this time of year. Cutting to the chase, we have some first-hand comments from the team at Forest360 to start today’s issue.
Moving to carbon forestry, this year is going to be a dynamic one for investments to offset our growing carbon emissions. Changes to the Emissions Trading Scheme came into effect on 1 January 2021; The Climate Change Response (Emissions Trading Reform) Amendment Act 2020 came into force in June 2020. This Amendment Act will help New Zealand reach its targets to reduce emissions. It changes how the Emissions Trading Scheme (ETS) operates for all sectors. For forestry, some new provisions under the Act came into effect on 1 January 2021. There is serious interest building in this newly-attractive market from both local and offshore investors. Correspondingly, we are already seeing plenty of registrations coming in for our Carbon Forestry Conference in mid-June.
Looking now to our HarvestTECH and Forest Industry Safety & Technology Conferences running concurrently in Rotorua in April, we are pleased to showcase new technology that will be highlighted in a case study. The ‘weigh’ of the future - LOGR is a haulage and weighing solution that simplifies tracking of trucks through its mobile app, eliminating the use of paper dockets and data entry. This allows data to be instantly shared with forestry companies, contractors and customers.
Moving to other wood markets, where despite weakening demographics, there are still some growth sectors and good business in Japan! RUSS TAYLOR GLOBAL is pleased to announce a complimentary report that summarizes Japan’s wood imports and industry, including historical trends, key issues, and major developments. The Japan Part 1 report covers log and wood products imports and domestic production and supply trends, including some historical perspectives back to the 1960s and 1970s.
This week we have for you:
China deal: FOA likes new agreementBreaking News - This morning Forest Owners Association president Phil Taylor spoke to RNZ's Corin Dann on the recently signed free trade deal between China and New Zealand - Exporters are rejoicing after the government announced an upgrade to New Zealand's free trade agreement with China.
The deal will allow faster access to Chinese markets for New Zealand goods and a reduction in tariffs for paper and wood products.
Trade and Export Growth Minister Damien O'Connor says the upgrade addresses some aspects of trade that weren't as sophisticated when the deal was signed ten years ago. ExportNZ executive director Catherine Beard and president of the Forest Owners Association, Phil Taylor speak to Corin Dann.
Listen to the report >>
Log export markets - 360 viewThis week we welcome commentary from Marcus Musson (pictured), Whanganui director of Forest360 - I commented in this column a few months back about the expected headwinds in the export market with a foreseen large increase in supply expected from Europe and Australia that would have likely driven the export price south. Thankfully, this has not manifested."
The Chinese Government has got into some geopolitical biffo with Australia which has culminated in the banning of all Australian softwood imports into China. This has left a supply hole of around 400,000 cubic metres per month (10 per cent of total supply into China) which is likely to be filled by NZ radiata. European supply has been thwarted by the Covid resurgence and a global shortage of container freight (most European logs arrive in China in containers).
In addition to this, the supply from Canada and the US continues to reduce due to declining allowable cut levels and strong internal housing demand. Other Asian markets are not performing as well as China, with India feeling the full effects of Covid and the re-direction of the Australian supply putting pressure on these markets.
January has seen export prices increase to over $140/JAS for A-grade logs in most ports and, though not as high as the $150/JAS in the month immediately following lockdown, it is a very strong price compared to the 3-year average of $126/JAS.
This is considering the $US:NZ forex has increased from $0.66 to $0.72 in the past three months, which is unlikely to rectify itself until the US sorts its leadership issues.
Shipping rates have firmed following increases in fuel costs, but reduced cargoes following the Christmas slowdown may somewhat negate this.
In market Chinese softwood inventories have reduced from more than 5 million cubic metres post-NZ lockdown (the first one) to around 2.7 million in late December. This will likely increase somewhat as China goes into Chinese New Year celebrations in late February.
It is expected, however, that the Chinese Government will implement a staggered holiday period to prevent any Covid outbreaks, which may see some production continuing over this period. In any case, heading into CNY with inventory below 3 million cubic metres is a very good place to be for suppliers.
Domestic sawmills continue to perform strongly with demand for pruned and sawlogs very high. Many sawmills are running very low inventories of sawn lumber and this is unlikely to change as housing demand continues to surge and New Zealanders pour their holiday money and low-rate mortgages into renovations and decks.
So, 2021 is off to a good start in our industry and we are expecting to see strong pricing for at least the first quarter of the year. One thing we have learned, however, is that who knows what curveballs are around the corner and it may not be time to put the steel undies away just yet.
Having been in this game for a couple of decades now I have seen prices reach the mid-$140's/JAS numerous times. Each time the drivers for strong pricing are different, and each time there is a sharp correction soon after. The current scenario does feel like it has some legs……but I have heard that before.
ETS changes with effect 1 JanuaryChanges to the Emissions Trading Scheme came into effect on 1 January 2021 - The Climate Change Response (Emissions Trading Reform) Amendment Act 2020 came into force in June 2020. This Amendment Act will help New Zealand reach its targets to reduce emissions. It changes how the Emissions Trading Scheme (ETS) operates for all sectors.
For forestry, some new provisions under the Act come into effect on 1 January 2021. Three key changes that affect the forestry sector are outlined here:
Fixed price option (FPO) - When a participant owed the Crown for emissions, the fixed price option let them pay money instead of surrendering units. The FPO will not apply for emissions from 1 January 2021 – the participant will need to surrender units.
The FPO continues to apply to emissions before 1 January 2021, regardless of when the emissions return is submitted or amended. Emissions in a calendar year (for example from pre-1990 deforestation) will use the appropriate rate – $25 per unit for emissions prior to 2020 and $35 per unit in 2020.
There are transitional provisions for post-1989 forestry emissions returns covering multiple years. Under these, the participant will need to submit a net return for all carbon accounting areas covered by the return. Access to the FPO will be pro-rated based on the proportion of the period covered by the return for each FPO rate.
More information >>
HarvestTECH - From log to LOGRFrom log to LOGR, new technology allows Tasmania’s harvested timber to be tracked in real-time - The evolution of forestry practices has greatly evolved over the last decade. From investing in research and technology to building sustainable communities, to harvesting reclaimed timber from the bottom of a remote lake, to studying the density of plantation grown timber for potential new uses, innovation has exploded across Tasmania’s forestry sector. The state’s forestry suppliers and companies are employing the most innovative systems and processes to ensure efficiency from tip to toe, all with the technology to prove it.
One of these leaders in innovation is SFM Environmental Solutions, a leading provider of independent plantation management across Australia. SFM offers fence to fence management of commercial forestry estates, harvesting logistics solutions, market options and independent advice to a wide range of forest- based projects. Implementing a new software platform has elevated their chain of custody tracking giving their customers peace of mind- in real time.
The weigh of the future - LOGR is a haulage and weighing solution that simplifies tracking of trucks through its mobile app, eliminating the use of paper dockets and data entry allowing data to be shared with forestry companies, its contractors and customers, instantly. LOGR consists of a cloud-based administration dashboard and companion mobile app for drivers transporting timber, and a solution suite that assists in the management of transporting forestry products from collection to delivery.
SFM’s Finance Manager and Production Coordinator Tammy Price was the lead on implementing the new technology and says the new software solution has transformed the way they look at their supply chain.
“LOGR replaces the old paper docket system so all interested parties can keep track of what’s being harvested and transported. A driver creates a docket at the start of their route and real-time figures and data are made available along their route, all the way to their final destination. We can see how many trucks we have on the road at any given time, where they are and what they’re carrying,” explains Price.
Our FIEA HarvestTECH Conference in April will feature a case study on the implementation of this system.
To register for HarvestTECH click here.
Japan wood imports and industryDespite weakening demographics, there are still some growth sectors and good business in Japan! - RUSS TAYLOR GLOBAL is pleased to announce a complimentary report that summarizes Japan’s wood imports and industry, including historical trends, key issues, and major developments. The Japan Part 1 report covers log and wood products imports and domestic production and supply trends, including some historical perspectives back to the 1960s and 1970s.
Despite the runaway US market right now, Japan is still a most important market for global exporters of higher quality and value-added/engineered products. Understanding and reviewing some of the major industry/market trends and issues in Japan should be useful to most industry players.
Source: RUSS TAYLOR GLOBAL
HarvestTECH: Additional workshopFor all harvesting contractors and harvest planners who'll will be in Rotorua, New Zealand for the major HarvestTECH2021 event that will be running in mid-April, an extra workshop (no charge to HarvestTECH 2021 delegates) on the afternoon before the event runs on Monday 12 April has been set up.
It’s titled “Developing an Intelligent Roadmap for Harvest and Wood Flow Planning”. It will be covering how best analytics technologies can be used to meet harvest and wood flow planning goals, with tech tips and take-away tools to develop your own planning roadmaps. More details can be viewed via this link.
The workshop will be run by Corinne Watson, Asia Pacific General Manager, Remsoft, New Zealand (in-person) along with Sandy Loder, Senior Analyst & Sacha Gascoigne, Technical Sales Analyst Remsoft, Canada (live remote). Registrations for those interested in the three-hour workshop can be made as part of your HarvestTECH 2021 registration.
Details on the harvesting and wood transport event for 2021 can be found on the event website, www.harvesttech.events/ht21
SnapSTAT - sponsored by COP
Source: RISI & FEA Canada via Campbell Group Timberlands
IFA calls for fire fighting focus shiftContract awarded for harvesting fire affected logs - K’gari Bushfire Review an opportunity to address Queensland’s fire response and prevention shortcomings - The peak organisation representing some 1,000 professional and scientific forest land managers in Australia has made a submission to the K’gari (Fraser Island) Bushfire Review, calling for a greater focus on year-round bushfire prevention activities over the use of water bombing aircraft.
Institute of Foresters of Australia and Australian Forest Growers (IFA/AFG) President Bob Gordon urged the review panel to weigh-up the effectiveness and cost of relying on water-bombing aircraft as a reactive measure against the need for conventional wildfire responses and enhanced year-round prevention activities across Queensland.
“We often see aircraft bombing established fires, and people think that they put the fires out. They don’t put forest fire out. It is ineffective to attempt to water bomb a large fire out,” Mr Gordon said.
“The time to attack a fire is before it starts, with prevention and hazard treatments, and soon after while the fire is small in area, with aggressive, land-based attack.
“Forest fires require a lot of work on the ground to remove fuels so that the fire is actually stopped from moving by a mineral earth break. These are often enlarged using backburns to remove fuel between the active fire edge and the constructed fuel break. Most people do not see this work on the ground take place.
“A greater focus on year-round land management would ensure those equipped with the specialised skill set and resources to fight forest fires could mount timely and informed attacks on any new fire fronts.
“The IFA/AFG are calling for an adequate network of fire access tracks and strategic fuel breaks to be maintained on Fraser Island to support safe burning operations and wildfire response and the establishment of an annual prescribed burn target. This burn target should be based on recommended fire regimes, cultural burning requirements and principles and should be somewhere in the vicinity of 15,000 hectares annually."
“We also recommend an independent review of the effectiveness and efficiency of firefighting machinery and air fleet in comparison with fireline maintenance and wildfire mitigation activities."
“In Queensland, the immediate priority for future management should be on other extreme risk localities around the state, where the next fire disaster is more likely. This includes adequate fireline network design and maintenance, widespread burning involving Traditional Owners where possible, and adopting traditional burning design methods."
“This will require a commitment from all levels of Government to better fund and resource active forest management and fire management programs across the state, in accord with COAG’s Bushfire Management Policy Statement for Forests and Rangelands.
“Active management is integral to reducing the risk of catastrophic wildfire events, which is more important than ever as Australia faces hotter and drier conditions as a result of climate change.”
Retro: The NZ Forest Products of oldRetrospective: The once-proud NZ Forest Products - As a new generation of land is converted from farming to carbon-farm tree plantations, former NZ Forest Products Kinleith mill manager Ashley Wilson looks at what and who brought down the once-mighty business.
The 1980s were incredible for New Zealand, politically and economically. At the start of the decade, I was working for the largest company in the country, NZ Forest Products, as its man in Wellington, keeping finance companies, investment analysts, the Government and the Opposition informed of its activities and plans.
By the end of the decade, Forest Products no longer existed. To understand what went wrong, it pays first to know something of the company’s history.
NZ Forest Products was established in 1936 to exploit the huge forests of pinus radiata sown on the Central Plateau of the North Island up to and during the Great Depression. Under entrepreneur David Henry, sawmills and the wallboard mill in Penrose, Auckland, were established, followed in 1953 by the start of pulp- and paper-making operations at Kinleith in the South Waikato.
Forest Products lost its status as New Zealand’s largest company by market capitalisation in 1981, when Fletcher Holdings and Challenge Corporation merged to form Fletcher Challenge.
That decade was characterised by a number of company bites of other enterprises, and takeover offers. Some examples:
- Fletcher made a grab for Carter Holt
- Caxton tried to buy UEB
- Goodman Fielder bid for Wattie’s
- Wattie’s countered with a bid for Goodman Fielder
- Forest Products formed strong links with Australian paper company APM, now AMCOR.
- Forest Products took 40 percent of UEB
- Alex Harvey Industries bought into Carter Holt to form Carter Holt Harvey.
- Fletcher Challenge was prepared to spend $1.5 billion to take over Forest Products.
There was a good reason for companies to take aim at Forest Products. At that time, we had more than 150,000 hectares of planted forests. In our balance sheet, these were valued at cost. Our accountants argued that since a forest could be destroyed by disease or fire, this was a conservative position to take. However, there had never been a serious fire or threat of disease, and one analyst suggested the then share value of $4.42 could really be as high as $8.
Forest Products was doing well. We were a major producer for the local market as well as being an exporter, so we were getting export incentives. We made 250 grades of paper because we were protected by import licensing. Customers in New Zealand had to use our products; once a year, we told them the new price they would have to pay!
But farmers were complaining to the government that industry was getting a financial advantage over them and feared good pastoral land could be lost to forestry. As well, New Zealand’s export incentive scheme was under fire from GATT, the Geneva-based multilateral General Agreement on Tariffs and Trade.
Everything changed in 1984. At that time, I was manager of the Kinleith mill, which employed more than 3300 people. It was election year, and in keeping with our tradition, we invited both the Prime Minister, Rob Muldoon, and the Leader of the Opposition, David Lange, to speak at lunchtime meetings. Muldoon was the first to visit. He gave an outstanding address, and despite the workers being mainly Labour supporters, there was no booing.
Lange, when he visited, received an enthusiastic reception, and went on to score an emphatic victory at the polls. But his new government was immediately faced with a currency crisis, and the incoming Minister of Finance, Roger Douglas, floated the dollar, phased out export incentives and moved to sell state-owned enterprises.
Contract let for fire-damaged log harvestAustralian forestry services company Harvestco has been awarded the contract to harvest, store and stockpile the first 200,000 tonnes of pine in the Kangaroo Island Plantation Timbers (KIPT) estate.
Harvestco started work on the Island in December 2020, clearing rows of trees alongside powerlines, as part of KIPT’s fire prevention work in conjunction with SA Power Networks. Soon the harvest proper will start, with Pinus radiata logs cut to length and sorted according to potential future markets – logs, chips, pellets.
The best of the fire-damaged timber will be sent to water storage at KIPT’s Macgill property, and placed in the Sheep Creek Dam on that property. A harvesting trial starts this week to determine the optimal recovery from the pine estate. After the trial is planned to start clearfell harvesting, building to an annual production rate of 200,000 toned per annum from April. The harvest of about 4.5 million tonnes of fire-affected timber is expected to take about five years.
KIPT Managing Director Keith Lamb said it was an important step for the company to have appointed HarvestCo for the initial harvest. “This is an experienced company with an excellent record and we’re glad to be working with them.”
Harvestco will initially employ about 12 people for the Kangaroo Island work and that will increase over coming years. Harvestco Managing Director Rick Murphy said he was looking forward to the harvest-proper on Kangaroo Island. “There are some unique challenges in working on an Island and with a fire-damaged resource but we have many years’ experience across Australia and we’re looking froward to bringing our expertise to the circumstances on Kangaroo Island.”
Mr Murphy is keen to employ local operators on Kangaroo Island and Harvestco has a well- established training program in concert with the Logging Investigation and Training Association (LITA), based in Mt Gambier.
Sumitomo sets sights on wooden satellitesSumitomo Forestry and Kyoto University have joined forces to develop what they hope will be the world’s first satellites made out of wood by 2023.
“We are very concerned with the fact that all the satellites which re-enter the Earth’s atmosphere burn and create tiny alumina particles which will float in the upper atmosphere for many years,” Takao Doi, a professor at Kyoto University and Japanese astronaut said. “Eventually it will affect the environment of the Earth. “The next stage will be developing the engineering model of the satellite, then we will manufacture the flight model.” As an astronaut he visited the International Space Station in March 2008.
Sumitomo Forestry, part of the Sumitomo Group, which was founded more than 400 years ago, said it would work on developing wooden materials highly resistant to temperature changes and sunlight. By manufacturing wooden satellite housings, the plan would be for them to simply incinerate and vanish in a blaze of glory when passing back through Earth’s atmosphere if they ever do happen to de-orbit.
At this point the ambitious program is still in a conceptual phase with scientists exploring which varieties of wood might endure the harsh conditions of space, which include violent temperature fluctuations and radiation bombardment.
The team’s preliminary investigation into the feasibility of their invention is being heavily guarded and their intended methods are secret. Experts have warned of the increasing threat of space junk falling to Earth, as more spacecraft and satellites are launched.
Satellites are increasingly being used for communication, television, navigation and weather forecasting. Space experts and researchers have been investigating different options to remove and reduce the space junk. There are nearly 6000 satellites circling Earth, according to the World Economic Forum (WEF). About 60% of them are defunct (space junk). Research firm Euroconsult estimates that 990 satellites will be launched every year this decade, which means that by 2028, there could be 15,000 satellites in orbit.
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... and finally ... your midweek giggle ...
Ironically, of all the phobias that people suffer from, fear of heights is right near the top.
A politician visited a remote little rural town and asked the inhabitants what the government could do for them.
"We have two big needs," said the town's Mayor. "First, we have a medical clinic but no doctors."
The politician whipped out his cellphone, spoke for a while and then said, "I have sorted it out. A doctor will arrive here tomorrow. That was easy, now tell me, what's your other need?"
"We have no cell phone reception at all in our town."
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