WoodWeek – 3 July 2019

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Greetings from your WoodWeek news team. Thanks to everyone who supported our successful HarvestTECH 2019 conference last week – including contractors, forest managers and supervisors, service providers and suppliers. The group enjoyed innovations from logging from afar to two-stage log transport innovations on the stage indoors, as well as networking in the sunshine and warmth outdoors complete with BBQs amongst the array of harvesters.

Looking to markets, it now looks certain to be a year of two halves for log exports to China. Dark clouds have descended on export log prices to China following the drop in their currency against the US dollars among other things. Many people's livelihoods will be affected by this potential downturn in our biggest market. Time will tell if this is an aberration or a significant market correction. There was a brief correction in prices to China in August last year when the renminbi last suffered a large fall against the greenback. Comments from the market are that some impacts are seasonal and some represent structural changes that have been building for the last few years.

On the other hand the economic sun has been shining on our industry for several years now - see the statistics for last year. The facts are in from Stats NZ - operating profit for the agriculture, forestry, and fishing industries combined increased $1.0 billion (up over 22 percent) to $5.6 billion in the 2018 financial year. Forestry and logging had a significant operating profit increase of $0.39 billion (up 40 percent) in 2018. This reflects the increased exports, measured by both volumes and prices.

Before we go any further have a look at this brilliantly simply clip. It’s about as clear and concise as you can get when it comes to how GOOD wood really is ... featuring Peter Maddison from Grand Designs Australia!

Check it out >>

Finally this week, if you see a new name around soon, it’s because Hikurangi Forest Farms has been renamed Aratu Forests.

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Export log prices drop

Stockpiles of pinus radiata logs in China have depressed New Zealand wharf-gate prices by about $US20 ($NZ29.70) during the past fortnight, putting pressure on the jobs of smaller contract logging crews.

Anecdotally, four logging crews around Southland and North Otago have been laid off in recent weeks, affecting 20 to 25 staff. Major estate forest owners are not considering laying off staff, despite the expectation prices will be depressed for the next two to three months.

The extra pinus radiata accumulating on China's wharves is affecting the sector nationwide but should be a 'short-term correction' that may take until September or October to revive, Southern Wood Council chairman Grant Dodson said.

'Yes, it's the logging crews in the woodlot sector who are most vulnerable,' he said.

The woodlot sector is defined as small farm forestry investments, who are deciding not to engage contractors to cut their forest lots because of the depressed prices.

'The woodlot operators have one opportunity to cut it down, so want to avoid the [low price] trough,' Mr Dodson said.

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Source: Otago Daily Times


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July log market update

Several cascading effects have impacted Chinese markets for NZ pine logs in Q2 CY19, which will have ramifications throughout Q3 CY19. Some of these impacts are seasonal and some represent structural changes that have been building for the last few years. Cumulatively, these changes have shifted the NZ pine market in China to one of oversupply.

See the attached update from China Forestry Group New Zealand Company Ltd.

Download the report


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Funding boost for women in forestry

Female forestry training programme receives PGF boost - The Government is supporting a primarily female training programme in Northland that will help address labour shortages in the male-dominated forestry industry, Regional Economic Development Minister Shane Jones and Employment Minister Willie Jackson announced on Monday.

The Provincial Growth Fund (PGF), through the He Poutama Rangatahi (HPR) programme, will invest $421,050 in Wahine Toa, a five-month intensive pilot initiative to prepare mostly young women for training and employment in the forestry sector. The initiative launches today in Kaikohe.

“Investing in skills and training is a clear priority for this Government and I’m pleased to see both HPR and the PGF’s other employment scheme, Te Ara Mahi, already making a difference to people’s lives up and down the country,” Shane Jones said.

“As Forestry Minister, I know labour shortages are a significant concern for the sector so initiatives like Wahine Toa are a great investment. The industry is also trying to encourage more women into forestry so this programme ticks both boxes.”

“We know that supporting young people into long-term jobs delivers benefits for the whole community,” Willie Jackson said.

The programme will be predominantly women, but has a small cohort of men who will be in a separate crew.

“It’s great to see programmes aimed at encouraging more women into the male- dominated forestry industry and I wish the participants every success.

“Wahine Toa is modelled on the Eco Toa (Ecological Warrior) initiative, another HPR programme funded through the PGF that was announced in March this year. The initiatives focus on rangatahi aged between 16 and 24 who not in education, employment or training (NEET). Through training, individualised pastoral care and financial support, both programmes help young women get onto a path to sustained employment.

“The success of programmes like Eco Toa shows that when Government partners with local people, we can make a real difference in the lives of young people who are at- risk of long-term unemployment.

“Projects like these are all part of the Government’s wider efforts to tackle youth unemployment in the regions,” Willie Jackson said.

Update: Click below to hear a short interview with Jack Johnson, who runs the programme, who spoke to RNZ's Susie Ferguson.

More >>

Source: RadioNZ





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OneFortyOne continues investing

OneFortyOne set to invest a further $19M at its Mt Gambier Mill - When OneFortyOne took ownership of Mount Gambier’s Jubilee Highway Sawmill in 2018, it not only cemented the company’s commitment to the Green Triangle region, but it also marked the first of many significant investments to be made at the site. Over the past 18 months, OneFortyOne has invested $19 million in various projects, ensuring the mill remains one of the largest and most efficient mills in Australia, and at the cutting edge of domestic processing.

The company has announced this week a further $19 million investment at the site for two major capital projects. Work is set to start this month with the purchase and installation of a new scanner and two new highly efficient Continuous Drying Kilns, with the projects set to conclude in 2020.

OneFortyOne’s Executive General Manager Australia, Cameron MacDonald said “We are excited to see the positive impact of our ongoing investment across the mill, ensuring it continues to be a world class plant for many years to come.

We know this will provide job security for our team and is another positive for our local economy.”

Maintaining the internationally recognised timber industry in the Green Triangle is critical to ensuring that Australian grown and processed timber products are competitive against those imported from overseas.


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Primary sector export profits up

Operating profit for the agriculture, forestry, and fishing industries combined increased $1.0 billion (up 22.1 percent) to $5.6 billion in the 2018 financial year, Stats NZ said last Friday.

Food product manufacturing, and grocery, liquor, and tobacco product wholesaling, which are related to the agriculture, forestry, and fishing industries, also had increased profits.

Growth in the primary industries reflects favourable seasonal factors and export prices over this period, as seen by increased exports of beef, lamb, dairy products, logs, and kiwifruit.

The largest contribution to the increase in primary industry operating profit came from sheep, beef cattle, and grain farming, which increased $0.44 billion (up 52.6 percent). This was driven by a $1 billion increase in sales, primarily due to improved export returns. Led by price increases for dairy products, sales in the dairy industry increased $1.2 billion in 2018.

“After the downturn in 2016, operating profit for the dairy industry has continued to recover, but not back to the level seen in 2014,” national accounts senior manager Gary Dunnet said.

Forestry and logging had a significant operating profit increase of $0.39 billion (up 40.0 percent) in 2018. This reflects the increased exports, measured by both volumes and prices.

Source: Statistics NZ


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AI startup targets inventory prediction

Forestry tech company CollectiveCrunch has announced the closure of a €600,000 funding round led by Finland’s Thominvest, taking the company’s total funding to €1 million. Existing and new angel investors also participated to complete the round. CollectiveCrunch will use the funds to finalise and launch the first commercial version of its Linda Forest platform in the second half of 2019.

With its long history in forestry, Thominvest has a solid understanding of the value CollectiveCrunch brings to this market. The firm’s state-of-the-art AI-supported technologies help landowners to more accurately assess and manage their forestry inventory and buyers of wood resources to target the wood they actually need.

“We are following developments in AI closely and have been aware of CollectiveCrunch since 2017,” said Thominvest Group’s Mats Soderstrom. “CollectiveCrunch is focused on the forestry industry and we were convinced by the team’s capabilities and the commercial progress they have made in the last quarters,” he concluded.

CollectiveCrunch’s Linda Forest AI platform utilizes climate, geo, and customer process data to arrive at better predictions of forest inventory. The solution lets foresters know the volumes and species of wood they have on their land without having to drive out for inspection. Traditional solutions are cumbersome, time-consuming, expensive, and may have error rates of up to 30 per cent.

“The funds raised in this round are essential in building the team and technical capabilities to fulfill our ambition of becoming a global leader in AI for the forestry industry,” said CollectiveCrunch CEO Rolf Schmitz. “We thank our existing and new investors for their support and faith in our vision,” he concluded.

The closure of this latest €600,000 round brings the company’s total funding since inception to €1 million.

The round closure follows a recently announced a multi-year partnership with Finland’s Metsahallitus Forestry that aims to improve harvesting and forest development planning. The company has offices in Helsinki, Berlin, and Munich, and forestry customers in Finland, Sweden, Estonia, and Brazil.


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Guidelines for fatigue management

Guidelines for forestry industry fatigue management released - In South Australia, the Logging Investigation and Training Association (LITA) has released guidelines for developing and implementing a fatigue management policy for the forestry industry.

The material aims to assist forestry industry participants to identify, assess and manage the risks associated with fatigue. The guidance material offers a structured approach to the development of a fatigue risk management system including a fatigue policy, risk assessment tools and risk-based control options to manage fatigue.

SafeWork SA commends the new forestry industry fatigue management guidelines and has visited a number of forestry businesses to check on fatigue management. It has issued Improvement Notices to encourage the development and implementation of appropriate fatigue management plans.

“We would like to remind workers that if they have concerns about safety in the workplace, they should let us know,” said Imogen Selley, SafeWork SA Director of Compliance & Enforcement.

A copy of the new LITA fatigue management guidelines can be viewed online.

More >>


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KiwiRail goes long for logs

Longer log trains between Waingawa and Wellington will deliver clearer roads and lower greenhouse gas emissions, KiwiRail Group Chief Executive Greg Miller says.

Yesterday KiwiRail announced it has increased the number of wagons on its daily trains transporting logs from Masterton to CentrePort.

"Last year KiwiRail moved 267,000 tonnes of export logs from the Wairarapa to CentrePort. Increasing the number of wagons from 30 - 45 a day, we will be able to move up to 370,000 tonnes a year. That's about a 40 per cent increase in capacity," Mr Miller says.

"Our log trains already avoid about 16,000 log truck journeys into Wellington each year. The additional rail capacity will avoid a further 6,000 truck journeys each year on the Remutaka Hill Road, the Hutt motorway and the pinch-point of Aotea Quay."

"Not only does this help reduce congestion on the highways, it also reduces road maintenance costs, and transport emissions - given rail has 66 per cent fewer emissions per tonne of freight carried than trucks."

"This is a great example of taking a multi-modal approach to transport. Trucks transport logs from the forest to the Waingawa hub but rail covers the distance to CentrePort. It shows how rail and road can work effectively together to create economic and social benefits for the people of the wider Wellington region."

Given log harvests in the lower North Island are expected to see a sustained increase in the coming years, KiwiRail is working with CentrePort and the forestry industry on the potential of further capacity increases from the Waingawa hub.

KiwiRail is also currently developing a log hub at Wairoa, to transport logs on the recently reopened Napier-Wairoa rail line to Napier Port and the Government has announced potential funding for another log hub in Dannevirke.


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SNAP Story: NZ log exports to China




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UDC Finance delivers improved result

Specialist commercial lender UDC Finance increased first-half net profit 6 percent but sees slower growth in lending in the period ahead as the economy cools.

Net profit climbed to $34.7 million for the six months to March 31, from $32.7 million a year earlier. Total revenue for the period lifted 11 percent to $73.4 million and total lending stood at $3.3 billion at balance date, from just over $3 billion a year earlier.v "Continued consumer and business investment in motor vehicles, plant and machinery" drove that growth "during a period of more caution in the New Zealand economy," chief executive Wayne Percival said.

“Businesses are approaching investment in new equipment and vehicles with more consideration. The prospects for many of the key industries we focus on, such as forestry, road transport and the construction sector remain positive."

Inquiry levels at last month's National Fieldays also reflected "a sound outlook for the broader primary sector,” Percival said in a statement.

UDC said provision expenses for the period totaled $7 million and there were "no individually significant write-offs."

Net cash inflows at $188.0 million were considerably down on the comparable period, which showed net positive cashflow of $232.0 million.

UDC, previously earmarked for sale by ANZ, earlier this year stopped taking new investments and said it would repay its secured debentures as part of a review of its funding sources.

In notes to its half-year accounts, UDC says it is winding up the debenture programme and expects to repay "all existing secured investments in or up to late 2019."

ANZ announced the sale of UDC in January 2017 as part of a strategic effort to simplify the business and focus on the group's core banking activities. But the $660 million sale to China's HNA Group was rejected by the Overseas Investment Office later that year and ANZ's alternative plan for an IPO were also dropped.


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Carbon Match market update

Carbon Match Weekly Market Update - Last week saw bigger volumes of NZUs change hands, trading a range from $22.50 to $23.10. Many buyers have little urgency to add to their spot holdings. Some who exercised the fixed price option at $25 feel like that decision could yet be questioned.

It might help to think about two things:
First, the politics of climate change in New Zealand haven't been here before - we have never seen such consensus on the need to act and mitigate. We look set to bring our commitments into legislation via the Zero Carbon bill, which will set up an independent Climate Change Commission and legislate not only that audacious goal but also see the production of a series of stepping stone budgets that should create a credible path to get us there.

The dialogue has changed. Sure, there is plenty of debate about definitions and fairness. But gone, or least very quiet, are the deniers. While the support of National does not appear to be required in order to get the Bill through, it seems to be desired - both by the Government and the Nats.

Yes, the issue of agriculture remains difficult to say the least, but against myriad real world reminders - from sweeping European heatwaves to two metre deep hailstorms in an otherwise 30 degree Guadalajara in Mexico - few NZ politicians are any longer willing to put their hands up as sceptics.

And the last ten years of political history demonstrates ongoing support for the ETS as a key policy tool from almost all quarters. This is not Australia, the ETS is not going away and whether you fall in the camp of green optimist or realistic reluctant, your ambition to act / resignation that we will have to, can only be increasing.

Which takes us to our second point: when you look around and say "yes, we have to do this", where do you think the domestic action is going to come from?

Where exactly is the low hanging fruit in the transition and how significant is it against the 200 million overshoot New Zealand looks likely to have on our Paris Budget of about 600 million tonnes for the period 2021 - 2030?

Forestry is trucking along, and while the story is not necessarily as simple as it has been (catch up on the recent positions of the 50 Shades of Green group and listen to MPI's response ) it might, all going well, perhaps make up for as much as a quarter of the 200 million overshoot. But what about the rest of it? Forest sequestration only buys time and recent newsroom debate has highlighted that not everbody is happy about forestry being New Zealand's climate change technology of preference.

New Zealand's response needs to be much more diversified than it has been to date. While $20 - $25 might drive afforestation, much higher carbon prices are needed in order for actual abatement, as opposed to just forest sink-creation, to take place.

The Productivity Commission has said that Huntly coal could be retired at an emissions price of around NZ $40 a tonne of CO2e and the Taranaki gas CCGT at a price of around $60 a tonne of CO2e.

Speaking more generally they find that to reach a target of 25 megatonnes of CO2e by 2050 (around 60% below 1990 levels) will likely require emissions prices to rise to between $75 and $152 a tonne by 2050.

The Commission says that the bigger goal of net zero emissions will require a carbon price of up to $157 a tonne of CO2e by 2050, even with rapid technology change. With slower technology change prices may need to rise up to $250 a tonne by 2050.

Today, our (almost) single source, slow grown, non-vintaged, non-expiring NZUs are bid $23.05 and offered $23.25, with forward agreements perhaps worth exploring off this lower base - do get in touch if we can assist.

Source: Carbon Match - every weekday from 1-5pm.


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Napier Port IPO details announced

Napier Port staff wanting to participate in the firm’s partial listing have been guaranteed a minimum of $5,000 worth of stock. The port, currently owned by Hawke’s Bay Regional Council, will offer 45 percent of its shares to investors next month and plans to give staff, local residents and iwi preferential access.

The port has about 265 staff. Those working full-time at July 15 will be eligible to subscribe for shares under the priority offer, and can also seek an interest-free, limited recourse loan from the company to help fund that purchase. Individual residents of Hawke’s Bay, and individual non- resident ratepayers, who opt to participate will also be guaranteed a minimum allocation of $2,000 of shares.

Chief executive Todd Dawson says the port is also talking to iwi, some of which have shown “quite a lot” of interest in recent months about learning more about the share sale and about the port itself.

“We are anticipating quite a bit of interest from those groups,” he told BusinessDesk.

Enabling high staff and public involvement was a key factor in the council’s preference last year to proceed with a listing of the port, as opposed to a long-term lease of the operation, or the formation of an operating partnership with an investor.

“Like the regional council, we believe strong local participation in the port IPO is desirable,” company chairman Alasdair MacLeod said in a statement. “The port’s purpose is to build a long- term successful business that supports a thriving region by connecting our customers and community to the world.”

Dawson said the firm has no clear assumptions on what the local take-up is likely to be.

Discussions with staff have only just begun. While the mood on the port is good, and staff have asked lots of good questions around the offer and the interest-free loan the company is offering, it is still “pretty early” in the process.

Napier Port is the fourth-largest container operation in the country and is seeing increasing log and cruise liner traffic. It expects to invest about $350 million during the next decade to cater for the region’s growing log, timber and apple exports.

The council can’t afford to meet that and the other obligations it faces in the region so is selling down its holding while retaining a controlling stake. In October, it estimated a 45 percent sale might bring in $181 million, leaving it $83 million to invest elsewhere after the IPO costs and after clearing almost $87 million of port-related debt.

Under the offer detailed late last week, the preferential offer to iwi is not limited to Ngati Kahungunu Iwi Incorporated. The iwi’s four taiwhenua groups – as individual entities - can also receive a preferential allocation, as can the other iwi trusts that appoint members to the Hawke’s Bay Regional Planning Committee. The port noted that the allocation to iwi groups will be made once overall demand in the IPO is known.

Pre-registration for shares for staff, residents and iwi closes on July 12, with the port aiming to publish a product disclosure statement July 15. The priority offer will open on July 23 and close Aug. 5. Final pricing and share allocations are expected on Aug. 7 with the port expecting to have its shares trading on the NZX from Aug. 20.


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Mass timber plan for 'smart city'

Last week Google sister company Sidewalk Labs released a draft of its master plan to transform 12 acres on the Toronto waterfront into a smart city. The document details the neighborhood’s buildings, street design, transportation, and digital infrastructure— as well as how the company plans to construct it. When a leaked copy of the plan popped up online earlier this year, we learned that Sidewalk Labs plans to build the entire development, called Quayside, out of mass timber.

The subsequent release of the official plan reveals the key to doing so: Sidewalk proposes investing $80 million to build a timber factory and supply chain that would support its fully timber neighbourhood. The company says the factory, which would be focused on manufacturing prefabricated building pieces that could then be assembled into fully modular buildings on site, could reduce building time by 35% compared to more traditional building methods.

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(Sidewalk Labs reveals the key to its smart city plans: An $80M building factory The Google sister company plans to build an entire supply chain to support its plan for a mass timber neighbourhood—but only if Toronto adopts its plan wholesale.)
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Jobs



Buy and Sell



... and finally ... timelines we just don't understand

This week's funny will appeal to those who sometimes, often or always have to use the southern motorway to get into Auckland ...









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

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John Stulen
Editor
Innovatek Limited
PO Box 1230
Rotorua, New Zealand
Mob: +64 27 275 8011
Web: www.woodweek.com

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