WoodWeek – 10 June 2020

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Greetings from your forest and wood news team. Looking to markets and this week the big gains have been in the carbon market. Last week, the Government formally announced a raft of reforms. The changes when taken together appear to have brought sunnier days to NZU holders for the time being. Mind you, this is a market that will always be subject to regulatory risk and political leaning. Thanks to the experts, Lizzie Chambers and her team at Carbon Match, for their commentary on this market.

Moving to our main log market, Champion Freight's latest report shows total log export values to China year-on-year to the end of April were down 20 percent, and overall log exports decreased by 24 percent across all markets. Today we are pleased to announce and welcome our latest SnapSTAT partner - AgriHQ - with their latest graphic and a special offer exclusive to WoodWeek subscribers.

Next week we are running our Forest Safety & Technology webinar series. We have had a fabulous response, so it is shaping up to be a great couple of days. We will be delivering to an international audience of loggers, forest managers and safety champions, just like you. You can still register online using this link. We have a great group of innovative and thought-provoking safety culture and technology speakers for you. Thanks to our growing list of loyal sponsors and forest companies who have registered their client and staff groups already. We are very pleased with the excellent webinars sessions we've got for you on 16th & 18th June.

Back to the hotly debated topic of log trader registration legislation. The Forest Owners Association (FOA) says more exports of processed timber products from New Zealand looks a good prospect on paper, but Shane Jones’ current Log Bill is not going to achieve this and there are better options. FOA is responding to statements from the New Zealand Wood Processors and Manufactures Association (WPMA) in favour of the Bill, which WPMA expects will result in diversion of export logs to local sawmillers at cheaper prices. FOA President Phil Taylor says any legislation which diverts income from one part of a sector to another is distortionary to the economy.

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Carbon market update - Prices reach new high

NZUs This Week - Just after our the Carbon Match market opened yesterday at 1pm we saw NZUs change hands at $30 - a benchmark never seen before in the history of the NZ ETS.

Since the Government’s announcements of a week ago liquidity has been relatively thin. Sellers have progressively reset their sights higher while buyers have wanted to digest the screeds of detail in the reform package, and confirm their understanding before necessarily driving the price further north.

Today, not long after our 1pm open a parcel of 50,000 NZUs offered at $30 appeared to prompt a buyer to call it and finally breach the $30 mark.

Some have asked what has changed - so for those who missed it, last week the Government formally announced a raft of reforms, which included:

> That the fixed price option will be increased to $35 and extended to cover emissions from activities in the 2020 year.
> A provisional emissions budget (not officially set in regulation) which would limit net emissions to 354 million tonnes over the five years from 2021-2025.
> That (out of the unallocated portion of the PEB above) the five year period 2021-2025 will indicatively see the Government introduce fresh supply into the market of just under 90 million tonnes.
> That approximately 19 million tonnes of this may be sold across four quarterly auctions in 2021.
> That the first of these is targeted for 17 March 2021, meaning that there will be an overlap between that first auction and the ability to use the fixed price option of $35.
> While the auction operator is yet to be confirmed some key settings have been announced - there will be a $20 auction reserve floor price and a trigger for a “cost containment reserve” of $50, above which further supply will become available. Both the $20 floor and $50 CCR trigger will increase by 2 percent in future years in line with inflation.

The changes when taken together appear to have brought sunnier days to NZU holders for the time being.

To those sellers who are rueing recent sales, they're likewise a reminder that it is the Government, and no one business or sector, that is the most significant actor in this market - a market which will always be subject to regulatory risk and political leaning.

To those sellers who said they'd be back at higher prices, you will be happy to hear that higher prices appear to have arrived.

But, as the old adage goes, change is the only constant in this jolly ETS. So even the most ebullient of folks will be conscious of the Government's potential weight in its own market - with about 40 million tonnes likely to be made available at no more than $35 between now and the end of May 2021.

NZUs yesterday - bid $30.90, offer $31.00 as of 5pm today on Carbon Match - every weekday from 1-5pm.

Source: Carbon Match Weekly

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Log export market update: Mind the gap!

Thanks to the Champion Freight team here is a graphic summary of the latest monthly update for export log markets.

Champion Freight's latest report shows total log export values to China year-on-year to the end of April were down 20 percent, and overall log exports decreased by 24 percent across all markets. Logs to India, our second largest log market, decreased by 21 percent in April y-o-y.

To the end of April, China shipments month-on-month were down 66 percent and overall log exports down 69 percent. Logs to India decreased 99 percent month-on-month in April.

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FOA: There are better options than Jones bill

Taylor: Better Options Than Log Bill - The Forest Owners Association (FOA) says more exports of processed timber products from New Zealand looks a good prospect on paper, but Shane Jones’ current Log Bill is not going to achieve this and there are better options.

FOA is responding to statements from the New Zealand Wood Processors and Manufactures Association in favour of the Bill, which the WPMA expects will result in diversion of export logs to local sawmillers at cheaper prices. Forest Owners President Phil Taylor says any legislation which diverts income from one part of a sector to another is distortionary to the economy.

“It’s a dangerous experiment in protectionism, just at a time when our government is cautioning against other countries doing this. Neither the basis nor the effects of the Bill have been researched at all, and it is being rushed through under urgency. As NZIER has pointed out, a comparable policy to protect Australian car manufacturing has cost a fortune and ended in disaster.”

Phil Taylor says the WPMA Chairman, Brian Stanley’s claim that the Bill would bring forestry into line with the rest of the land based industries is not accurate.

“There is no part of the New Zealand primary sector which has ever had a regime imposed where exports were expected to subsidise local manufacturing. It’s a WPMA fantasy.”

“Likewise, Mr Stanley asserts that since other countries subsidise their timber industry, then the solution should be more processing in New Zealand sawmills, with foresters forced to pay for it. That is misguided and dangerous. The international market in timber is way more subsidised and protected than the international log market. Mr Stanley would take us out of a Post-Covid and developing international log trade protection smouldering fire, into a red-hot blast furnace of trade protectionism for timber products.”

Phil Taylor says there are ways to grow processing in New Zealand which would work.

“A timber preference policy for wood construction is one obvious and cost-free way the government could give substance to its ambitions for local processing.”

“The government says it’s going to have a major international trade promotion for the primary sector. Forest products must be a part of that. Some doors into other countries’ markets can only be opened by cabinet ministers.”

“But the biggest opportunities are in timber product innovation. The future lies in a bioeconomy, and our plantation forests can be part of that exciting future. We want to embrace that with our science teams and government. We’d like to hope that WPMA would have the vision to be part of that as well.”

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SnapSTAT - We're back with fortnightly graphics

The below graph is provided by AgriHQ as part of their monthly Forestry Market Report. To receive a free copy of the full report, simply contribute to the following log price survey: AgriHQ Log Price Survey.

Otherwise, a full list of AgriHQ's forestry coverage options can be viewed here.

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Duff drives trans-Tasman forest standard

This month is the first anniversary of the formation of the strategic trans-Tasman sustainable forest management standard reference committee, the first of its kind – and no one is more passionate about AS/NZS 4708 than its chair Dr Gordon Duff, a Tasmania-based scientist, professor and researcher.

The new standard will be audited for acceptance by PEFC International to meet the rigorous requirements of a fully-fledged JAS-ANZ accredited sustainable forest management system and to meet current and future expectations for forest management in both countries.

With more than 25 years’ experience in forest management, Dr Duff understands how important it is for stakeholders in the forest products industry to have a standard they can trust, one that balances expectations for social, environmental and economic outcomes.

“The committee is doing a great job of balancing the interests of all stakeholders, taking into account key differences in sustainable forest management between the two countries,” Dr Duff said.

One example, he said, was fire management which, in the Australian context, was a key tool for protection and maintenance of forest biodiversity and ecosystem function. “The focus in New Zealand is more on fire suppression or exclusion,” he said.

With a focus on producing a standard that balances stakeholder expectations, as well as one that is clear, unambiguous and auditable, the committee is working towards a release of the draft standard for public comment in August-September this year. Once released, the public will have more than nine weeks to review the draft and provide public comment.

“Drawing on the combined experience of the committee, the standard will use wording that is transparent and easily understood and interpreted by all involved in the certification process,” Dr Duff said.

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New Forest Asia gains fund manager licence

New Forests Asia (Singapore) Pte Ltd announces its newly attained Capital Markets Services (CMS) Licence, bolstering its capabilities as a Singapore-based fund manager. The licence is issued by the Monetary Authority of Singapore (MAS) and affirms that New Forests Asia meets compliance standards to provide regulated financial services. The CMS Licence enables New Forests Asia to conduct funds management for accredited or institutional investment clients.

New Forests Asia was established in 2011 in Singapore as a wholly owned subsidiary of New Forests Pty Ltd (“New Forests”), an Australia-based investment manager specialising in sustainable forestry. The New Forests Asia team includes eight professionals with expertise in forestry investment, operations, resource modelling, and asset management throughout the Asia-Pacific region. The team currently manages the New Forests Tropical Asia Forest Fund (TAFF), which includes investments in certified timber and rubber plantation businesses in Malaysia, Indonesia, and Laos.

Managing Director Geoffrey Seeto explained, “We feel it is beneficial to be licenced here in Singapore, from where we can lead asset management activities for our existing portfolio as well as set the stage for our continued growth in the region. Singapore is strategic to not only our operations in Asia but to our efforts to align with the rising call for sustainable finance in the region.”

MAS has noted that the ASEAN region needs an estimated USD 200 billion per year of sustainable finance. Singaporean asset managers, like New Forests Asia, will be critical in mobilising this capital. Seeto continued, “Part of New Forests’ mission is to be a conduit for institutional and impact investors to place capital into a more sustainable way of operating the region’s forestry businesses. While the broader Asian growth story is widely understood by investors, many are unaware of the region’s strategic role in global timber supply and demand and of the opportunity for the positive sustainable development and climate impacts that can be pursued alongside financial returns.”

To date, only a small portion of the more than USD 100 billion global forestry investment market is invested in Southeast Asia, yet the region has emerged as an important source of wood fibre to meet its growing timber demand. New Forests has championed sustainable forestry investment in Southeast Asia through the TAFF, which is the first and only institutional investment fund dedicated to sustainable forestry in the region.

Director of Operations Paul Speed noted, “New Forests has been operating in Asia since 2008, and we’ve worked steadily to prove our original thesis that a sustainable finance approach to forestry in the region is viable. We now have a diversified portfolio of forestry businesses, with different geographic and market exposures, and which are all certified for responsible forestry practices under the standards of the Forest Stewardship Council.”

Speed added, “Going forward, it is more apparent than ever that the region needs a well- capitalised and professionally managed plantation resource base. By investing in a strong plantation-based timber resource, processing infrastructure, and a skilled labour force for the sector, we can set the stage for Southeast Asia to be a leader in producing sustainable, renewable wood products and to be part of the nature-based solution to climate change. This kind of investment bodes well not just for Singapore’s financial sector but also for region’s green growth and a prosperous future.”

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Northland student receives forestry scholarship

Northland student Camryn Stewart (pictured) has received an academic scholarship from Waipu-based timber manufacturer Northpine - In her fourth and final year of a Bachelor of Forestry Science at the University of Canterbury, Camryn says the financial grant from Northpine is a huge help to put towards her course fees and costs.

“As a student you don’t really have a lot of money, and it is such a massive help financially. I am putting it towards my course fees and extra course costs like field trips,” she says.

As a Northlander born-and-bred in Kaitaia, Camryn has spent some of her practical course work interning for another Northland company, Summit Forests, completing practical experience in plotting and helping with trials.

After graduating from her Bachelor of Forestry Science, she hopes to work in forestry management or forestry marketing and supply chain operations.

“The variety and flexibility of the forestry industry appeals to me, and I enjoy being outdoors on the job,” she says.

“I’m excited about the possibilities and what my future holds.”

The scholarship was presented to the industry at the Northland Forestry Awards in September 2019 and was endorsed by the Northland Wood Council. Applicants can apply via the Northpine website. “I’m extra grateful to receive this support from a company in Northland. I extend my thanks to Northpine for their generosity,” says Camryn.

Employing over 60 people, Northpine is a privately-owned timber manufacturer based at Waipu (Northland), with a distribution centre in Silverdale (Auckland). Northpine processes only high- quality structural pine grown in the north. Its specialist range of large-dimension timber beams and square posts, sold under the brand name Northbeam, is available nationwide via building supply merchants.

Northpine General Manager Bruce Larsen says supporting forestry students in their studies is part of their commitment to the industry and fostering the next generation.

“Northpine is delighted to award this scholarship to Camryn, who is committed to her studies and is working towards a career in forestry,” he says.

“We’re committed to encouraging each individual to achieve their full potential, and this extends to our next generation who are currently students.”

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Slash in stream bid brings charges

Farman Turkington Forestry, AM Forest Harvesting and the company directors (Guy Farman, Michael Johnstone and Anthony Johnstone) have all been convicted and fined for damaging a tributary of the Taueru River and discharging sediment during a forestry harvesting operation on the Cleaver Forest Block, Masterton.

Greater Wellington Regional Council laid a total of 25 charges against the operators almost a year ago, in June 2019. The case concluded today (Friday 5 June 2020) in Wellington District Court with a fines for each of the companies.

The starting point for fines was $130,000; Judge Thompson allowed discounts from that for early guilty pleas and previous good behaviour. This resulted in fines of $51,000 for Farman Turkington Ltd and $25,800 for AM Forest Harvesting Ltd.

In passing sentence the Judge commented that, “The operation fell short of the standard that could reasonably be expected of professional foresters”. He also stated, “A penalty has to bite and should not be set at a figure that can be looked at as the cost of doing business”.

The damage and discharges occurred during the harvesting of trees on Cleaver Forest Block between September and December 2018. The council attended after it received photographs showing impacts on a stream. When council officers attended, and investigated, they discovered that there was extensive damage to the banks and bed of the stream on the property. There were a series of failures to prevent sediment and forestry slash from entering the stream.

It was determined that National Environmental Standards for Forestry had been breached and the operation was undertaken without a resource consent.

The effects of this type of works and the resulting sediment discharges are; damage to the instream habitat for aquatic life and direct effects on water quality downstream during the period of discharges. The issues with the operation were put down to poor planning and management of the site.

Since the incident all defendants have put efforts into remediating the damage done and improving their environmental performance. They cooperated with the council investigation and recognised that they needed to do better. In recognition of the individuals’ (Guy Farman, Michael Johnstone and Anthony Johnstone) cooperation and good character, the Judge granted discharges without conviction. He directed they each should pay $5,000 as a contribution to the council’s costs in properly bringing a prosecution.

“It is important that operators engage properly with the council and seek resource consents where appropriate”, said council Environmental Regulation Team Leader, James Snowdon, “Professional operators should plan carefully and if they don’t understand the regulatory requirements, seek advice. We would rather be advising people on how to minimise their impact on the environment than taking them to court”.

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Northland: Concern at deer in Kauri forests

Feral deer sightings spark concern for kauri forests - Northland residents are being urged to report feral deer sightings after several animals were spotted in the area. Four deer were recently seen - and one shot - from a helicopter in the Bay of Islands. Wild deer are classed as an 'eradication species' in the north and it is illegal to release or move wild deer in or around the region.

Northland Regional Council biosecurity manager Don McKenzie said Northland is one of the few regions in New Zealand that has no established wild populations of deer and it would be "disastrous" for the area's kauri forest if this changed.

"Deer would really graze the understorey right out so it would be very, very damaging for our kauri forests in terms of the kinds of vegetation that makes Northland iconic," McKenzie said. He said hooved animals, such as deer, also spread soil-borne disease, like kauri dieback.

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Buy and Sell

... and finally ... binge-exercising in lockdown

While there's been plenty of new terms to learn while in lockdown, we don't remember this one (binge- exercising) being one of them. That said, this great role model and family guy comes across as most genuine when it comes to showing how his lockdown habits and new behaviours has worked so well:

Watch and learn below >>

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John Stulen, Editor

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