WoodWeek – 2 December 2020

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Greetings from your good wood news team. It’s not hard to find the good wood news this week, in New Zealand at least. Today's log report shows shipments to China month-on-month to end of October were up by a whopping 43 percent, aided by double and triple digit percentage growth to Japan, South Korea and other countries.

In more good news, Aratu Forests announces the appointment of Neil Woods as their new Chief Executive Officer, effective 11 January 2021. He will succeed Ian Brown, who retired at the end of October after leading the organisation with distinction for three years.

As part of the Forestry and Wood Processing Industry Transformation Plan, Te Uru Rakau is working on biofuel business cases due to be completed by mid-2021. These will focus on wood-based products that will provide a large source of residues that can be used to produce 3 priority products identified in stage 1; including biocrude oil, liquid biofuels (such as sustainable aviation fuel) and solid fuels such as wood pellets.

Moving across the Tasman now, where no ships carrying softwood logs have sailed from Portland for more than two weeks, leaving tens of thousands of tonnes of logs stacked around the port and in danger of deteriorating to the point they won't find a buyer. More than $70 million of plantation harvesting and haulage equipment is "parked up" for lack of work, according to the chair of the Green Triangle Forest Contractors Group, Wendy Fennell, who is co-owner of one of the biggest forestry industry and transport companies in the area.

Finally, for everyone connected to carbon forestry, mark 15 & 16 June in your new diary for our 2021 FIEA Carbon Forestry Conference in Rotorua. Change is coming to the Emissions Trading Scheme. Also, the Climate Change Commission will deliver important new carbon budget plans. We are working closely with MPI and others to arrange pre-conference workshops and post-conference information sessions to make your travel as efficient as possible. Post-conference you can also take in the Fieldays at Mystery Creek to make a week of it.

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Aratu Forests appoints new CEO

The Board of Aratu Forests (Aratu), has announce the appointment of Neil Woods as new Chief Executive Officer, effective 11 January 2021. He will succeeds Ian Brown, who retired at the end of October after leading the organisation with distinction for three years.

Neil will be joining Aratu Forests from the NZ Super Fund, New Zealand's sovereign wealth fund responsible for investing and managing retirement savings, where he has worked as Portfolio Manager (Rural and Timber) since 2009.

In that role he has been responsible for the performance of NZ Superfund’s c. NZD2.3 billion exposure to forestry assets in NZ, Australia and South America. He started his career in forestry as field crew in the Central North Island before going onto further study and graduating as a forester. Since that time, Neil has gone onto work in a wide range of roles throughout the plantation forestry sector.

His professional experience includes managing the sale and operational transition of the Kaingaroa and Carter Holt Harvey plantation assets to a range of institutional investors. As a result, he is very familiar with the operational, legal and financial structures that Aratu fits within and our investors environmental, social and governance (ESG) performance expectations.

More recently, Neil acted as Chief Operating Officer at Timberlands Ltd, the manager of the Kaingaroa Forest Estate, to provide leadership to the executive team during the CEO transition at that company which highlights his capacity as a leader in a complex business environment.

Throughout his career, be it from establishing the technical forestry team at Kaingaroa Timberlands or managing a commercial relationship with Ngati Porou, Neil has demonstrated outstanding people and relationship management skills, operational understanding, cultural awareness, and curiosity that could not be more relevant or necessary to Aratu’s success in the years ahead.

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Chinese ban on Australian exports starts to bite

Crisis looms in sea and forest as China tightens export bans - The customary roar of trucks and harvesting machines across vast softwood plantations astride the Victorian-South Australian border has turned to near silence.

Two weeks ago, crayfishing boats were left moored in the port of Portland as the crayfishing season began.

As China ramps up its assault on Australian exports to include tariffs of up to 200 per cent on Australian wine this week, those who harvest the forests and the sea in south-west Victoria and south-east South Australia have been reeling for weeks.

China's recent trade bans on logs and crayfish are causing a crisis in Portland and what is known as the "green triangle" – a cross-border area rich in 340,000 hectares of plantation forests.

No ships carrying softwood logs have sailed from Portland for more than two weeks, leaving tens of thousands of tonnes of logs stacked around the port and in danger of deteriorating to the point they won't find a buyer.

More than $70 million of plantation harvesting and haulage equipment is "parked up" for lack of work, according to the chair of the Green Triangle Forest Contractors Group, Wendy Fennell, who is co-owner of one of the biggest forestry industry and transport companies in the area.

Chief executive of the Port of Portland Greg Tremewen said China's ban on logs was putting the economy of the port and the entire green triangle at risk.

"At stake are hundreds of millions of dollars," Mr Tremewen said. "Thousands of jobs rely on the wood export industry ... The federal government has to find a way to sort out this problem urgently."

The managing director of Green Triangle Forest Products, Laurie Hein, estimated more than $100 million of log exports were at risk over 12 months, and about $9 million had already been lost.

The member for Wannon and cabinet minister Dan Tehan – whose electorate covers Portland and a significant part of the green triangle – said he was deeply concerned and would meet the board of the Port of Portland within weeks to discuss the crisis.

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Source: Sydney Morning Herald

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Log exports: 'and we're racing again'

To quote the proverbial 'horse race caller' New Zealand log exports lead the pack as shipped volumes took their biggest monthly jump of 2020.

Thanks to our team at Champion Freight we have a graphic summary of the latest monthly update for export log markets. Champion Freight's latest report shows shipments to China month-on-month to end of October were up by a whopping 43 percent, aided by double and triple digit percentage growth to Japan, South Korea and 'Other' countries thus bumping overall log export values by 47 percent over October last year.

Log export values to South Korea were up by 53 percent month-on-month in October. Logs to Japan India were up 111 percent compared to October 2019.

Log export values into China year-on-year (y-o-y) to the end of October are now only down 11 percent. The negative trend is mirrored across most other export markets leaving the total down 13 percent y-o-y. Logs to South Korea, now our second largest log market (but only one-tenth of China), decreased by 11 percent y- o-y to end of October.


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MPI: Accelerating our biofuels industry

Accelerating New Zealand’s investment into biofuels - Te Uru Rākau is moving ahead with the next stage of research into creating a New Zealand biofuels industry, following a successful first stage, Director Sector Investments Jason Wilson announced yesterday.

He says their Wood Fibre Futures project earlier this year identified viable wood-based alternatives to high carbon emitting products such as transport fuel, concrete, steel, and coal. Mr Wilson says there is considerable interest in biofuels and biomass energy from organisations such as Air New Zealand and Fonterra.

"Having identified the options, we are now looking to accelerate to stage 2 of the project, which will be to build business cases for attracting international investors to New Zealand. We are now putting out a tender, seeking an organisation with extensive international contacts and experience that can develop compelling business cases for investing in the biofuels and solid fuels sector in New Zealand." These business cases are expected to be completed by mid-2021 and will focus on wood-based products that will provide a large source of residues that can be used to produce 3 priority products identified in stage 1:
> biocrude oil
> liquid biofuels (such as sustainable aviation fuel)
> solid fuels such as wood pellets.

"We have a huge amount of pine in New Zealand that can be used to create these fuels, but we need to attract investment and prove that there is both the demand and a viable supply, and that is what we are aiming to do by developing these business cases," says Mr Wilson.

"The growing demand for alternatives to fossil fuels has the potential to transform the forestry sector into a provider of biofuels, bioenergy, and a range of renewable bioproducts alongside more traditional wood products.

"The government is committed to moving New Zealand to a low carbon future and forestry has a major role to play in that future." Mr Wilson says biofuels will also have the added benefit of supporting regional development with biofuel manufacturing centres being in areas where forestry is prevalent.

"We are already seeing sizeable investment in wood pellets to replace coal use in New Zealand and this will only increase as the domestic carbon price rises. In North America and Europe, government policies targeting transport emissions are beginning to catalyse investment in biofuels, which also have the ability to benefit New Zealand economically and environmentally, and create employment in our regions."

Te Uru Rākau is leading this work as part of the Forestry and Wood Processing Industry Transformation Plan, which is 1 of 6 transformation projects given priority by the government. The other 5 are construction (through the Construction Sector Accord), agritech, advanced manufacturing, food and beverage, and digital technologies.

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Australia: Green Triangle Forest Products up for sale

Global Forest Partners LP to commence sale process for Green Triangle Forest Products - Global Forest Partners LP (GFP) has appointed Resolute Advisory to advise on the divestment of Green Triangle Forest Products (GTFP), a world-class softwood plantation business currently owned by GFP-managed investment funds. GTFP is located in the south-west of Victoria and south-east of South Australia, in an area known as the Green Triangle, widely recognised as Australia’s premier forestry region.

The estate is planted with radiata pine and comprises a freehold land area of c.24,700 ha with a total productive area of c.22,200 ha. The business has a strong domestic focus, predominantly supplying well- established customers in the region that serve the Australian market.

GTFP is locally managed by a high-quality team with deep forestry sector experience. The estate benefits from a long-term focus on sustainability and stewardship, and continuous improvement philosophy.

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Survey: Loggers reveal rates and costs

Canada: Logging contractors on the BC Coast have made a comeback since 2106. Back then the BC government launched a Logging Contractor Sustainability Review outlining proposals to improve mill and contractor relations. Following that, a 2018 Contractor Survey showed positive trends. Now, in 2020, the situation looks even better – on the surface, at least. Logging rates have improved for nearly half of all Coastal contractors, revenue is up, and more young people are entering the industry.

But challenges remain, such as higher operating costs, which lead to low profit margins, and regulatory issues including export policies and stumpage fees. These issues will need to be addressed to ensure the situation on the Coast improves for all contractors, not just the big players.

Contractors on the B.C. Coast, in general, reported the following:
Rates and profits - Across the country, just under half of all contractors (45 per cent) say their rates have increased, while 27 per cent say their rates have not changed in the past five years. This means that for the majority of contractors, rates are improving or holding steady. This is especially the case on the BC Coast, where more than half of respondents (57 per cent) reported a rate increase compared to five years ago. This is a slight drop from 2018, when that number was 58 per cent, but still a huge increase from 2016, when it was just 39 per cent. Thirty-one per cent of respondents say rates have stayed the same.

While these numbers are positive, there is cause for concern, as 13 per cent of Coastal contractors report their rates have decreased by more than five per cent. In 2018, no contractors in the region reported a decrease this large. This might be a result of the eight-month long Western Forest Products strike on the Coast from July 2019 to February 2020.

But in comparison to contractors in Atlantic Canada, where just 14 per cent report an increase in rates, Coastal contractors are doing much better. Nation-wide, 43 per cent of contractors report a profit margin of three per cent or less, and 25 per cent report no profit – a small increase from 2018, when those numbers were 48 and 28 per cent, respectively.

With regards to profit, Coastal contractors continue to struggle, with 31 per cent making zero profit. Just 13 per cent report a profit higher than 10 per cent. The average profit margin on the B.C. Coast is 5.5 per cent, slightly higher than in the B.C. Interior.

In comparison, in Alberta, only 18 per cent of contractors report making no profit, and 36 per cent say their profit margin last year was higher than 11 per cent. The average profit margin there is 8.4 per cent.

To make sense of these numbers, we have to consider operating costs. Across Canada, it’s not just machinery that’s costing contractors money – insurance costs have skyrocketed compared to three years ago, likely as a side effect of the increased value of machinery.

On the B.C. Coast, 80 per cent of contractors say insurance costs have increased, while 64 per cent report the cost of buying machinery is significantly higher than three years ago. On top of that, 93 per cent of respondents say the cost of machinery parts/services has increased.

It’s not surprising then, that when asked how their profit margins compare to two years ago, more than half of all Coastal contractors (57 per cent) say profit margin is lower.

Operator pay - As a whole in Canada, operator pay is on the rise; the average salary is up slightly from $29/hour in 2018 to $30/hour in 2020. Coastal loggers continue to pay operators the highest wages, along with those in Alberta, at $37/hour. Just six per cent of Coastal contractors pay $30/hour or less.

In comparison, in Alberta, nine per cent pay $30/hour or less, and that number jumps to 32 per cent in the B.C. Interior. Heading east across the country, only Quebec loggers report paying operators more than $30/hour, although this is a very small percentage (three per cent).

But while operator pay is on the rise, operator benefits are declining, with 61 per cent of contractors nationally offering benefits to employees, compared to 66 per cent in 2018.

However, BC loggers are much more likely to offer benefits, with 75 per cent of Coastal companies offering some form of benefits. Like in 2018, only the B.C. Interior has a higher percentage, at 89 per cent.

Company size - BC Coastal loggers remain smaller than their western regional neighbours, but bigger than those in the eastern regions. The estimated average annual volume for Coastal companies is 164,000 m3, up slightly from 2018, when the average was 163,000 m3. In comparison, Alberta contractors have the largest estimated average output of 233,000 m3.

Nationally, when it comes to the number of employees per operation, the estimated average fell from 27 in 2018 to 19 in 2020.

But more contractors on the Coast have larger teams than in any other region – 31 per cent employ 21 to 50 people, and 13 per cent employ 51 to 100 people. The average number of employees on the Coast per operation is 24, the second largest behind Alberta. This is not surprising given the unique terrain on the Coast, which means more hand falling is required, as opposed to in the B.C. Interior and Alberta, where work is largely mechanized. Contractors on the B.C. Coast also have fewer machines on average than their western counterparts.

With lower machinery costs and maintenance requirements, and, therefore, presumably lower insurance costs, it makes sense that Coastal contractors have the highest average revenues in Canada, at an estimated $6.3 million. This is up from an estimated $5.3 million in 2018.

In comparison, the national average is down from $4.52 million in 2018 to $3.96 million in 2020. Contractors in the B.C. Interior come in at a close second at an estimated $6.0 million, while Alberta contractors’ revenues have dropped to $4.975 million.

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Workforce Council led by industry people

Who knew? Forestry and Wood Processing Workforce Council - The Forestry and Wood Processing Workforce Council has been established to oversee the actions specific to developing workforce capability and capacity for forestry and wood processing through implementing actions on the Forestry and Wood Processing Workforce Action Plan.

It will take the lead in working to address the sector's workforce development challenges. The Council is made up of representatives nominated by their industry body to represent the wide range of skills required in a thriving forestry sector.

The inaugural meeting of the Workforce Council was the culmination of a huge amount of collaboration between Te Uru Rākau, Ministry for Primary Industries (MPI), and the forestry and wood processing sector.

We have already seen work getting underway: vigorous discussion over direction, graduates passionate about their career in forestry, veterans keen to mould reformed vocational education into a fit-for-purpose training system that creates engaged and knowledgeable professionals, and ministry research specialists assessing workforce demand and developing better methods of monitoring trends.

Find out about the Workforce Council

Forestry and Wood Processing Workforce Action Plan - During 2019, representatives from across the forestry sector worked with MPI to develop an action plan to support a skilled, safe, and diverse workforce. The Forestry and Wood Processing Workforce Action Plan 2020–2024 aims to support the development of a skilled workforce.

The action plan:
• Supports the current and future needs of the sector's workforce;
• Brings new initiatives together to form a cohesive and comprehensive way forward;
• Leverages areas of shared interest with the wider primary sector.

Four focus areas - The action plan has four focus areas for the forestry and wood processing sector:
• Knowledge: Making good workforce decisions based on robust information and data;
• Attraction: Inspiring and attracting a larger, more diverse workforce;
• Education and training: Ensuring people have the rights skills and knowledge to be successful;
• Employment: Having people thrive in workplaces with good practices and work conditions.

Find out about the action plan Project updates - The Forestry and Wood Processing Workforce Council has selected the primary projects that, when successful, will achieve the goals set out in the Forestry and Wood Processing Workforce Action Plan. These projects are currently in the process of being scoped and funding sought. We will introduce each project individually over the upcoming weeks:

Council input on the Reform of Vocational Education - The Forestry and Wood Processing Workforce Council keeps a watching brief and provides input on behalf of the forestry and wood processing sector into the following three developing reforms in vocational training:
• The planned Primary Industries Workforce Development Council. This new body, one of six nationally, will develop training resources and lead vocational education and the development of the workforce in the primary industries.
• The New Zealand Institute of Skills and Technology: Te Pūkenga (NZIST) includes all polytechnic structures around New Zealand and will be tasked with organising and delivering training nationally across all industries.
• The Primary Industry Centre of Vocational Excellence is a specific body currently being set up to use a project-based approach to create innovative new learning systems within the primary industries.

The process of doing so will occupy the Council in the next couple of meetings and we will report progress.

Find out about RoVE

The Forestry and Wood Processing Workforce Council will be sending regular updates and seeking industry input in the future. Please email “subscribe” to WorkforceCouncil@mpi.govt.nz to ensure that you are on the mailing list for future communications!

For more information contact Forestry and Wood Processing Workforce Council Chair, Fraser Field (Fraser.field@rayonier.com)
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AKD Softwoods selects Trimble Forestry's LIMS

AKD Softwoods, an integrated forestry and timber process company based in Colac, Victoria in Australia has selected Trimble Forestry’s Log Inventory & Management System (LIMS) to manage its extensive forestry operations across Victoria, New South Wales, and Queensland. AKD Softwoods will also use Trimble’s Connected Forest Xchange (CFX) to allow log load and scale information to be viewed on mobile phones, tablets, or via a web browser, providing visibility into key metrics and improved timber security throughout AKD’s integrated businesses and supply chain partners.

“Introducing Trimble Forestry’s cloud-based log accounting system, LIMS, is consistent with AKD’s commitment to leveraging polished and proven technology in an increasingly complex and exciting industry,” said Karen Johns, Forestry Solutions Analyst, AKD Softwoods.

LIMS and CFX are part of Trimble Forestry’s Connected Forest Business portfolio. Implementing both solutions will allow AKD to have end-to-end visibility into its supply chain. LIMS will manage the settlement process for accounts payable and receivable transactions. Together the solutions will provide faster settlements, greater timber security, and a more efficient operation.

LIMS provides management control over all phases of timberland, woodland, yard, and mill operations. It combines the features of a log or timber accounting system with features for silviculture, harvesting, contractor payables, wood or fiber procurement, wood trading or sales, consumption, and comprehensive reporting and planning. CFX aggregates fiber supply data in easy-to-view and share dashboards, enabling better supply chain coordination and efficiency.

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Log exporter fed up with Marlborough treatment

A forestry company barred from harvesting is considering leaving Marlborough after ending a court battle. Zindia Limited was stopped from processing its block in the Queen Charlotte Sound after the Marlborough District Council issued a cease and desist notice, saying it breached its resource consents.

The Environment Court overturned the council's orders, finding harvesting was allowed, but the notice was restored after the High Court ruled the Environment Court had “erred in its interpretation”. The company took its case to the Court of Appeal, which agreed in June to hear it, but the company later withdrew its application.

Zindia Limited’s managing director Jacob Mannothra said it could be time for the company to “bid goodbye” to Marlborough. “We’ll probably look at going overseas, because it's too hard here. No-one sticks together ... There's just no support,” Mannothra said. “The [Court of Appeal] application was costing us thousands in legal fees ... It's better to cut our losses. It's a pity, but that's how it is.”

Mannothra said the company’s footprint was “quite large”, employing about 250 people each time it shipped logs from Marlborough.

Council advocacy and practice integration manager Barbara Mead said by discontinuing the application, Zindia had accepted the High Court's decision, which concluded it needed a harvesting consent. “It has a wider implication for us because [the determination] ... means permitted activities cannot be swept up into a resource consent and gain the protection of being a consented activity.”

The two consents at the centre of the dispute were approved by the council and included several references to forestry harvesting, including building an access way “to transport logs harvested”. Zindia argued this was broad enough to warrant log harvesting. But the council argued Zindia required a new resource consent under the region’s environment plan to harvest a plantation, as log harvesting had the potential to cause significant adverse effects, and those effects needed to be guarded by consent conditions.

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Source: Stuff News

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Hancock grows Oregon timberlands

USA – Already the largest forest owner in New Zealand, the US arm of the Hancock Natural Resource Group has completed the acquisition more timberlands in southern Oregon.

Part of the Manulife Investment Management Company, the forest manager has completed the acquisition of approximately 60,000 hectares of timberlands in southern Oregon from Weyerhaeuser Company.

Since 2017 they have acquired more than 80,000 hectares of quality timberlands in the state.

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German buyer of Gisborne forest land

Consent granted
Section 12(a) Overseas Investment Act 2005
Decision Maker Overseas Investment Office
Decision Date 29 October 2020
Pathway(s) Sensitive land – special forestry test
Investment An overseas investment in sensitive land, being the Applicant's acquisition (through a subsidiary) of a freehold interest in approximately 2,007 hectares of land known as Te Rata Forest located at Tarndale Road, Gisborne (the Land).

Consideration: Withheld under s9(2)(b)(ii) of the Official Information Act 1982
Applicant: ACTIF Aquila Capital Timber Investment Fund S.A. SICAV-SIF
Germany: (100%)
Vendor: QIC Strategy Timber No.1 Limited, Australia (100%)

Background - The Applicant is seeking consent to acquire the Land through a subsidiary limited partnership (Te Rata Forestry LP).

The Land is currently used for forestry purposes by an overseas person, and the Applicant intends to continue using the Land for forestry purposes (as required by the special forestry test).

The Applicant will enter into a forest management agreement with a New Zealand based forestry manager who will manage and operate Te Rata Forest.

Approximately 1,018ha of the land is exotic forestry planting. Of the remaining land, approx. 578ha is native bush (subject to a QEII Trust covenant), and 411ha is made up of ancillary uses in support of the forestry operations (i.e. unplanted areas, infrastructure, such as roading).

This is the Applicant’s first investment in New Zealand but it has forestry investments in Scotland, Finland and Australia. The Applicant’s wider parent group (Aquila Group) has made more than 20 previous investments under the Act.

The underlying owners of the Applicant are primarily German church funds.

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Buy and Sell

... and finally ... the midweek laugh...

Sign seen recently outside a bookshop: 'Post-Apocalyptic Fiction has been moved to our Current Affairs section'


Modern sign: 'In case of fire, exit the building BEFORE tweeting about it!'


The last word on rugby …

Two guys in a bar. One says, "I just don't understand women! 364 days of the year they're on at us to show our feelings, express emotions, let out the pain …
and the one day we show some feelings, we get told: “Get over it, it's only a game!"


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

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

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