WoodWeek – 3 March 2021

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Greetings from our WoodWeek team in Rotorua. Up first, we look to log markets where PF Olsen adds numbers to last week’s commentary from Forest360. We also have news on the China log market from Indufor, including some interesting facts about Russian-China log trade. In the Far East of Russia, the export ban would have an immense effect on their employment. The local forest sector employs over 35,000 people there. Amid the export ban deliberations, the country’s government is considering setting up a state-owned trading company that will be allowed to export roundwood.

Looking to another of China's growing log sellers, Germany, where an annual survey on forests found that more trees died in 2020 than ever before and only 21% of trees under observation had an intact canopy, an indication of how healthy a tree is. That was the lowest value since assessment began in 1984.

Moving to our conference updates, you can still register at our earlybird rates for our combined HarvestTECH and Forest Safety Conferences in April and our mid-June Carbon Forestry Conference are proving popular as we make reminder calls to all of you register.

To round out the numbers for today, here are some trade statistics – New Zealand’s overseas trade index goods terms of trade rebounded in Q4 (2020) as export prices didn’t deteriorate as much as import prices. Dairy prices lifted 2.4% q/q following a sharp fall the previous quarter. Meat prices eased 3.6% q/q while forestry lifted 2.6%. The price of imports fell primarily due to lower prices for imported petroleum products. For the month of January 2021 compared to January 2020, exports of logs, wood, and wood articles, were up $13 million (4.1 percent).

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Log market update

(PF Olsen Wood Matters Market Summary) - Domestic demand for logs and sawn timber remains strong as wood processors around the country struggle to keep up with demand for sawn timber. Most log processors received price increases for domestic sawn timber products in February.

Log demand in China is strong due to a busy construction season, while supply has been constrained. Since December there has been a 15% increase in CFR sale prices for logs in China. Increases in ocean freight costs of up to 40% in this same time and the strengthening NZD against the USD has partially offset the benefit of the higher log sale prices for forest owners in New Zealand. The AWG prices for export grade logs increased by $5-$8 per JASm3 in January and by $5 per JASm3 in February.

Due to the increase in AWG export log prices the PF Olsen Log Price Index increased by $4 in January and $2 in February to $130. The index is currently $9 above the two-year average, $6 above the three-year average, and $6 above the five-year average.

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Potential implications of a Russian export ban

Potential implications of possible Russian 2022 roundwood export ban - Russia has been one of the largest roundwood traders globally for many years by its roughly 10-20% share of the market between 2010-2020. Based on the announcement of President Vladimir Putin last year, instructing the country’s government to ban the export of untreated or roughly processed wood, the roundwood exports might be heavily limited from next year on, should the legislation take force as proposed.

Figure 1 - Share of the Russian Exports in the Global Roundwood Trade. Source: Russian customs statistics, Faostat, Indufor analysis

While the proposed ban is still under discussion, it is widely expected to be in force already in 2022. According to the plans, the ban should apply to softwood logs and pulpwood, as well as birch veneer logs. The ban would not mean an absolute prohibition of exports but would raise the export tax to 80%, which in practice would mean the same.

This article is about the implications of the roundwood export ban on the Russian forest industry, while the related effects and consequences to the main trading partners, such as those in Asia and Europe, will be discussed in another article coming soon.

Despite the obvious benefits, such as the increase of raw material supply and stimulation of value-added wood processing in the country, the ban may also lead to some uncertain outcomes for the Russian forest industry. First of all, this is related to small and medium-sized wood harvesting companies and forest leaseholders, who do not have their own or other wood processing facilities close by and are heavily dependent on international trade, i.e. exports. Many of them are located in the Far East of Russia, where about 20-30% of the harvested wood (mainly softwood logs) is exported to China.

Indufor's view is that local entrepreneurs would require heavy investments into new wood processing industries or other support, to survive. Social significance should also be considered. The local forest sector employs over 35,000 people in the Far East of Russia and the export ban would have an immense effect on their employment.

Amid the export ban deliberations, the country’s government is considering setting up a state-owned trading company that will be allowed to export roundwood. The plans were discussed in the Russian media back in 2018 and were recently confirmed by the Presidential Plenipotentiary Envoy to the Far East Federal District of Russia, Mr Yuri Trutnev. A similar governmental structure operated during the Soviet Union era.

According to Mr Yuri Trutnev, the funds received from the commercial activity of the company can be earmarked for developing value-added wood processing centres in the country and attracting also private investments. The measures may lead to a monopolization of the international roundwood trade, but obviously can be a way of supporting the local forest industry until the region has developed sufficient further wood processing industry.

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Source: Indufor

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Updated wood availability forecasts in progress

Margules Groome advises that, on behalf of the New Zealand Ministry of Primary Industries (MPI), they are currently undertaking the 2020 update to the New Zealand wood availability forecasts (WAF). These forecasts build on the National Exotic Forest Description (NEFD) data, provided by New Zealand plantation forest owners, to predict the potential wood availability at both national and regional levels. These forecasts are carried out roughly once every 5 years, with the last WAF published in 2014-2015.

Late in 2020, Margules Groome developed the forecasts for the Nelson Marlborough wood supply region as a pilot exercise. With the successful completion of this pilot region, we are now moving on to the forecasts for the remaining regions and the national level forecasts. The project is scheduled to be completed by the end of June 2021. All regions follow a similar methodology to that which has been used for the last couple of forecasts.

The NEFD areas statements and yield tables form the basis for the Remsoft Woodstock wood flow models. The models are designed to mimic generalised future forest management practices in each of the regions. These generalised practices include rotation ages and replanting rules. We are undertaking a survey of large forest owners to obtain an understanding of their harvesting intentions over the next 10-20 years. These harvest intentions will be used to provide a solid base for the future predictions. Several different scenarios will be modelled to demonstrate different potential future supply forecasts for each region. Once the draft models are completed, regional meetings will be held to canvas feedback on the draft forecasts. This feedback will be incorporated into the final models and forecasts. The final forecasts will be made publicly available on the MPI website.

If you own forests in New Zealand of greater than 3 000 hectares, you or your forest manager can expect to be contacted by a Margules Groome representative to help us understand your harvesting intentions over the next 10-20 years. In addition, all New Zealand plantation owners should receive an invitation over the next couple of months to a regional meeting (likely to be in March) to discuss your regional draft forecasts, which we encourage you to attend. If you haven’t been contacted and think you should have been, please don’t hesitate to get in touch: info@margulesgroome.com

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European forest infestations continue

BERLIN (Reuters) Fire, drought, beetles ravage German forests, study finds - The condition of German forests has deteriorated to record levels due to fire, drought and a bark beetle infestation, the agriculture minister said last week, prompting calls from environmental groups for greener policies.

More trees died in 2020 than ever before and only 21% of trees under observation had an intact canopy, an indication of how healthy a tree is, an annual survey on forests found. That was the lowest value since assessment began in 1984.

Germans, who pride themselves on their environmental awareness and whose culture and history are steeped in woodland legend, are concerned about the state of forests, which cover 11.4 million hectares, a third of the country’s area.

“We need our trees and forests in Germany: as climate protection, habitats for diverse fauna and flora, air and water purifiers, carbon dioxide reservoirs, employers or as recreation for humans,” Agriculture Minister Julia Kloeckner said.

The study, which examines the condition of 10,000 trees each year, showed that a record 1.7 percent of the trees under observation died between 2019 and 2020, almost 10 times the average. Particularly hard hit were spruce trees, about 4.3% of which died.

The study cited an infestation of bark beetles as the main cause. This was made worse due to a dry summer which enabled the beetles to get deep into barks. It also blamed storms, drought and forest fires in the past three years for massively damaging German forests.

Photo credit: M Schmitt / Innovatek

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Source: Reuters

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OneFortyOne appointment

Brent Guild has been appointed Executive General Manager, New Zealand, by OneFortyOne - He replaces Lees Seymour, who resigned from the role in late 2020.

“We are very pleased to confirm Brent’s appointment,” says OneFortyOne Chief Executive Officer, Andy Giles Knopp. “Brent has been working as General Manager Forests for OneFortyOne New Zealand since 2019 and as one of two acting leaders for the New Zealand team for the past several months. In this role he has made a significant impact on the business, particularly during a difficult 2020.”

Brent said that he is looking forward to the challenges and opportunities offered by the role. “Our industry is an important contributor to the Nelson Tasman and Marlborough regions. We have very committed teams in both the forest and the mill, and I am looking forward to working with them and better understanding the aspirations of our stakeholders,” says Brent.

Brent Guild’s appointment as Executive General Manager, New Zealand, became effective 1 March 2021.

Source: OneFortyOne

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Te Uru Rākau - ETS: Have your say

Views Sought On Additional Proposals For The ETS Forestry Regulations -Te Uru Rākau / Forestry New Zealand is seeking feedback on proposed amendments to the New Zealand Emissions Trading Scheme (ETS) Forestry Regulations that it hopes will encourage new planting of both indigenous and exotic forest.

These latest proposals follow an initial round of public consultation on amendments that was held from November 2019 to January 2020.

Director Forestry and Land Management Oliver Hendrickson says Te Uru Rākau has been considering feedback and worked with forestry experts to refine the proposals relating to the approach to carbon accounting for forestry.

“The proposals provide options for how the new ‘averaging accounting’ method will work for new post-1989 forests that register with the ETS," Mr Hendrickson says.

“They will determine how flexible or precise carbon accounting will be for future forests in the ETS. This will in turn impact how easy it will be to harvest at different times or change species on a second rotation (for example, changing from radiata pine to indigenous forest). They will also impact the level of administration required by participants and when carbon credits will be earned.

“Ultimately we are trying to make the system simpler for all participants as undue complexity has been a barrier to participation.”

Mr Hendrickson says Te Uru Rākau was keen to understand how people felt about the trade-offs and likely impacts of various options for how averaging accounting will work in terms of the flexibility they offer participants versus how complex they are.

“These options will shape the future of new forests in New Zealand and how they are managed. However, this consultation doesn’t cover existing forests moving to averaging. The decision about whether registered post-1989 forests can transition to averaging will be made by Cabinet by the end of 2021.

“These Regulations implement the decisions and improvements to the ETS which were passed last year while also setting the groundwork for future decisions New Zealand will make to support our climate change strategy. When the Climate Change Commission's final recommendations are published we will be in a good position to respond.”

Mr Hendrickson says 333, 000 hectares of land were currently registered in the ETS, for which around 6.9 million carbon credits were claimed last year. This is equivalent to the carbon emissions from approximately 2.3 million cars in a year.

“The ETS plays an important part in helping New Zealand meet its international climate change obligations so it’s important that we take the time to get feedback and ensure people understand the changes we are trying to make.”

The deadline for submissions on these proposals is 5.00pm on Friday 9 April 2021.

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Marton Rail Hub on track (npi*)

Progress towards the construction of the Marton Rail Hub is moving forward with planning consultants beginning work on the site - The development of the Marton Rail Hub was announced in early 2020 in a partnership between Rangitīkei District Council, Te Rūnanga O Ngā Wairiki Ngāti Apa, the Ministry of Business, Innovation and Employment’s Provincial Development Unit and Rangitīkei Forestry Holdings.

The rail hub project will set up the Rangitīkei District as a key logistical hub for the forestry industry across the Lower North Island.More than 80 jobs will be created during the construction phase and 22 full-time positions when operational. At a Rangitīkei District Council meeting in December, the tender for a planning consultant was awarded to firm WSP, in a move that allows the rail hub project to progress towards comprehensive development planning.

Planning work and assessments on site, off Makirikiri Rd outside Marton, started this month. A governance board for the project was also appointed in December. Rangitīkei District Mayor Andy Watson said the appointments marked an exciting key milestone in moving the rail project forward.

“The rail hub will significantly benefit our community, economy and iwi. It’s great to see progress being made as we get into the new year,” Watson said. “As we look at 2021 and the process of recovering from the impacts of COVID-19, we are motivated to continue pushing forward to turn this opportunity into reality.”

In August, a $9.1 million investment managed by the Provincial Development Unit was announced through the Infrastructure Industry Reference Group, which helped identify infrastructure projects as part of the Government’s $3 billion COVID-19 Response and Recovery Fund.

Rangitīkei District Council has committed $225,000 to a District Plan Change process, which will allow the industrial build to take place on former farmland, if confirmed, and a further $525,000 to create roading and rail access. Rangitīkei Forestry Holdings will contribute $500,000 to the project, as well as building and commissioning a debarker facility at the site.

Watson said Rangitīkei District Council was committed to ensuring the Marton Rail Hub project was beneficial to the community and was currently working to address the concerns raised in an appeal to the District Plan Change. A comprehensive development plan is due to be completed by April, which will determine the next steps for the project.

(* npi = No pun intended.)

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Log Truck Safety Accord renewed

Renewed Log Truck Safety Accord signed - The broad range of bodies involved with the log trucking business have come together to reach a new accord on log truck safety. Putting their signatures to the Accord this week were; FOA, the Farm Forestry Association, the Forest Industry Safety Council, the Road Transport Forum, the Log Truck Safety Council (LTSC) and the Forest Industry Contractors Association.

The Accord aims to improve log truck safety for drivers and the pubic alike, on public and private roads. The parties agree to:
> support compliance with all regulations and codes of practice,
> recognise the importance of complying with speed limits,
> disincentivise overloading,
> back the LTSC Operator Certification Programme and driver training,
> reduce fatigue in the industry,
> actively promote mechanical equipment improvements,
> identify roading infrastructure priorities,
> contribute to accurate incident reporting,
educate the public on safety awareness and,
> produce an annual Safety Improvement Plan.

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Are mill closures a sign of times?

(BusinessDesk) Are Waitara and Whakatāne closures a sign of things to come? - Plant closures in Waitara and Whakatāne look set to cost another 250 high-paying jobs in regions that can ill afford to lose them. Hopefully, the Waitara Valley methanol plant may re-start in coming years — if gas development and the government’s confused energy and climate policy allow.

But the closure of Whakatāne’s 82-year-old carton board mill looks like a done deal. Despite many years effort to reduce costs — particularly energy use — and more recent efforts to find a buyer, Swiss packaging giant SIG Combibloc has called time on the operation.

That should be ringing painfully loud alarm bells in the corridors of power. Because without international investment, how are we to deliver on the economic transformation required to fulfil the country’s net-zero 2050 vision — a large part of which assumes major expansion of wood processing and wood-based bio industries?

If we can’t keep the investors who are already here — even with the bounty of renewable electricity the prime minister likes to crow about — what hope do we have of attracting new players?

Cycles - It’s not a new issue. During the past 20 years, ageing sub-scale industrial exporters have shrunk back to supply domestic markets or shut altogether. Firms like Carter Holt, Holcim and Norske Skog have retrenched more than they have reinvested.

We now import more cement, steel and newsprint, with the loss of local jobs and to the detriment of our balance of payments. The emissions from making some of those products and shipping them here are higher than if they were made locally.

Lose, lose, lose.

(Content abridged)

Risks - The danger in the current process is policymakers will fixate on delivering the shrinking emissions lid of the ETS, rather than the actual goal of lowering global emissions. No effort will go into policing imported carbon and domestic emission reductions will be achieved through closures and cutbacks — because that is easier than committing to long-term plans and investment in lower-emissions technology.

Some closures are inevitable, and the Climate Change Commission has been commendably honest about that.

But as Oji Fibre Solutions has warned previously, New Zealand has to compete for capital globally and other countries are already making plans and offering considerable incentives to help keep industries viable while they drive down their emissions.

Are our current policy settings really going to deliver the “thriving, climate-resilient and low-emissions” economy the commission promises? I doubt it feels that way in Whakatāne.

Reporting by Gavin Evans for BusinessDesk

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Port of Tauranga market update

Port of Tauranga, New Zealand’s largest port and international freight gateway, has just reported increased profitability for the first six months of the 2021 financial year, despite volatile cargo volumes and congestion issues being experienced at Ports of Auckland.

Highlights and Challenges for the six months to 31 December 2020:
> Imports increased 5.0% to 4.9 million tonnes
> Exports decreased 4.8% to 8.2 million tonnes
> Log export volumes were 2.1% lower than same period last financial year, at nearly 3.3 million tonnes
> Dairy exports were down 10.8% to 1.1 million tonnes
> Group Net Profit After Tax increased 2.3% to $49.4 million
> Total trade decreased 1.3% to nearly 13.1 million tonnes
> Container volumes decreased 4.6% to 612,988 TEUs

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... almost finally ... back by popular demand

Who Knew? Whittaker's brings back NZ's most requested chocolate block - It's back and just in time to curb your lockdown hunger. One of New Zealand's most requested chocolate blocks is back for the first time since 2014. Whittaker's has brought back the Hundreds & Thousands king size chocolate block - its most requested flavour of all time.

The block, which replicates the Griffin's Cookie Bear Biscuit, is back for a "limited time only". Whittaker's co-chief operating officer Holly Whittaker said a petition online last year requesting its return helped bring back the chocolate Kiwis most want.

"We often get requests to bring back limited edition flavours, but Hundreds & Thousands is by far the most requested product of all time, even sparking an online petition last year calling for the flavour's return. We're delighted to be able to bring it back once more for a limited time in response to the ongoing requests from our chocolate lovers over the past seven years."

The good news is Whittaker's has produced more this time around so there's no need to panic and binge- buy like what we saw with toilet-paper during last year's lockdowns.

"Given the popularity of this flavour last time around, we've produced more this time but it is still a limited- edition product," Whittaker said.

The Hundreds & Thousands block is made with white chocolate and combined and blended with crunchy biscuit pieces and sprinkles to replicate the taste of the biscuit. Apparently it been available nationwide since February 22 for as long as stocks of this limited edition product last.

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Buy and Sell

... and finally ... something funny in a Covid week

Sorry, that's a New Zealand only reference ... anyway, time for good mid-week laugh.


A very elderly lady went into the bank, handed her bank card to the cashier and said “I would like to withdraw £10 please”. The cashier told her “For withdrawals less than £100, please use the ATM." The old lady wanted to know why …

The cashier returned her bank card and irritably told her “These are the rules, please leave if there is no further matter. There is a line of customers behind you.”

The old lady remained silent for a few seconds and handed her card back to the teller and said “Please help me withdraw all the money I have.”

The cashier was astonished when she checked the account balance. He nodded his head, leaned over and respectfully said, “You have £400,000 in your account but the bank doesn’t have that much cash currently. Could you make an appointment and come back again tomorrow?”

The old lady then asked how much she could withdraw immediately.
The cashier told her any amount up to £,3000.
“Well please let me have £3,000 now.”

The cashier kindly handed £3,000 very friendly with a smile.
The old lady put £10 in her purse and asked the teller to deposit £2,990 back into her account!

The moral of this story is…. Don’t be difficult with old folk, they've spent a lifetime learning skills.


Some groaners:

1. Dad, are we pyromaniacs? Yes, we arson.

2. What do you call a pig with laryngitis? Disgruntled.

3. Why do bees stay in their hives during winter? Swarm.

4. Just so everyone’s clear, I’m going to put my glasses on.

5. A commander walks into a bar and orders everyone around.

6. I lost my job as a stage designer. I left without making a scene.

7. My friends and I have named our band ‘Duvet’. It’s a cover band.

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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