WoodWeek 4 August 2021
We also have coverage of other log and wood markets beyond China, including South Korea. South Korea is New Zealand's second largest log export market and accounts for 8.0 percent of total log exports. Demand for logs slowed over the past few years as economic growth has weakened. In addition, importers are forced to compete on price with Chinese importers, so while volumes have decreased, the value of exports has remained relatively steady, as rising Chinese demand has lifted prices. Export volumes to South Korea are expected to remain low as Australian logs are being rerouted following China’s ban on them, placing further downward pressure on demand for New Zealand logs.
Meanwhile, acquisition activity is humming in our industry. Hard on the heels of their Boral acquisition Pentarch Group has just announced they have purchased the assets of Dormit Pty Ltd. Dormit operates two sawmills and associated operations located at Dandenong South and Swifts Creek in Victoria, Australia.
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This week we have for you:
Champion Freight Log Export Market UpdateLog exports to China continued to grow, which is unusual for this time of year, with the reporting month (June) showing a big increase over June 2020 which when exports were still in the post-Covid work stoppage shadow. This week we've got our monthly update from the team at Champion Freight. For the month ended in June our log exports to China saw shipments soar by 39 percent, compared to June 2020, taking overall log exports up a solid 28 percent. Notably, logs to South Korea were 37 percent for the month, but still less than 10 percent of the values to China at NZ$30m.
Year-on-year this month's chart shows total log export values to China to the end of June are up 39 percent to NZ$3.27 billion dollars, contributing to overall log exports lifting by 28 percent from NZ$2.35B across all export markets. Log exports to South Korea were up for the year by 15 percent up while volumes while logs to India were down 60%.
Source: Champion Freight
MPI: Situation and Outlook for ForestryStrong outlook for log exports - Log exports are forecast to reach $3.6 billion in the year ending June 2021, led by demand from China raising prices and incentivising harvesting. This is an increase of 25.5 percent compared to the previous year following four consecutive quarters of growth. This strong demand has pushed log export prices near the record levels observed in 2018-19 (Figure 24).
Chinese demand for logs remains strong, driven by increased construction activity and further supported by supply constraints such as the ban on Australian logs, and a reduction in global shipping capacity (although log shipping from New Zealand appears to have remained relatively unscathed). New Zealand remains the largest supplier of softwood logs to China followed by Germany, Russia, the US, Uruguay, and the Czech Republic. China’s log imports from most countries have been growing, including New Zealand, and accounted for 83.3 percent of New Zealand’s total volume of log exports in the year ended March 2021.
Log export revenue is forecast to reach $3.8 billion in the year ending June 2022, on the back of continued strong demand as China ramps up infrastructure projects. The outlook for log prices is expected to decline slightly due to increased supply from other countries. European and South American foresters anticipate increased log shipments to China, which is likely to put downward pressure on New Zealand log prices. It’s not clear whether Russia's proposed log export ban in early 2022 will be a complete or phased-in ban, but nevertheless, the ban is expected to partly offset the impact of increased supply into China and support New Zealand log demand and prices in the medium-term.
South Korea is New Zealand's second largest log export market and accounts for 8.0 percent of total log exports. Demand for logs slowed over the past few years as economic growth has weakened. In addition, importers are forced to compete on price with Chinese importers, so while volumes have decreased, the value of exports has remained relatively steady, as rising Chinese demand has lifted prices. Export volumes to South Korea are expected to remain low as Australian logs are being rerouted following China’s ban on them, placing further downward pressure on demand for New Zealand logs.
India’s demand for New Zealand logs plunged due to the COVID-19 pandemic and is yet to rebound. Export volumes are down 69.5 percent in the year ended March 2021 compared to last year. India now accounts for only 2.0 percent of total log exports. Demand from India is expected to remain subdued for the rest of the calendar year, as COVID-19 cases remain high. In addition, Australian logs have been redirected to India after China banned them, putting pressure on this market. Over the medium-term, demand from India is expected to increase as the pandemic wanes and conditions improve.
Poto Williams May Limit ExportsHouse building crisis: Government could limit timber exports to ensure local supply - The Government was warned its efforts to tackle New Zealand's housing affordability issues could be hampered by wood shortages. The issue has become so significant, Building and Construction Minister Poto Williams is considering limiting timber exports to ensure there is enough in the country.
It's also caught the attention of Green MP Chlöe Swarbrick, who this week intends to call for a select committee inquiry into building products, with a specific focus on timber. This comes as the cost of building materials continues to rise, pushing up house prices.
Newstalk ZB can reveal the alarm was raised in April, in an urgent briefing from Ministry of Business, Innovation and Employment officials. Documents, obtained under the Official Information Act (OIA), show officials' concerns after timber giant Carter Holt Harvey cut distribution to ITM, Bunnings and Mitre 10.
Source: NZHerald and NewstalkZB
UPDATED STORY - Red Stag's Marty Verry was interviewed on RNZ this afternoon. He was able to highlight the bigger picture on timber supply, with global factors at play affecting housing markets in Australia, USA and wider markets.
Listen here >> Potential limit on timber exports by the government not welcome
Contractors: Caught in CrossfirePressure mounting across entire forestry supply chain as port build ups highlight issues - The Forestry Industry Contractors Association (FICA) is calling for an all of forestry strategy to deal with the mounting pressure on the entire forestry supply chain, currently being highlighted by build-ups at major New Zealand ports. FICA say the situation is far from over and the sector needs to work together to find solutions.
Export market demand for New Zealand logs has been strong in recent months, putting extra pressure on our infrastructure, particularly at ports. FICA spokesperson Prue Younger, who represents contractors as the CEO of the organisation, says “I don’t think we have ever tried to deliver the volume of wood that we are, and we are finding out our infrastructure just can’t cope,” she says.
The growing number of ships waiting to dock at multiple ports across New Zealand is a visible indication of the building supply chain pressure. Starting with Gisborne, build ups have reportedly spreading to Tauranga and Napier more recently. In the case of Gisborne, delays have been compounded by infrastructure upgrades to add a second berth and weather conditions.
Ms Younger says delays are not just happening at the ports; the entire forestry supply chain is under pressure and has been for some time. “The delays are evident everywhere, from slow deliveries of imported gear such as personal protective equipment (PPE) and vehicles, to harvesting, trucking and shipping back- logs. The entire supply chain is being stretched,” she says.
“While pressure mounts, forestry contractors are caught in the cross-fire. They’re not receiving any compensation, with lost revenue mounting. Many are being stretched to the absolute limit financially.”
Representing the Log Transport Safety Council, Warwick Wilshier says “Logs are being transported around to other ports, but it feels like money is being wasted moving the problem around, when it could be used more productively and wisely supporting the industry.”
This is coupled with a mid-month export log price drop, putting extra financial pressure on everyone. “The latest log price drop is pretty typical of the cycle in logging, where we see prices reach new heights, then drop and stabilise to re-set the market,” says Ms Younger.
“The issue is that as an industry, we are lacking a coordinated strategy. We’re just reacting without a plan of response. It’s like the weather – sometimes it’s good and sometimes it’s bad, but if we know the forecast, we can make appropriate plans.”
“We talk about the need for a pan-industry strategy, but we don’t have one. We keep banging on about working together and through CoVID, we did. We need to be coordinated and work together to better manage our supply chain, so we don’t get pulled into this boom or bust mentality yet again,” she says.
Source: FICA and LTSC
Australia: Pentarch Group Buys Dormit operationsHard on the heels of their Boral acquisition Pentarch Group has just announced they have purchased the assets of Dormit Pty Ltd. Dormit operates two sawmills and associated operations located at Dandenong South and Swifts Creek in Victoria, Australia. It processes hardwood logs primarily for pallet production with final processing occurring in Dandenong. Dormit is Australia’s largest manufacturer of wooden pallets, up to 1.2 million units per annum, supplying the majority of CHEP Australia’s pallet requirements. Pentarch will continue the supply of wooden pellets to CHEP, cementing Dormit’s 30+ year relationship with the company.
This acquisition solidifies Pentarch’s strategic commitment to invest and expand its forestry holdings. It adds to the recently announced agreement to buy Boral Limited’s hardwood and softwood business in New South Wales and compliments the greenfields sawmilling operation Pentarch is developing in Eden, NSW. A briquette plant is also under development in Eden alongside Pentarch’s existing chipping and log export operations.
Paul Heubner, CEO Pentarch Forestry said “The strategic acquisition of both Dormit and Boral Timber alongside our other developments, places the Pentarch Group in an enviable position for future growth and diversification. Late last year we also purchased the assets of a wood testing laboratory, Wood Industry Technical Services Ltd (formerly WITS - now Pentarch Technical Services) based in Kawerau, New Zealand. We are looking to invest in and provide end-to-end forestry services and we are actively seeking new opportunities across both countries”. Pentarch’s purchase of Dormit took effect from 26 July 2021.
China: New Industry IndexLooking to the traditional business activity indicator – PMI (Purchasing Managers’ Index), in June 2021, China's PMI index declined to 50.9. The index has remained above 50 for four consecutive months indicating that the economy continues to recover. In June the wood production and manufacturing industry maintained a good momentum. Wood production continued steadily, domestic demand remained stable, however the price of raw materials accelerated, inventory continued to decline and cost pressure increased.
What is PMI based on? As an indicator of the economic health of the manufacturing sector, the PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.
New index reported in China; GGSC-CN Index Report - The Global Green Supply Chain (GGSC) for forest product is a global platform voluntarily established by enterprises, research institutes, industry associations, international organisations and others to implement “an initiative to build a collaborative network for a global green supply chain for forest products”. The GGSC- CN reports on sentiment among participating enterprises in China.
The GGSC-CN for June registered 53.3 (compared to 55 for June 2020 and 45.7 for June 2019). The index has been above 50 for four consecutive months indicating operations of the enterprises represented by GGSC-CN index continues to expand.
Source: ITTO TTM Report Vol 25 No 14
Harvest and Haulage Cost Index UpdateMargules Groome’s quarterly harvest and haulage cost index for Australian plantation operations is based on actual price indexation mechanisms used by industry weighted by volume harvested. The previous index published in June 2020 showed a massive fall in fuel prices, some 29%, due to the impact of the COVID-19 pandemic control measures on fuel demand.
The impact on harvest and haulage cost index then was equally massive, down 7% and 9% respectively. Then it was predicted that the index will shift back to normal well into 2021, if not later. Sure enough, after a false start in the September quarter of 2020, fuel prices began recovering in early 2021. Increases in CPI and wages indices to above pre-pandemic levels in nominal terms have contributed to pushing harvest and haulage cost indices back towards pre- pandemic levels.
Fuel prices still have some way to go to get back to pre-pandemic levels. Currently, at ~AUD1.22- 1.26/L, they were at ~AUD136-140/L in December 2019. We know this leap could occur quickly – within a quarter or less. Nonetheless, one would assume that as economies continue their recovery fuel prices will also continue increasing pushing the harvest and haulage costs higher.
Sources: Margules Groome, ABS AIP
UC Forest Road Engineering updateUniversity of Canterbury (UC) School of Forestry staff members Rien Visser and Campbell Harvey recently gave a presentation on “Forest Roads in NZ” to an international audience. The presentation includes an overview, details current construction practices, as well as highlights issues and research of forest roading. It was part of a Webinar series on ‘Forest Roads around the World’ coordinated by IUFRO (International Union of Forest Research Organizations).
The 45 min video presentation can be found here and is followed by 45min of questions and discussion from an international audience. It compliments presentations given on Forest Roads in Western North America, Europe, South Africa and Asia. These presentations can be found here.
A key point of difference was NZ’s over-arching ‘fit-for-purpose’ design approach in our plantation forests. This means aligning the road performance expectation to the harvest activity - both in terms of covering the cost of construction and also actual road standard.
Source: Rien Visser, School of Forestry
Updated Forestry Decision Data from OIOStatistical Information on Overseas Investment Office (OIO) decisions for 2020/21 - The following statistical information shows applications approved or declined for the sale of Sensitive Land, Significant Business Assets and Fishing Quota in New Zealand to overseas persons in the financial year 2020/21. It does not necessarily indicate that a sale has taken place.
Agriculture, Forestry and Fishing as a combined sector has the greatest number of approved OIO applications at 35 for 2020/21 year. Forestry had 32 applications approved covering 38,579 gross hectares (15,381 net).
For more OIO statistics click Here>>
Tigercat Releases LSX870D Shovel LoggerBased on the popular LX870D series track carrier platform, the machine is designed for extreme duty steep slope logging. With the choice of attachments including the new Tigercat BG13 grapple with a live heel boom or the SC08 shovel clam grapple, the LSX870D is suited to pre-bunching and shovel logging in challenging terrain.
The addition of the LSX870D to the Tigercat lineup provides a higher power, closed loop drive alternative to the LS855E. Where the LS855E provides higher swing speed and lower ground pressure, the LSX870D allows for improved multifunctioning ability and quicker, more responsive travel speed. The Tigercat FPT C87 engine supplies 245 kW (330 hp), which combined with the dedicated attachment pump, provides plenty of multi- functioning power. Lift and reach capabilities for the LS855E and the LSX870D are identical.
MTB bike design Meets PlywoodJames Smurthwaite from pinkbike.com looks into some bike projects that caught his eye, and the tech and builders behind them.
First up is a plywood, linkage-driven, single-pivot from a German builder called Bene Mack. Bene studied product design and also took a six-month internship in the design department of a German bike company, so he decided to take those skills and build himself a bike for the first time. The bike was his chance to try out some ideas he had been working on using Fusion 360 and also try out the boundary-pushing geometry that is being tested by some bike brands.
So, to get the most obvious question out of the way first, why plywood? Well for Bene, it was simply a matter of practicality. Bene says, "Since I never welded before and without any access to the necessary facilities, I decided to build the frame out of plywood. The frame was designed to be built from 2D parts, which gives the bike that unique look." Thankfully he owns a jigsaw, a belt sander, a router, and a drill press in a small workshop and a friend owns a lathe, meaning he could create the bike with the required level of precision.
After around 500km of riding on the bike, Bene is starting to pick out some interesting performance benefits to wood too. He says, "It's the quietest bike you can imagine. And the feeling of extra damping that wood provides is something I could get used to." However, he's unlikely to ever suggest that plywood bikes are the future.
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... and finally ... "Your honour, it's the vibe"
A lawyer was playing golf when he got hit by a ball. When the player came along looking for his
ball, the lawyer said, "I'm a lawyer, and this will cost you $5,000".
Two Mafia hitmen are walking deep into a forest in the middle of the night.
One of them says, "I gotta admit I'm pretty scared out here."
The other replies, "You're scared; I gotta walk back alone"!!!
A defending attorney was cross examining a coroner. The attorney asked, "Before you signed the death certificate had you taken the man's pulse?" The coroner said, "No."
The attorney then asked, "Did you listen for a heart beat?", and again the coroner said, "No."
Then the attorney asked, "Did you check for breathing?", and again the coroner said, "No."
"So when you signed the death certificate you had not taken any steps to make sure the man was dead, had you?"
The coroner, now tired of the brow beating said, "Well, let me put it this way. The man's brain was sitting in a jar on my desk, but for all I know he could be out there practicing law somewhere.
That's all for this week's wood news.
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