WoodWeek – 15 September 2021

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Greetings from your good wood news team. Thanks to the team at Champion Freight, we can see that up to and including July, monthly log exports set records for 5 of those 7 months. What will be hard to tell is how the next 5 months' results fairs compared to history back to 2017 as today’s bar chart shows.

Looking deeper into our most important export log market for a sign, this week’s insights come from the PF Olsen team. “Softwood log inventory has not risen in the last month and sits around 5.5m m3 although there is significant volume sitting on vessels. Daily port off-take has increased about 15k per day over the last month to around 75k m3 per day. Market participants in China expect further increases in demand over September.”

Our annual ForestTECH 2021 conference, exhibitions and workshops are running on 23-24 November in Rotorua. Last year this event drew a large audience online as well as being popular with our NZ delegates able to enjoy in-person experience. Once again we are offering virtual registrations for our colleagues in Australia and further afield through live streaming. Click here for full details.

On the east coast, Aratu Forests is working closely with eLandNZ to plant native trees on unusable land, creating permanent buffers alongside waterways. The partnership plans to stop forestry waste, such as logs, from being washed into waterways by planting native trees on otherwise unusable stretches of land across 33,000 hectares of forestry plantation, mostly in the Gisborne region.

We remind you registrations are still open for our 6th Annual WoodWorks Conference on 3 November. The event has grown by over 50 percent already as embodied carbon accounting rules for new construction are being mooted. With a BRANZ pre-conference workshop and over 70 percent of delegates booked for our Red Stag CLT plant tours on Tuesday 2 November, we are committed to providing you with an in-person experience for this event. To register or see more details click here.

Finally, for anyone who has followed New Zealand and European carbon prices over the last couple of years, it has been easy to draw parallels between them - Both markets have experienced strong and nearly identical price gains since the beginning of 2019 on the back of policy reform. However, when looking into the stockpile volumes in the two markets, there are clear differences between them.

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PF Olsen Export Market Commentary

Export Log Market AWG prices – AWG prices are usually set at the start of each month. This month In August exporters were very reluctant to set prices, with CFR prices still not confirmed in China as there was a standoff over prices in LC’s for vessels enroute. During this time shipping costs increased, and the New Zealand dollar strengthened, which did not help the AWG calculations. Once the dust settled there was still differences in AWG between exporters but not the array seen in July. The average drop in prices was about 35 NZD per JASm3. AWG prices in Gisborne were again affected by the high demurrage costs, but the ability to load vessels during the Covid Level 4 lockdown has eased this situation.

China – The price for A grade logs was in the mid 160’s USD per m3 for A grade. Exporters noted log buyers were immediately more active upon announcement of the Covid lockdown in New Zealand. This lockdown will be for two weeks to the end of August. Vessels have been able to be loaded during this time, but all harvesting has ceased. This has assisted with port congestion at Gisborne and Tauranga. The average number of vessels departing New Zealand each month has been 55 this year. There are currently less than 35 vessels planned for September. This reduction in supply will hopefully assist with port congestion in China, where at two main port areas Lanshan and Xinminzhou log vessels are now waiting longer than three weeks.

Softwood log inventory has not risen in the last month and sits around 5.5m m3 although there is significant volume sitting on vessels. Daily port off-take has increased about 15k per day over the last month to around 75k m3 per day. Market participants in China expect further increases in demand over September.

There is an audit underway of sawmills in the Lanshan area to see if they are achieving set environmental targets. Hopefully, this will not significantly impact log demand in the short term.

The use of prefabricated wood structures is featured in the latest five-year provincial plan for new construction in China counties. This is a promising sign for increased consumption of logs in China. In June, the Chinese Ministry of Housing and Urban-Rural Development (MOHURD), released the formal Guideline on Strengthening Green and Low-carbon Construction in Counties. The policy contains specific requirements on county development and states that new residential buildings in counties should be predominantly six storeys and, in principle, not higher than 18 storeys. No less than 70 percent of newly built residential buildings should be 6-storeys and lower. Requirements to achieve this guideline indicate significant opportunities for wood-frame and prefabricated wood structures in construction.

India – The price for sawn timber in Kandla is weak at INR 591 levels per CFT, due to negative sentiments and seasonal factors. The log market in Kandla expects about 9 vessels to arrive in September, from Australia, New Zealand and Uruguay, with an additional five vessels in October.

Tuticorin should receive its first bulk log ship in about three years when they receive a shipment from Uruguay. They used to regularly receive log shipments from New Zealand. Container shortages has made shipping companies quote excessively high freight rates which have made log shipments in containers untenable.

The Indian monsoon should subside in September. The log market anticipates log buyer sentiment will become more positive in October. The North Indian new accounting year starts on Diwali day, November 4th and demand should increase through to the year-end.

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Source: PF Olsen Wood Matters


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Champion Freight: Log Exports by the Numbers


Thanks to the team at Champion Freight we can see that up to and including July, monthly log exports set records for 5 of those 7 months. What will be hard to tell is how the next 5 months results fairs compared to history back to 2017 as their graph shows.

In July, log exports to China continued to float on a positive wave, in a big way, mainly with the reporting month being the biggest in history. - This week we've got our monthly update from the team at Champion Freight. For the month ended in July our log exports to China saw shipments soar by 73 percent, compared to July 2020, taking overall log exports up a solid 60 percent from the same month year. Notably, logs to Japan were up 48 percent for the month.

The chart shows total log export values to China to for the year to end of July are up a whooping 45 percent year-on-year contributing to overall log exports lifting by 39 percent across all export markets. Log exports to South Korea were up for the year by 17 percent up while volumes while logs to Japan held steady and logs to India were down 59 percent.

Source: Champion Freight






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Freight Rates: Holy Ship Captain

Ocean freight costs have soared - Demurrage costs at ports in New Zealand and China add to the high daily costs of vessels. The reduction of logs vessels from New Zealand in September will do little to ease the market as logs account for less than 10% of the total handy size trade. The Baltic Dry Index was sitting at 1200 in November and is now at 4235. High ocean freight costs are the biggest impediment to improving AWG prices through quarter 4 in New Zealand.

The Baltic Dry Index (BDI) is a composite of three sub-indices, each covering a different carrier size: Capesize (40%), Panamax (30%), and Supramax (30%). It displays an index of the daily USD hire rates across 20 ocean shipping routes. Whilst most of the NZ log trade is shipped in handy size vessels, this segment is strongly influenced by the BDI. The Singapore Bunker Price has continued to edge upward.

Source: PF Olsen Wood Matters

Graph Source: TradingEconomics.com



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Forestry: Not for the Faint-hearted

(RNZ) The forestry industry is beset by supply chain issues, port disruptions, oversupply in China, sky-high shipping rates, the Delta disaster …. and that’s before you even look at the difficulties of planting and cutting down the trees.

On top of that the industry gets a bad rap from the rural sector for being a ‘spray and walk away’ business that’s eating up valuable grazing land, for damage done to the landscape, and for contributing to a lack of employment.

So why would anyone invest in a forest? Forestry is not for the faint-hearted – but for the persistent, there are good rewards.

Click on the link below to hear an interview on RNZ's "The Detail" as Sharon Brettkelly talks to the Forest Owners Association; a small forest owner; and a forest manager and consultant who can’t believe some of the bad press the industry gets.

Allan Laurie is a forest manager. “Nobody wrote the rule book on what the net impacts across your business would be in a Covid-infested world,” he says.

“We’re all challenged. But what we experienced with the last lockdown was a resurgence in business which was quite unprecedented. People with climate change awareness are looking at forests as investments. We’re getting an awful lot of inquiries for our business right across the scale from people wanting to plant a couple of hectares of trees to people wanting to plant several hundred hectares.”

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Source: RNZ The Detail


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ANZ: From Log On to Log Off

Forestry prices in the ANZ Commodity Price Index are well off their highs. China’s housing market and construction is slowing, reducing demand for NZ logs, as the Government increasingly focuses on financial stability risk in the developer space.


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Aratu Forests branches out with ElandNZ

One of the country’s largest forestry plantation owners, Aratu Forests, has signed a 90-year agreement with eLandNZ to plant native trees on unusable land, creating permanent buffers alongside waterways.

The partnership, brokered by law firm Anderson Lloyd, plans to stop forestry waste, such as logs, from being washed into waterways by planting native trees on otherwise unusable stretches of land across 33,000 hectares of forestry plantation, mostly in the Gisborne region, forestry law specialist Dan Williams said.

About 170 ha of riparian land would be planted this year, according to the eLandNZ website. eLandNZ describes itself as a sustainable land use company, will manage the ongoing planting. The scheme has the backing of Ūawanui, the Gisborne District Council and Crown Research Institute Scion.

Williams said besides protecting waterways from slash it was also hoped that use of marginal land for planting natives would benefit Gisborne and enhance sustainability and biodiversity. Native trees would help to stabilise the plantation lands and prevent water run off that could lead to slash events like Tolaga Bay, as well as storing more carbon.

Biodiversity and sustainability were becoming an attractive selling point for both investors and lenders, and was a growing part of the law firm's business, he said. Ten to 15 years ago, Aratu might have left the unusable forestry land, Williams said. “But now, we can help our clients realise value that’s more than just economic.”

Anderson Lloyd has employed specialists in carbon trading, the Emissions Trading Scheme and climate change, because of the increased interest. Changes to the regulatory approach had led to new business opportunities for farmers, because the rising price of carbon meant farmers could plant trees or establish other carbon projects on marginal land, he said.

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Source: stuff.co.nz



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Foresters challenge WA native forests logging ban

State Government call another example of thought-bubble policy – The Western Australian (W) Government’s decision to end native forest harvesting from 2024 is deeply concerning because it has been made in the absence of public consultation and is not backed up by science or long-term thinking, says the professional association representing some 1,000 forest scientists, researchers and professional forest land managers in Australia.

Institute of Foresters of Australia and Australian Forest Growers (IFA/AFG) Vice President Dr Michelle Freeman said that while the association welcomed the Government’s commitment to plant 50 million more trees and support ongoing management to improve forest health, the singlemindedness of the decision to bring an end to native forestry was flawed.

“The IFA/AFG is concerned that professional forest scientists, researchers and managers do not appear to have been consulted to inform this decision, and also questions whether the views and aspirations of Traditional Owners have been considered,” Dr Freeman said.

“This thought-bubble policy is out of step with the rest of the world, which views well-regulated, sustainable native forest management and biodiverse plantings as the preferred source of timber, because of their positive contribution to climate change mitigation, biodiversity and forest resilience.

“Although more softwood plantations are certainly required to address current and predicted future major shortfalls in domestic timber supply, we question how Western Australia will meet their ambitious plantation aspiration.

“Especially considering there are numerous reasons why national progress so far towards meeting the Federal Government’s plan for a billion new trees has been basically nil.”

“The WA Government claims their decision was made to protect the state’s native forests, however by removing resources, a skilled workforce and equipment tasked with sustainable management of the forests, it may well do the opposite. Declaring National Parks and creating new protected areas is easy, but managing them - to maintain biodiversity, mitigate catastrophic fire and enhance resilience to climate change, pests and disease - is not.”

“It is worth noting that the Government is continuing to support the flattening of forests for mining while ignoring evidence that sustainable native forestry is actually part of the solution to addressing climate change, threatened species and fire risk.

“The IFA/AFG considers that active management, in genuine partnership with Traditional Owners, is vital to the sustainability of native forests. We advocate for ongoing investment and research into the causes of forest and species decline and the role that active and adaptive management needs to play in addressing climate change.”

Source: IFA/AFG


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Big forest road cost reductions realised

There are massive pay offs when you think outside of the box!

By adding PolyCom Stabilising Aid, TPMS cut the metal requirements by a massive 54.2% over their standard pavement design, decreasing the build costs of this 3.2km by 15.9% and saving three days of standard construction time.

Last year (May 2020), TAML Forestry of Hawera, South Taranaki approached Total Pavement Maintenance Systems Ltd (TPMS) to upgrade some forestry roads in a remote part of Taranaki, New Zealand. The task was to work with the onsite roading contractor to improve the dry strength of the clay sub-grade and save metal costs by adding PolyCom Stabilising Aid to a recently completed road lining project. The cost of getting metal to this remote site was crippling and a more cost-effective way was needed moving forward. The road was to be stabilised to a depth of 200mm.

The savings to the forestry company have been significant; 105 less truck and trailer movements, 90% less maintenance over two wet Taranaki winters and significant savings in construction.

For full details on the roading project specs and results, click here. More information can also be found here.

Source: TPMS

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NZETS evolving differently from EU

For anyone who has followed New Zealand and European carbon prices over the last couple of years, it has been easy to draw parallels between them - Both markets have experienced strong and nearly identical price gains since the beginning of 2019 on the back of policy reform. However, when looking into the stockpile volumes in the two markets, there are clear differences between them. For any NZ ETS market participants who have expectations that “where Europe goes, New Zealand will follow” the contrasts in stockpile volumes should be a cautionary tale.

Price trajectory and policy reform: a shared history
Both the NZ ETS and the EU ETS have experienced a rapid growth in prices over the last couple of years and this invites an easy comparison between these two markets. The price rises are very well aligned with each other:
• European prices have risen from $NZ42 at the start of 2019 to exceed more than $NZ100 in most recent trading – a price rise of 137%.
• New Zealand prices have risen from $NZ25 at the start of 2019 to reach $NZ60 at the end of last week – a price rise of 139%.

The strongest driver of these substantial price rallies has been policy reform in both markets. However, while policy reform is common to both markets, the focus of each reform package has been quite different. The European reform package has specifically focussed on addressing its oversupply/stockpile issues, whereas reform in New Zealand has been needed to fix a much broader range of structural issues.

European carbon market reform: a focus on oversupply ~ The most recent round of European carbon market reform was initiated in response to the oversupply of units that built up in the years following the Global Financial Crisis (GFC) of 2008/9. The EU ETS quickly became oversupplied after the GFC because the demand for units dropped sharply as economic activity fell and the supply of units into the market was rigidly fixed. European prices dropped away from their pre-GFC price peak above $NZ45 to a low of $NZ5 in early 2013. The five years of trading from the beginning of 2013 to the end of 2017 saw low and rangebound prices. Brexit wasn’t helpful either.

The solution for oversupply that European policymakers arrived at was to auction fewer units. By auctioning fewer units this would force market participants to consume units from the stockpile. The units which were withheld from the auctions would be placed in a reserve and would not be available for market participants to access.

This reduction in auction volume was carried out in two phases. As a short-term measure, auction volumes were reduced by about a third over the 2014-16 period. As a long-term measure, a mechanism was put in place to reduce auction volumes whenever the unit stockpile was larger than a pre-determined target stockpile volume. This mechanism, called the Market Stability Reserve (MSR) started operating in January 2019.

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Agrichemicals Manual Updated

The primary sector relies on agrichemical use for disease and pest free animals and crops. Pesticides, detergents and sanitisers are a critical component of New Zealand’s $48 billion agricultural sector.

The recently released and updated ‘NZS 8409:2021 Management of agrichemicals’ provides guidance for spray operators, farmers, growers and other users to manage a range of chemicals safely, responsibly and effectively. Having undergone its first review in 17 years, the widely-used Standard brings agrichemical use into the 21st century. The review has left no page unturned in offering good practice advice.

Specifically targeted for addressing New Zealand’s distinct climate, environment and legislation, the Standard helps exporters to comply with quality assurance programmes such as New Zealand Good Agricultural Practice (NZGAP) – allowing them to sell produce in overseas markets.

The Standard has been reviewed to ensure that it remains relevant for new technologies such as automated sprayers, unmanned aerial vehicles and drones. Recent regulatory changes and measures to protect the environment are also included.

A collaboration between 17 committee representatives - users, central and local government, and industry (including Agcarm) - as well as a public consultation, ensured the voice of all parties was heard. As well as conventional and organic agriculture, the Standard applies to park rangers, council workers and the Department of Conservation in managing biosecurity. Growsafe training of agrichemical users is also based on the standard.

“Much of New Zealand’s economy and environment rely on good responsible agrichemical use, and through setting and communicating clear standards we can make sure we’re all doing our part to grow New Zealand, responsibly and safely,” says Agcarm Chief Executive Mark Ross.

More>>

NZS 8409:2021 Management of agrichemicals is available on the Standards NZ website.

Source: Agcarm


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The English language - A bit of a joke

10 reasons why English is weird!

1. The bandage was wound around the wound.

2. The farm was used to produce produce.

3. The dump was so full that it had to refuse refuse.

4. We must polish the Polish furniture.

5. He could lead if he could get the lead out.

6. The soldier decided to desert his dessert in the desert.

7. Since there is no time like the present, he thought it was time to present the present.

8. A bass was painted on the head of the bass drum.

9. When shot at the dove dove into the bushes.

10. I did not object to the object.

Imagine trying to learn the language, let alone speak it ... !



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

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

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