WoodWeek 20 October 2021
With the volume bonus for ports from log loading and shipping being dependent on proximity to forests, investment analysts have been digging deeper into the future of the lucrative log trade and what it might mean for NZ’s port companies. A recent forecast sees the total log harvest start tracking down from a peak of about over 39m cubic metres of logs in 2024-25 to about 30m cubic metres by 2030. In time, carbon forestry may negatively impact harvesting levels further.
In other, not unrelated news this week, wood processing in China is reportedly slowing with power rationing policies in effect in many provinces in order to limit activities of energy-intensive industrial enterprises. At the same time, China's September new construction starts slumped for a sixth straight month, the longest spate of monthly declines since 2015.
Uncertainty with the evolving Covid situation in New Zealand is causing safety concerns for those travelling between regions. As a result we have decided to reschedule our planned ForestTECH 2021 conference and workshops to late February. We considered the option of an all-virtual event, but instead we will run ForestTECH 2022 in Rotorua on 23-24 February 2022. All registered delegates (both live and virtual) to ForestTECH 2021 will automatically be carried through to the rescheduled event in February 2022. Our speakers and sponsors have agreed this is the best and safest decision under the current circumstances. For more information see our event website.
Meanwhile in rural regions, the Forest Owners Association is saying that foresters’ intentions to plant more trees is an immediate and practical insurance against New Zealand not achieving greenhouse gas reduction goals. While MfE previously cited landowners and forest managers’ intentions to plant more than 380,000 hectares of plantation exotics by 2035, they now estimate rising carbon prices may result in between 806,000 and 1,370,000 hectares being planted by 2050. This would be a mix of exotics and indigenous forests.
But Phil Taylor says the forest industry continues to doubt whether even the more modest level of planting will occur. New forests will occupy less than four percent of the sheep and beef estate, but it still requires 25,000 hectares of planting to be maintained year in and year out for the next 15 years.
This week we have for you:
Ports' Heavy Reliance on Logs in JeopardyNew Zealand ports, reliant on ever-increasing log exports, will start facing reduced volumes in the coming years as NZ’s forestry assets are unable to support demand out of China. Logs are significant earners for North Island ports, accounting for more than 80% of all log exports out of the country. Most are sent as raw logs on charter vessels.
Ministry for Primary Industries (MPI) data shows that more than half of NZ logs head to China. Port of Tauranga, the preferred exit point for the large central North Island forests, exported 6.3 million cubic metres of logs last year, or one in every four NZ-grown logs destined for offshore markets.
The ministry expects log exports to grow about 7% this calendar year, from 20.1m cubic metres last year to 21.5m cubic metres. That’s of the total NZ harvest of about 36m cubic metres, up almost 3m cubic metres on 2020.
Tauranga is also the dominant port for sawn timber, last year exporting more than half of total volumes of 1.7m cubic metres. Northport, Napier and Gisborne share about 40% of the market by volume. By contrast, the two largest log exporters on the South Island – Port Otago and Port Nelson – combine for about 10% of overall wood volumes.
MPI data shows Napier was at 20% with Dunedin third at 6%.
Across all wood categories, China remains the biggest market by export receipts, accounting for about $3 billion, or 53% of $5.7b in exports last year. Australia, at $517m, remains in the top two.
FOA: Slippage on Carbon ReductionsExtra Planting ‘just As Well’ Given Slippage On Carbon Reduction Targets The Forest Owners Association is saying that foresters’ intentions to plant more trees is an immediate and practical insurance against New Zealand not achieving greenhouse gas reduction goals.
The Association President, Phil Taylor, says the reaction to the Ministry for the Environment’s just released consultation document shows even the short-term greenhouse gas reduction targets are not going to be met.
“It is just as well that MfE can then cite a survey of landowners and forest managers’ intentions to plant larger areas of trees, than the 380,000 hectares of plantation exotics by 2035, which was anticipated by the Climate Change Commission at the beginning of the year.”
“MfE now estimates that the price of carbon, under the Emissions Trading Scheme, will result in between 806,000 and 1,370,000 hectares being planted, a mix of exotics and indigenous, on a longer time-scale to 2050.”
“MfE is stating in its document that ‘forestry could sequester between 18 and 32 million tonnes of CO²’ in the year 2050.
“That is a huge volume. You can see this amount in the context of New Zealand’s current total yearly gross emissions running at 82 million tonnes CO₂e,” Phil Taylor says.
But Phil Taylor says the forest industry continues to doubt whether even the more modest level of planting will occur.
“New forests will occupy less than four percent of the sheep and beef estate, but it still requires 25,000 hectares of planting to be maintained year in and year out for the next 15 years.”
“Already, nursery stock is short, and some of the planting will also be needed in the calculations for offsetting methane and nitrous oxide emissions on farm.”
He also says the MfE report is right to highlight the post-forest benefits of wood material in combating climate change.
“For instance, MfE says that just the wood residues from harvesting existing forests could replace 70 per cent of aviation fuel usage. There’s also the dairy industry rapidly converting its coal fuelled boilers over to using wood fuel.”
Phil Taylor says the report is being realistic about the cost of planting indigenous trees. MfE states that establishing a hectare of native trees could cost up to $50,000 per hectare, whereas pine tree establishment costs up to $2,500 per hectare. Native trees are also much slower at storing appreciable amounts of carbon.
“If I have one technical issue with the forestry side of the MfE report, it’s that there is some idea that planting forests over the next few years will result in increased carbon emissions.”
“That can’t be right. The soil is not cultivated. It’s not a machine process. A planter will cut a standard single slit into the ground, put that tree in, and that’s it. You wouldn’t be able to measure the amount of carbon emission which comes from that.”
East Coast Iwi critical of Carbon Farming ReportCarbon farming land will be 'losing money in 100 years' — East Coast report - A stark report on the future of carbon farming on the East Coast has concluded land planted in pine trees for carbon will be losing money in 100 years, leaving behind potentially unsellable land covered in ageing pine.
Even in the short-term, planting land in pine that’s never intended to be harvested could harm the region’s employment if it replaces forestry or farming, according to a BDO report on carbon farming in Tairāwhiti/the East Coast.
But Ngāti Porou Holdings, which owns some 25,000 hectares of forestry land in the region, says the report has gaps – and should have considered the iwi’s perspective.
Ngāti Porou Holdings chief executive Shayne Walker says it’s hard for those who don’t own land on the East Coast to understand how tough land use decisions can be on steep and difficult terrain, which is not suitable for pastoral farming.
The report by BDO Gisborne proved so controversial in Tairāwhiti that some local business leaders argued against making it public.
It concluded that, after an initial boom in carbon profits, land in left in pine trees could end up unable to cover its own rates bills. It recommended regulation of anyone planning to keep large areas of land in pines past their typical harvest age.
SnapSTAT: Unpruned Log Price Trend (ANZ)
ANZ: Commodities riding highANZ's most recent commodity price index may help explain why Finance Minister Grant Robertson was so cheerful last week as company tax came in ahead of expectation. All commodity indicators were firmly in the green as seen on the graphic in their latest report summary.
EXPORT PRICES RECOVER - In-market log prices dropped sharply in August as demand from China eased, but prices have since improved somewhat. Excessively high shipping costs now account for a substantial part of the total value of the logs.
It is not unusual for log prices to ease in the middle of the year, as China’s building activity slows during the extremely hot summer months. This year various outbreaks of the Delta variant of COVID-19 have resulted in a number of China’s ports being closed or operating below capacity, with flow-on impacts resulting in ongoing delays getting ships unloaded.
Stocks of logs on wharves in China are now reported to be high, which puts downward pressure on prices. A sharp drop in prices was recorded in August, but prior to this, prices were very elevated. Prices have now started to recover with in-market prices still about 33% higher than the 5-year average.
Source: ANZ Research AgriFocus October 2021
China: Wood Processing slows(China) Power rationing - wood processing capacity drops - Power rationing policies are in effect in many provinces in order to limit activities of energy-intensive industrial enterprises. There are two issues behind this one is that the government is trying to achieve lower energy consumption the other reason is that there is a shortage of electricity production capacity across the country.
Measures to limit electricity use in factories are currently being enforced in 10 provincial regions including the economic centres of Jiangsu, Guangdong and Zhejiang Provinces.
Many companies and factories in Guangdong province have been required to operate on a staggered schedule in which production lines are allowed to run for two to three days a week. Household power use is not limited.
Wood processing enterprises are facing challenges in terms of environmental impact assessment and the power issue will further affect processing and production will decline further.
Photo credit: PF Olsen China Trip Report
Source: ITTO TTM Report
Cash Injection For ‘Pine To Natives’ ConversionThe country’s largest ‘pine to natives’ forest conversion project has been given a $15,000 cash injection by a leading producer of radiata pine products. The initiative by Hawke’s Bay-based Forest Lifeforce Restoration Trust (FLRT) is converting the former Maungataniwha Pine Forest into 4,000 hectares of regenerating native forest and now has the financial backing of the Pan Pac Environmental Trust.
The land lies adjacent to the Maungataniwha Native Forest, a 6,120-hectare swathe of New Zealand bush straddling the ridge system between the Te Hoe and Waiau Rivers in northern Hawke’s Bay, bordered to the north by Te Urewera National Park and to the west by the Whirinaki Conservation Forest.
Eighty years ago, the land was covered in mature native forest full of mistletoe, kiwi, kokako and kaka. The mature podocarps were logged and in the 1980s some 4,000 hectares were clear-felled and burnt for the planting of pine trees.
FLRT was established in 2006 to provide direction and funding for the restoration of threatened species of native fauna and flora in forests within the Central North Island. In 2018, it took control of the fully harvested block from Matariki Forests, which had held the licence to log the pine.
The aim is to re-vegetate the area with indigenous forest. There is sufficient native species seed in the soil to enable natural regeneration but the major challenge, and cost, is the elimination of regenerating pine seedlings which crowd out the slower growing native forest species.
It takes a decade to clear logged land of wilding pines completely and to get it to the point where it can be described as fully regenerated. During this time the land is nurtured, treated and monitored by the FLRT to ensure that the species they expect to appear do so.
About a third of the area, 1,400 hectares, can now be described as clear of regenerating pines and successfully regenerated with native species.
The conversion is the FLRT’s biggest and most expensive single undertaking. It uses a mix of aerial spraying and manual clearance methods to keep the wilding pines at bay.
FLRT Chairman Simon Hall said the trust was “beyond grateful” to the Pan Pac Environmental Trust for the cash injection, which would go some way to helping to meet the costs of the project. The work had been funded equally by FLRT and the Department of Conservation between 2015 and 2018, but since then FLRT had been carrying the financial burden of about $70,000 a year on its own.
“Conservation in New Zealand is no longer the preserve of government agencies,” said Mr Hall. “The job’s too big and complex. Everyone has a role to play, ideally working together as much as they can. That’s why we’re delighted with, and very grateful for, private sector support such as that provided by the Pan Pac Environmental Trust. It’s vital to helping us get the job done.”
In addition to its native forest regeneration work, FLRT runs a restoration project aimed at boosting the wild- grown population of kākābeak (ngutukākā/Clianthus maximus), a flamboyant and extremely rare shrub; seeks to provide a secure breeding habitat for the whio (Blue Duck); and undertakes various pest control and eradication initiatives. It has also carved out a name for itself as one of the most prolific and successful kiwi conservation initiatives in the country.
About the Forest Lifeforce Restoration Trust
The Forest Lifeforce Restoration Trust was established in 2006 to provide direction and funding for the restoration of threatened species of fauna and flora, and to restore the ngahere mauri (forest lifeforce) in native forests within the Central North Island.
It runs eight main regeneration and restoration projects, involving native New Zealand flora and fauna, on three properties in the central North Island. It also owns a property in the South Island’s Fiordland National Park.
China: Construction starts plungingChina's plunging construction starts reminiscent of 2015 downturn - China's September new construction starts slumped for a sixth straight month, the longest spate of monthly declines since 2015, as cash-strapped developers put a pause on projects in the wake of tighter regulations on borrowing.
New construction starts in September fell 13.54% from a year earlier, the third month of double- digit declines, according to Reuters calculations based on January-September data released by the National Bureau of Statistics on Monday.
That marks the longest downtrend since declines in March-August 2015, the last property malaise.
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... and finally ... time for a joke and a meme
“Two years ago, if you’d asked me who my favourite epidemiologist was, I would have given you a strange look indeed.”
See you again next week.
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