WoodWeek – 27 October 2021

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Greetings from your WoodWeek news team. The question for October is: “Have shipping costs peaked?”. Regardless of the answer, exporters in Australia marked the index peak earlier this month quite accurately as ‘stupid o’clock’. I couldn't have put it better myself. There has been some relief since then, but looking to the graph in our first story shows the index is still well above the five year average for the Baltic Dry Index.

Staying with the ‘dark clouds of October’ theme, prospects for the export log market in China seem to be no sunnier with the latest news on market nemesis, Evergrande and other debt laden developers teetering on the edge. News from Reuters this week speaks to the debt market beyond Evergrande saying, “A deepening liquidity crisis, however, continued to reverberate across China's property sector, with more default announcements, and many companies saw their bonds slip again on Thursday after they had rallied last week.”

Moving to more cheerful news locally, this month marked a major milestone in the Riparian native restoration project at Aratu Forest in Tairāwhiti with the first trees going in the ground. The project aims to plant millions of permanent native trees throughout the working forest estate over the coming years. Throughout the year Aratu and eLandNZ will work together to identify new areas within the forest that will be returned to their natural state through the process of intensive native planting.

Aratu Forests’ Chief Executive, Neil Woods, says: “With the full support of our shareholders and board, we are investing in this initiative because it is the right thing to do, and stands to deliver long-term benefits for the environment, the community and our company”.

Over to the ‘good news on one hand/bad news on the other’ front, we have more forestry v farming insights from Keith Woodford. This week he muses on rising carbon price tilting the playing field further: “For those who are farming sheep and beef there is the disconcerting reality, but also in some cases exciting reality, that carbon farming is now the most profitable land use. When I started writing this series on carbon farming back in July of this year, I used a carbon price of $48 per tonne, but right now it is sitting at $65. I have been rerunning some spreadsheets in recent days and inevitably the economics of carbon farming now look even stronger.”





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Shipping Costs 'Stupid'

(IndustryEdge, Australia 10 Oct, 2021): Shipping costs hit ‘stupid o’clock’ - Bulk and commodity trade and vessel movements are embroiled in further turmoil in early October, with day rates for vessel leases spiking so dramatically, a commodity trader told us, “Its stupid o’clock out there. You can get a vessel, but you’ll pay through the nose, and rates are increasing by the hour some days.”

The trader provided the comments to IndustryEdge during a client call, as discussions centred around changes in the make-up of Australia’s log exports and the obvious challenges in accessing shipping containers.

Defying expectations, the trader switched from their interest in containerized log exports (detailed later in this item) to raise bulk shipping as the new concern they were weathering.

To put these comments into their proper context, by the 8th October, the main bulk commodity shipping index had lifted 53% compared to the prior month. The Baltic Dry Index (BDI) – as the chart later in this briefing shows – skyrocketing almost 1,700 points to 5,526 points.

While true that the BDI is a perpetually volatile index, the stellar rises are adding to the turmoil in global shipping and freight markets right now.

Whether it is raw materials to feed industrial production, availability of containers, throughput capacity and logistics at ports, or shortages of truck drivers, the current situation is disastrously complex. For those at the furthest ends of the global shipping and freight system – Australia and New Zealand among them – the impact on national economic activity is becoming all the more serious as time passes.

The global turmoil appears to be an ever-compounding series of inter-related events, where the magnitude of the challenges increases with every response to the previous conditions more divergent than the last. In some respects, this is a classic feedback loop, but in other regards, the evidence is more akin to chaos theory.

More>>

Graph: Baltic Dry Index Credit: TradingEconomics.com

Source: IndustryEdge


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China: Bond Exemption Breather for Evergrande

China Evergrande secures bond extension as property sector turmoil deepens- Oct 21 (Reuters) - China Evergrande Group (3333.HK) has secured more time to pay a defaulted bond, financial provider REDD reported on Thursday, offering rare respite to the developer even as a debt crisis in the broader property sector deepened with more defaults.

News of the three month-plus extension came a day after Evergrande scrapped a deal to sell a 50.1% stake, worth $2.6 billion, in a property services unit that could have eased some immediate pressure on the firm.

Evergrande was once China's top-selling developer but is now reeling under more than $300 billion of debt, prompting government officials to seek to reassure markets that the firm's problems won't spin out of control.

A deepening liquidity crisis, however, continued to reverberate across China's property sector, with more default announcements, and many companies saw their bonds slip again on Thursday after they had rallied last week.

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Source: Reuters



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New Chair of the Eastland Wood Council

Forestry manager Ian Brown, with 40 years experience in the industry, has been appointed the new chair of the Eastland Wood Council. His appointment was ratified by the EWC members earlier this month after the council's annual meeting.

He replaces outgoing chair Daniel Williams who stepped down after three years in the role. Mr Brown, who operates Woodhill Consulting Ltd, has managed forests in three countries in a variety of senior roles with both large and small organisations.

He has a BSc forestry degree from Stellenbosch University, South Africa, and while in that country he worked in harvesting, transport, marketing, forest management and commercial forest development before deciding to emigrate to New Zealand in 1996.

In New Zealand he continued his career with senior roles in harvesting, transport, and supply chain management for Fletcher Challenge Forests, and later managed K&S Freighters' New Zealand operations for a number of years before moving to Sydney in 2009 to take up the softwood division general manager role with Forestry Corporation of NSW.

“Ian is a tremendous asset to EWC, because he brings with him many years of experience in leadership, with all aspects of production forestry and considerable knowledge of the supply chain,” said EWC chief executive Philip Hope.

“Also, he has a personal commitment to kaitiakitanga of our whenua and the health and safety of our workforce.”

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Aratu + ElandNZ: Boots on the Ground

Riparian Restoration Begins - This month marked a major milestone in the Riparian native restoration project at Aratu Forest in Tairāwhiti with the first trees going in the ground. The project aims to plant millions of permanent native trees throughout the working forest estate over the coming years.

Aratu Forests’ Chief Executive, Neil Woods, says: “With the full support of our Shareholders and Board, we are investing in this initiative because it is the right thing to do, and stands to deliver long-term benefits for the environment, the community and our company”.

Throughout the year Aratu and eLandNZ will work together to identify new areas within the forest that will be returned to their natural state through the process of intensive native planting.

In addition to increasing biodiversity within the forest, the native planting will also help protect waterways from slash, silt and debris that may result from future harvesting of the adjacent plantation forest.

This year’s planting encountered a few delays caused by lockdowns and extreme bad weather. However, the sun shone bright at the start of September enabling work to proceed. A team of 30 local planters from Logic Forest Solutions met early on day one for a Karakia before heading out into their allocated planting areas. The crew continued throughout the month, completing the first 60 hectares of planting.

The planting was overseen by eLandNZ Managing Director Sheldon Drummond who was delighted with the efficiency and enthusiasm of the team. “The planters were genuinely pleased to be working on this project as they saw the long-term benefits for the local environment and felt this was a great initiative from the commercial forestry industry.” stated Drummond.

Photo: Sheldon Drummond with a mānuka seedling.

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Keith Woodford on Carbon vs Sheep & Beef

Carbon and forestry, increasingly linked to overseas investors, continue to outmuscle sheep and beef but nothing about carbon is simple – I had intended this week to move away from forestry to other topics. But once again, I have been drawn back to forestry because it is the biggest issue right now facing rural land-use.

For those who are farming sheep and beef there is the disconcerting reality, but also in some cases exciting reality, that carbon farming is now the most profitable land use.

Somewhat ironically, this changing land-use is also relevant to the dairy industry, which in combination with the other pastoral land uses is supposed by 2030 to reduce methane by 10 percent. It is looking as if much of this might now come from the decline in sheep and beef.

When I started writing this series on carbon farming back in July of this year, I used a carbon price of $48 per tonne, but right now it is sitting at $65. I have been rerunning some spreadsheets in recent days and inevitably the economics of carbon farming now look even stronger.

Given that the ETS is controlled by Government, there is no certainty as to where prices will head long term. But as I have said previously, the ETS lies at the core of New Zealand’s climate policy, and the ETS cannot achieve its goals unless the carbon price climbs considerably higher. The Climate Change Commission made that point very clearly. The only alternative is for the Government to ditch the ETS in its present form and shift to tax and command systems.

More (on wrestling with forestry decisions)>>



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Will Trade Deal lift S&B Returns to Match Carbon?

(BusinessDesk) The lucrative threat to rural communities – Carbon farming may be lucrative, but it creates a “great big mess that someone else has to clean up”, says farmer Kerry Worsnop.

“The policy framework has been designed so that as the carbon price goes up, hands down, without any competition at all, carbon becomes the most profitable option,” said Worsnop, who has a sheep and beef farm near Gisborne adding, “We’ve reached that point with sheep and beef. Actually, we’ve gone past that point with sheep and beef, and it's closing in now on dairy.”

What is the issue? There is a difference between pure carbon farming and forestry and also farmers opting to turn some of their land into forest – either native or exotic.

Plant and walk away – According to critics, carbon farmers essentially buy up pastoral land, plant the trees and walk away. They say there is no job creation beyond the initial planting, no lumber, and a whole raft of potential problems around fire hazards, biosecurity and pests.

The land-use change is permanent and there is growing concern that carbon farming can also spell a death knell for rural communities as a raft of infrastructure from schools to meat plants may no longer be necessary. But there is money to be made.

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CentrePort enjoys Log Boom Benefits

CentrePort has recorded a positive financial result despite ongoing COVID-19 related impacts and incurring residual 2016 earthquake-related costs, Chairman Lachie Johnstone announced. CentrePort recorded an underlying net profit after tax (NPAT) of $7.2m (before Kaikoura earthquake-related items, Changes in Fair Value, Abnormal Items and the tax impact of these items) compared to $14.7 million in FY20.

Operating revenue of $80.2m compared with $84.9 million the previous year reflected the absence of Cruise due to the ongoing COVID-related ban on international cruise ship visits. These visits are not anticipated to resume in FY22.

“Over 1.8m JAS of logs exported. This was the highest in CentrePort’s history and a 21 percent increase on the previous year. The 194,000 JAS exported in June was the largest volume for a single month.”

Vehicles was another area of strong growth, up 21 percent on FY20, with more than 24,000 units processed through the port. Mr Nind said despite the global logistics supply chain disruptions CentrePort maintained container volume levels.

“CentrePort worked closely with importers/exporters and shipping lines to minimise disruption for customers,” he said. CentrePort’s regeneration continued to gather pace with a range of major initiatives achieved and/or underway. Good progress was made on the $38.6 million Thorndon Container Wharf reinstatement project, which will increase the operational length of the gantry cranes from 126 metres to 261 metres. The project is due for completion in early 2022.


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The Net Zero Readiness Index

NZ Primary Sector Best Performer In Global Emissions Survey – The New Zealand agriculture, land use and forestry sector has been ranked No 1 of 32 nations for the way it is getting to grips with climate change issues. "With environmental NGOs and commentators regularly pointing the finger of blame at our farmers it’s pleasing to see an independent and in-depth assessment tell a very different story," Federated Farmers President Andrew Hoggard said. For its just-published Net Zero Readiness Index (NZRI), global consultancy KPMG examined 103 indicators of commitment and performance on decarbonizing in 32 countries, which together are responsible for around three-quarters of global emissions. It ranked our overall national performance at No 9, with Norway, the UK and Sweden taking out the top three places.

But on the agriculture, land use and forestry league table, New Zealand was at No 1, with the report’s authors noting our high levels of forest biomass, low levels of food loss, a comparatively high number of agricultural clean tech companies and the He Waka Eke Noa government and food and fibre sector climate action partnership. Other comments in the report on the global agricultural scene also resonated with Federated Farmers, Andrew said.

"Unlike so many other studies and commentaries, KPMG recognises that feeding the world has to be balanced with emissions reductions. And particularly pertinent to New Zealand, the Net Zero Readiness Index report says gene editing could allow significant progress for food producers in the drive to limit global warming, ‘but many governments are opposed’… with their views ‘often based on older and less sophisticated genetic modification technologies’."

The report noted that reducing methane is a big issue for New Zealand, given livestock agriculture makes up a large share of our economy. Andrew said the technologies KPMG identified, such as low-emission feeds, future breeding programs and methane vaccines, will be key for our farmers, who already boast the lowest emissions in the world per kilogram of meat and milk produced.

While New Zealand ranked No 1 for agriculture, land use and forestry in the NZRI’s sector analysis on decarbonization action and preparedness, we didn’t do so well for the four other sectors. For electricity and heat we ranked 6th of 32; for transport we were 30th; for buildings 19th, and for industry 15th.

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Almost finally ... Wooden this be cool?

Who would have thought!!! The plastic card of the future in wood! Yes please!

A Swiss company has developed a wood material that is said to be up to four times harder than in its raw state and which is presented as an environmentally friendly alternative for "plastic cards".

Wood can replace plastic in "plastic cards". In a few years, it may become obvious to say "Wooden card".

Swiss Wood Cards are made of European wood (maple, cherry, oak or spruce) from certified sustainable forestry and have the same properties as a plastic credit card.

A wooden credit card offers a biodegradable and carbon-saving alternative to the global card industry, which has an estimated volume of 37 billion cards annually, says Dr Sascha Peters , founder of Berlin-based Haute innovation and participant as an innovation expert at Subcontractor InnoDex under Elmia Subcontractor November.

Through a patented thermomechanical treatment, the company Swiss Wood Solution has developed several unique materials in wood, including Sonowood for musical instruments, Bijouwood and Sensoveneer, which is an extremely thin and durable veneer.

Source: FWPA

Photo credit: Elmia. By Nils Lindstrand

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Jobs



Buy and Sell



... and finally ... some Wednesday funnies

Scientists have discovered trees have a way of communicating with other trees......it’s called "Whats Sap!"

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On my last online learning assignment, my English teacher accused me of plagerism.
Her words, not mine.

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Only in our crazy western world ... do we leave cars worth thousands of dollars in the driveway,
and put our useless junk in the garage.

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"Circulation of newspapers in the US has fallen to all-time lows. They say newspapers are becoming obsolete. I'll tell you how bad it's gotten. Today I saw a homeless guy sleeping on a park bench with an iPad on his face." - Jay Leno

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I went busking with a pencil and a sketchpad the other day.
Didn't earn any money, but I did manage to draw a crowd.

I've just been diagnosed as being colour blind by my doctor.
I can't believe it ... it just came right out of the green.

My art teacher told me to sketch a picture of a horse and buggy.
When I was finished, the teacher noticed my horse, but asked where the buggy was.
"Oh," I said, "the horse will draw that."

Life advice: Always borrow money from a pessimist - they don't expect it back.



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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