WoodWeek 11 December 2013
Next up, looking purely at the numbers from the commodity index report from ANZ, you’ll see that log prices inched up a ¼ of a percent.
The Queensland government is embarking on another sale of forestry assets, through its power subsidiary Ergon Energy. Also in Australia the government is under pressure from the forestry industry to reverse its election promise to scrap the Tasmanian forestry peace deal. Two of the biggest and most influential players have told media sources that it has allowed them to expand and create jobs for the first time in years.
In late January FICA gets busy with a Safety Communications Workshop running on the 22nd January in Rotorua. This full-day event is led by Werner Naef, who spoke at the ForestTECH 2013 conference in the Safety Summit. FICA members receive a 50% subsidy to send their staff. The workshop is best suited to managers and supervisors or crew leaders. Anyone who is managing operational people will find that this workshop gives them a whole new set of tools. We have it on good authority that entire workplaces have been transformed from managers attending this workshop. Now is the time to step up and take the challenge that this workshop offers.
This week’s forest safety alert is specifically for owners of Madill 171 or 172 yarder towers. We have a reminder for inspections, which should be carried out if your machine is going into the workshop soon. FICA is also planning a workshop for yarder tower inspectors in the first half of 2014.
If you're after more of a global view, we've got an update on the global forest industry this quarter courtesy of Wood Resources International. And finally – just before the jokes section today - we have a news update from the government clarifying what units will be permitted in the Emissions Trading Scheme (ETS) from 2015 - which does nothing to stimulate action to reduce the nation’s net greenhouse gas emissions.
So, it's ALMOST time for you to get that Christmas tree up and finish your TO-DO list – BUT we do have one more week of WoodWeek before you put the jandals on and head for the beach. Catch you again next week!
This week we have for you:
TPT Forests Export Market ReportOctober was another strong month across the Pacrim log markets. Supply of softwood logs reached 3.175 million m3 for the month which was the 3rd highest on recent record and considerably above the year to date average of 2.910 M m3. On a total roundwood equivalent basis, October’s total is 5.596 million m3, once again considerably above the 5.130 M m3 average achieved so far in 2013. October was the 2nd highest RWE level over the last 5 years assisted by 740,000 m3 of Canadian lumber into China.
Within the China market CNF prices have seen further strengthening in November and into early December. Relatively low in-market inventory levels and recent strong sales place suppliers in a favourable position going into the Asian winter/holiday season, however some ports across northern regions are showing the first signs of a slowing in sales with adjacent ports expected to follow suit as the year closes. China’s southern markets are not impacted by the severe winter conditions seen further North with demand currently very strong and prospects for increased supply in these southern regions looking positive for 2014 and beyond.
A recent sharp upturn in US domestic log/lumber prices reflects optimism around prospects for housing starts which are expected to reach around 1 million on average next year - up slightly on the 900-950 k level likely to be attained in 2013. Also a factor in current price strengthening are the seasonal buying patterns of PNW mills, which increase log inventory levels to cover for reduced winter harvesting. Buyers are in general becoming increasingly comfortable that the recent lifts in housing starts will be sustainable going into next year.
The impact of the recent strengthening in the US market, specifically the latest round of domestic log price increases and how this impacts PNW log export volumes & associated price levels has not yet had a major impact across export log markets. With Radiata exports running at record high levels (>1.6 million m3 total ex NZ & 1.2million jas to China in October), there is no perceived risk of a total undersupply in the short-term. However if PNW export volumes reduce month on month, aggregate inventory levels could quickly reduce further from their already low levels in relation to monthly sales. Even with the China market functioning well at current inventory levels, anything less than the equivalent of one month’s sales volume in softwood log inventory would be expected to stimulate demand and prices across the range of species and supply points.
Australia exported 250,000 m3 in October which is slightly up on the current year to date average. Supply from the main ports across Australia is expected to remain steady at these levels for the next 6 months. However the next few months are likely to push NZ production higher again. With vessel congestion in the main North Island ports it appears is if NZ infrastructure is now showing signs of creating major bottlenecks. While it will be possible to increase berthing capacity in the medium term, there are short-term infrastructure limitations which will prevent exported volumes increasing significantly. YTD 82.9% of NZ’s logs have come from the North Island, and 69.1% has come from the 3 top producing ports of Marsden Point, Gisborne and Tauranga.
In summary, in-market inventory levels are considerably below monthly sales ratios which we have seen over the last 3 Chinese New Year holiday periods so it is fair to assume that the market will again move through this period largely unscathed. The recent lift in US log/lumber prices should assist the market in the short-term as traders in those regions compete with domestic buyers for logs which in turn will promote increased price offerings in Asia for these logs. Even if this market move is short lived, it will stimulate prices/sentiment over the next 3-4 months.
While the export markets are expected to slow down during the remainder of 2013 in volume terms, this is seasonally normal and underlying demand volumes appear to be robust going into the back of Q1’14 and Q2’14.
There have been no significant changes in the Korean log market over the last month. The primarily manufacturing focussed country has continued to maintain strong exports in both volumes and dollar terms. October import arrivals of Radiata into Korea were ~230,000 m3, but arrivals of PNW logs were extremely low, at ~50,000 m3. Recent price increases are in line with movements seen in China.
In Japan it’s been a quiet month with no significant movement in market conditions or customer confidence, however housing starts continue to improve and are tracking ~19% up on the same period in 2012.
No silver bullets have appeared over the month for the Indian economy. India is one of the only regions in the world to have the dilemma of high inflation and low growth, and the log market is suffering accordingly. Inventory of NZ logs market is low at 2-3 weeks sales volume, with China’s extended strong run encouraging suppliers to take volume away from India. Inventory at this level would normally see buyers in a fluster but a lack of cash, and very limited demand has allowed inventory levels to deplete. Lumber prices in India are softening slightly which is against the trend compared with other markets which are all on a domestic uptrend. With lacklustre domestic demand creating significant surplus manufacturing capacity primarily in the sawmilling sector, it is not likely to improve in the short term.
In the shipping world a recent surge in the global freight markets has enabled owners to secure and maintain rate increases. However with Christmas holidays looming in the western world and with Chinese New Year being early in 2014 (31st January), some owners are starting to book vessels 6 to 8 weeks forward to lock in current levels prior to the expected decline in activity.
Source: TPT Forests
ANZ Commodity Price IndexThe ANZ Commodity Price Index eased 0.4 percent in November, the first decline in the index in five months. The decline was relatively minor, leaving the overall level of the index above the point it had reached two months earlier, The latest data point is 2.0 percent below the all-time high for the series, which was achieved back in April this year.
International prices for seven commodities increased in November, prices for six of our major commodities fell, while prices for three commodities were unchanged.
The price of aluminium recorded the largest fall across the commodity basket in November, falling 4 percent and dropping to a four-year low. Whole milk powder prices eased 3 percent, the international price of butter declined 2 percent, kiwifruit prices softened 1 percent, and lumber and casein prices both eased half a percent.
The price of pelts lifted 5 percent in November, to touch a sixteen-year high. This was followed by a 3 percent lift in the price of skim milk powder and a 2 percent lift in cheese prices. Lamb, beef and wool prices all increased 1½ percent, while log prices inched up a ¼ of a percent. Seafood, wood pulp and apple prices were unchanged in November.
In November, the value of the NZ dollar weakened against the United States dollar and Great British pound, but strengthened to a six-year high against the Australian dollar, and firmed to 6-month highs against the Japanese yen and European euro. The overall impact resulted in a 0.4 percent lift in the ANZ NZD Commodity Price Index. The index is 2.0 percent below the recent peak in August, and 6.9 percent below its all-time high in March 2011.
More Queensland forest assets to go on marketThe Queensland government is embarking on another sale of forestry assets, through its power subsidiary Ergon Energy, as global groups remain in talks over a potential purchase of the Gunns business, estimated to be worth at least AU$400 million reports The Australian. Ergon will place 3,700ha of hardwood forests on the market in January, with real estate firm CBRE tipped to be the adviser, in a deal that could reap the state-owned enterprise as much as AU$20m.
Ergon Energy confirmed the sale, which will follow the state government's sell-off of Forestry Plantations Queensland during 2010 for AU$603m through investment bank Rothschild. The power supplier's network has nearly one million poles, of which about 92 per cent are hardwood, which would need to be replaced over the next decade, and was the reason it invested in hardwood forestry plantations.
Market sources say Ergon's forestry assets may appeal to the unsuccessful bidders of the collapsed Gunns forestry business that is currently on the market through insolvency firm KordaMentha and investment bank Moelis. A move to sell about 220 properties previously controlled by Forest Enterprises Australia was announced also this week and real estate firm CBRE is also offloading a separate portfolio of Gunns properties worth about $50m, with the 94 properties being offloaded on behalf of McGrathNicol.
Forest asset investments will be the subject of the upcoming Forest Industry Engineering Association conference entitled "Forest Investment and Market Outlook 2014". This two-day conference will feature 3 international forest investment specialists. See story below for full details of the keynote speakers. Full conference information and registration details can be found at www.fimo2014.com.
Source: Various including The Australian
Safety Communications WorkshopFICA is pleased to announce the third of a series of workshops on SAFETY COMMUNICATIONS.
This workshop is led by communications expert Werner Naef of Kahler Communications. His presentation at the PF Olsen Safe-Start-Up meeting in Rotorua in January showed the importance of identifying communications styles for crew foreman and anyone leading staff in safety-critical workplaces.
Werner was also a high-rated speaker at the recent ForestTECH Safety Summit.
The Forest Industry Contractors Association invites contractors, forest managers, supervisors and sawmillers to register for this workshop - running in Nelson on 25 June. Registrations are strictly limited to 35 delegates per session.
When: 22nd January 2014, 9am - 4pm
Where: Distinction Hotel, Rotorua
Cost: $800 + GST ($400 + GST for FICA members)
To register contact Christa Otter at FICA on 07 921 1382 or email email@example.com.
Please note: An important part of the workshop involves registrants completing an online questionnaire before the workshop day. The completion of this questionnaire is essential to your attendance at this workshop as customises the course to your specific communication style.
Industry urges Abbott government to honour dealThe Abbott Government is under pressure from the forestry industry to reverse its election promise to scrap the Tasmanian forestry peace deal. Two of the biggest and most influential players have told 7.30 it has allowed them to expand and create jobs for the first time in years.
The deal, known as the Tasmanian Forests Agreement, was signed in late 2012 and is an attempt to end decades of division and conflict between loggers and environmentalists that crippled the industry. In return for protecting half-a-million hectares of forest, some green groups agreed to end all protests and support the forestry industry.
Neville Smith Timbers makes timber flooring and is one of the major beneficiaries of the deal. In a complete turnaround it is struggling to keep up with demand, with orders twice that of production levels.
"The Tasmanian Forestry Agreement really has allowed us to re-think what we're doing within our businesses and engender confidence with our customers," executive chairman James Neville Smith said.
"I'm an eternal optimist and have no doubt that where we're heading there's a bright future."
That positive outlook is shared by the Malaysian-owned veneer manufacturer Ta Ann.
"The Tasmanian Forestry Agreement really has allowed us to re-think what we're doing within our businesses and engender confidence with our customers," James Neville Smith, Neville Smith Timbers said.
Without the peace deal the company would have left Tasmania because it was losing customers as a result of pressure exerted by environmentalists.
"I don't think we'd be operating the business, frankly," executive director Evan Rolley said. "The Forest Agreement provided the basis on which we could go back in the market, hold the small amount of market that was still there for us.
"As conditions are improving, it will take two to three years to build again to be in a strong financial position."
The company received $26 million in compensation in return for forfeiting 40 per cent of its wood supply. Now its former Japanese customers have started to talk to them again and Ta Ann is building a new plywood mill and will begin employing staff early next year.
"It's better to have 60 per cent of a volume that you can sell product in market than to have a 100 per cent and not be able to sell that product," Mr Rolley said. "So a judgement, a business judgement essentially, is made that that reduction and the compensation to offset the impact was a way forward."
To read the full story click here
Source: APC Online
Do you own a Madill 171 or 172? - Read onPlease note: This article is intended solely for people who own, operate, repair or certify Madill 171/172 yarder towers.
Last year FICA issued a general safety alert for these machines regarding the upper tower section.
As a general reminder - with this being the season these units are taken to service centres for an annual checkover - please read the below linked safety alert/reminder document and take action as you see fit.
Click here to view the safety alert/reminder.
The Global Forest Industry this QuarterThe Global Sawlog Price Index (GSPI) dropped 0.6 % in the 3Q/13. The Softwood Wood Fiber Price Index (SFPI) edged up to $97.94/odmt in the 3Q/13. This was $0.19/odmt higher than in the previous quarter but $2.11/odmt below 3Q/12 price.
The Hardwood Wood Fiber Price Index (HFPI) fell for the fourth consecutive quarter to $98.15/odmt in the 3Q/13. This was down 2.3 percent from the previous quarter and the lowest level since the 2Q/09.
Demand for market pulp has picked up in all regions of the world with the biggest increases in Eastern Europe, Japan and North America. Higher lumber consumption in the US has resulted in both increased domestic production and a rise in importation of lumber in 2013.
Lumber prices in both the US and Canada have started to recover the past three months after the dramatic decline earlier in the spring. Softwood lumber imports to China and Japan have been 20% higher this year than last year, with the biggest increases in shipments from Europe.
Pellet export volumes from North America to Europe has continued to rise for the past seven quarters.
Excerpts from the 3Q 2013 issue of the Wood Resource Quarterly (www.woodprices.com). To read the full news update click here.
Source: Wood Resources International
Government ETS move a lost opportunityThe government has clarified what units will be permitted in the Emissions Trading Scheme (ETS) from 2015, but this does nothing to stimulate action to reduce the nation’s net greenhouse gas emissions, says the Forest Owners Association.
“In making the announcement on Friday, acting climate change minister Simon Bridges said he wanted to bring certainty to participants in the ETS. But overhanging the market is the ability of the government to auction NZUs to stimulate supply,” says association vice-president Peter Clark.
“Since the government has given no indication of the NZU price at which auctioning would be used, both emitters and foresters have been left uncertain and unwilling to take action. This is deeply concerning for anyone who understands the economic and environmental potential of forestry. Without a meaningful carbon price, new planting will remain at extremely low levels and deforestation on land with dairying potential will continue apace.”
Mr Clark says participants will be able to continue to use dodgy cheap international credits to meet their emissions obligations until June 2015 when NZ units will be the only ones permitted, with supply controlled by auctioning.
“Ever since this government took office forest owners have been asking for a government commitment to a carbon floor price to match the current ceiling price and for the removal of the one-for-two taxpayer subsidy for emitters. We and other participants need to know that the government is committed to carbon prices being in a band that provides us with an incentive to invest in carbon reduction.”
Less than a month ago iwi leaders met with the prime minister to ask for the ETS to be strengthened. They asked for a carbon price mechanism that better balances the interests of emitters with those who have the ability to invest in measures to reduce emissions. The Forest Owners Association wrote to the prime minister in support of the iwi submissions.
“We said a higher carbon price will lead to increased forest planting. This would give greater security of supply to domestic processors, increase primary sector diversification and resilience to adverse economic and environment events,” says Mr Clark.
“Given that the maximum price has already been passed on to consumers by power companies and fuel suppliers, a meaningful floor price is unlikely to have a significant impact on costs to household consumers.”
He says a higher carbon price is not a subsidy for forest owners, because any credits they earn are met with an equal liability at harvest. Also, income from carbon would help offset the risks which deter farmers and others from investing in forestry. “Forestry is a more profitable land use and contributes more to the economy than hill country sheep and cattle farming, but in the current economic and regulatory climate no-one is willing to commit to an investment where you have to wait 30 or more years before you get a return. A clear indication of the band in which the government would permit NZUs to trade in via auction would provide the certainty that all participants need to base investment decisions on.”
Source: NZ Forest Owners Association
Tenon searches for share price solutionsNZX-listed high value timber products exporter Tenon is to explore ways of enticing US investors to back the stock as the American housing market starts to lift the company’s earnings after a seven year slog through the sub-prime mortgage and global financial crises.
Chairman Luke Moriarty told shareholders at the company’s annual meeting in Auckland the company would also start a capital return programme for shareholders in the latter half of 2014 and would seek to improve liquidity in the short term by offering small shareholders a chance either to top up or quit their Tenon holdings.
Shareholders with fewer than 2000 shares will be offered a brokerage-free opportunity to take their holdings to that level, while holders of fewer than 500 shares will be given the chance to quit their holdings without incurring broking fees.
He also forecast operating earnings for the first half of the current financial year “should equal that which we reported for the entire 12 months of our previous financial year.” Earnings before interest, tax, depreciation and amortisation in the year to June 30 came in at US$5 million, from a US$3 million EBITDA basis loss the previous year. However, it still made a net loss of US$3 million in the last year, and Moriarty gave no guidance on the likely half-year out-turn on a net basis.
Nonetheless, he attributed a doubling in the Tenon share price in the last year to “the positive impetus of a recovering US housing market.” “The company still believes its current share price of NZ$1.30 to be well below fair value, based on comparable company equity market trading multiples, which imply a Tenon trading price well in excess of NS$2 a share and the positive earnings outlook made today,” Moriarty said in a statement.
The Tenon share price jumped 8.5 percent to $1.41 in the first half hour of trading on the NZX.
Moriarty said the share price performance was partly because three shareholders hold 80 percent of the Tenon register, creating a relatively illiquid stock, and because New Zealand investors had little information on the company’s key US market, where 90 percent of its revenue is derived.
“In 2014, we will be looking closely at increasing the company’s equity exposure to the US where news flow on our sector is much greater, where comparable company multiples are more favourable, and where we should be able to generate new interest in the stock as a result.
“There are many ways this can be achieved,” said Moriarty. “While a dual NZ-US listing is one obvious part that we will be looking at closely, we will also be undertaking a complete company review as to how Tenon can best position itself to create value for shareholders as the current US cyclical recovery progresses. Enhancing share price momentum is top of our minds.”
The company makes a range of indoor and outdoor wood products and mouldings, which it sells through major US home renovation and building outlets, including Lowes and Home Depot.
Source: BusinessDesk via Scoop News
Delay like in Super-Cycle for LumberNorth American and global softwood lumber markets are forecast to continue expanding in 2014, but at a slower rate than was previously forecast, according to the report WOOD MARKETS 2014 - The Solid Wood Products Outlook: 2014 to 2018 that was released last week by International WOOD MARKETS Group. The rapid expansion of North American lumber demand and an imbalanced supply chain that occurred in the second half of 2012 and first quarter of 2013 became more balanced (but still somewhat volatile) for the remainder of 2013, allowing supply to catch up and prices to moderate (but still at favourable levels). With the uncertainty surrounding the U.S. government shutdown in October, and the potential of a second shutdown in January 2014, the U.S. economic recovery continues to be more of a wildcard. A lumber market "super-cycle", in which demand overwhelms supply and prices soar, is still expected; but is now projected for later in the forecast.
Nevertheless, tightening supply side dynamics in North America still dominate the five-year outlook. "Recent announcements of mountain pine beetle-related mill closures in the B.C. Interior and North American companies' continued export expansions into Asia have shone a spotlight on the dynamics of the evolving business environment for wood producers," explained Russell Taylor, President. "Over the next few years, the timber supply base will continue to tighten across North America and will continue to do so until the end of the decade."
While the demand for lumber and panels from the U.S. housing industry is steadily increasing, lumber and panel producers in 2013 increased output at a slightly higher rate than overall demand, causing prices to retreat for three months starting in 2013/Q2 and later at the end of the year. "Although the lumber and panel industries have room to expand output over the next two years," said Taylor, "by about 2016, steadily rising demand (led by U.S. housing starts) is expected to absorb all of the available output, leading to supply chain shocks that should create substantial and sustained price increases, including record-level lumber prices." There will continue to be price volatility as more limited and higher cost capacity is added and/or more expensive imports increase in 2016 and beyond.
Published since 1996, the five-year forecast in WOOD MARKETS 2014 explores the evolving recovery of U.S. and Canadian lumber and wood panel markets. Trends assessed in the report include:
The peak of recoverable timber from the B.C. mountain pine beetle epidemic has now passed, and more BC Interior sawmills are forecast to close due to the uneconomic log supply from 10- year and older dead timber.
China's housing market has bubbled past the government's attempts to rein it in and demand continues for higher imports of softwood logs and lumber - but not necessarily from North America.
Japan's pending consumption tax has sparked a mini-boom that raised lumber imports in 2013, but this trend should shift lower in 2014 as the tax comes into effect. Russia's sawlog exports continue to decline despite the late-2012 reductions in the log export tax; however, lumber exports to China continue to increase.
Eastern Canadian sawmills are reopening, but production will not return anywhere close to its pre-recession levels due to significant timber harvest reductions in Ontario and especially Quebec.
The U.S. South is forecast to grow its market share and influence as the only North American region with the potential to increase its timber supply and wood products output. The European market is forecast to recover slowly, but lumber exports are expected to increase, showing up in many export markets, and eventually in the U.S. market at possibly record level volumes towards the end of the five-year forecast.
Five-year forecasts of OSB and plywood also see a prolonged period of growth, but without the sustained price increases eventually forecast for lumber. Market volatility will continue, especially for OSB as a dozen previously curtailed mills gradually re-enter the market - this sequence of restarts will have more impact on prices than demand.
For the MDF and particleboard sector, volume and price growth will also occur, but more slowly and evenly than for structural panels - as has been the general trend since 2010. The North American wood pellet sector is expected to grow rapidly over the five-year forecast period (especially in the USA South) and will provide new challenges to composite panel producers as it competes for existing raw materials.
The "super-cycle thesis" requires strong and growing demand in the USA market as well as stable to increasing demand in other key global markets, especially in Asia. A slowing U.S. recovery in 2013 (mainly from subdued housing starts) has pushed the expected peak out later as compared to previous forecasts. With multiple demand risks such as: further USA government shutdown(s) and/or default; a housing bubble collapse in China; the collapse of the euro currency; or other potential macro events; there is still the possibility that any super-cycle could potentially stall or be further delayed. In any event, the prospects of a tightening of the global timber and lumber supply are a reality and are expected to play out over the next five years in one way or the other!
Full details of the five-year outlook for the USA and Canada's lumber and panels consumption, imports, exports, production and price trends are available in Wood Markets 2013 - The Solid Wood Products Outlook - 2014 to 2018. Visit www.woodmarkets.com
Bank error in your favour - in real life!In the board game Monopoly you can draw a card stating "Bank error in your favour". Okay, it's just a game for rainy days. Read on for the real life version and decide for yourself if this guy in Napier made a GOOD call... or a BAD call. Ford fans need not read any further - you won't appreciate what this guy did with the money!
Denys Jeremy Douglas, 61, from Hastings, pleaded guilty to seven charges of using a document and three charges of money laundering when he appeared in the Napier District Court yesterday, Fairfax reported.
A summary of facts said the BNZ bank had agreed to loan Douglas $7000 for home maintenance, which would have taken his mortgage to $172, 250.
However, the bank accidentally credited his account for the amount.
Within a month, Douglas had withdrawn the money and bought three Holden vehicles, which he registered in other people's names.
He told the bank he had won the money in a lottery and claimed it was "normal" to make $50,000 withdrawals, Fairfax reported.
It was not until his mortgage repayments went into arrears that the bank realised its mistake.
Douglas was remanded on bail until his sentencing later this month. In a statement to APNZ, a BNZ spokeswoman said Douglas used funds that were incorrectly allocated to his account due to a "keying error". When BNZ contacted Mr Douglas he said he won some money from a lottery.
To read the full story click here
Buy and Sell
… and finally … pub funnies
A rough looking guy who goes into a bar and orders a drink. The bartender says: "No way. I
don't think you can pay for it."
That's all for our mid-week wood news roundup.
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