WoodWeek – 18 November 2009
Good morning from Australia. Woodweek comes to you today from Albury, NSW. We have news of the "AFCA Contractors Hall of Fame" - a celebration of living legends in our industry. It's a great plan to recognise people's long-term achievements - and a good sign for the continuing heritage of the contracting industry. The first successful nominees will be inducted at a gala AFCA Contractors Hall of Fame Dinner in Coffs Harbour in June 2010.
Also this week read about the confidence which the Australian and British Columbia governments have in their forest industries, with new injections of funding for improving competitiveness and for marketing.
Finally, what's up with emissions trading/carbon pollution reduction issues on both sides of the Tasman? Well it should now be clear to both Aussie and Kiwi politicians that the world leaders' meeting in Copenhagen is unlikely to reach agreement on any firm global targets. So, the rush for our politicians to go there with 'world-leading' schemes would seem unnecessary, if not foolhardy. Leaders from China and USA are not even attending.
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This week we have for you:
Contractors' Key Indicators
Check out this weeks changes in diesel prices, exchange rates and interest rates here.
NZ CONTRACTORS' KEY INDICATORS
18th November 2009 | | Interest Rates | Diesel Price Watch |  | 90-day bill rate = 2.76% |  | Average (excl GST / all regions) = $0.97 | | Exchange Rates | | Change (month) = +4% | | NZD/USD = 0.7487 | NC | Change(quarter) = +1% | | NZD/Yen = 66.69 | NC | Change (year) = -14% | | Labour Cost Index - Forestry/Logging | Consumer Price Index | | Sep 09 quarter = 1002 | | Sep 09 quarter = 1095 | | NC | Change (quarter) =+0.2% | | Change (quarter) =+1.3% | | N/A | Change (year) = N/A* | | Change (year) = +1.7% |
*Note:The LCI has been re-expressed on a June 2009 quarter base (=1000).
AUSTRALIAN CONTRACTORS' KEY INDICATORS
18th November 2009 | | Interest Rates | Diesel Price Watch | | 90-day bill rate = 4.00% | | VIC (excl GST) = $1.05 | | Exchange Rates | NC | NSW (excl GST) = $1.05 | | AUD/USD = 0.9346 | NC | TAS (excl GST) = $1.12 | | AUD/Yen = 83.26 | NC | SA (excl GST) = $1.07 | | Wage Price Index - All Industries | Consumer Price Index | | June 09 quarter = 123.1 | | Sep 09 quarter = 168.6 | | Change (quarter) = +0.6% | | Change (quarter) =+1.0% | | Change (year) = +3.8% | | Change (year) =+1.3% |
Biofuel Levy the Last Straw for NZ Forest Owners
A NZ Government decision to make big companies pay for some of their greenhouse gas emissions when using wood pellets and other biofuels is seen as the last straw by many in the forest industry. "The rest of the developed world is desperately trying to reduce its use of fossil fuels like coal and oil. Sustainable biofuels like wood pellets are being strongly encouraged," says Forest Owners Association chief executive David Rhodes.
"In New Zealand, our government is going to make some users of sustainable biofuels measure and pay for the tiny traces of methane and nitrous oxide they emit from their boilers. Yet these make up only 0.3% of the country's energy emissions and 0.13% of its total emissions." Mr Rhodes acknowledges that the proposed 5000 tonne threshold means only a handful of very large emitters - such as the big pulp and paper mills - will have to buy carbon credits to cover these emissions, but he says the message sent by the policy comes across loud and clear.
"Forest owners see the government, on behalf of taxpayers, picking up the tab for the 1.2 million tonnes of methane generated by livestock each year. Then they hear the same government demanding payment from users of biofuels for generating relatively trivial amounts of the gas."
"The message that comes across to forest owners is that the government cannot be relied upon to develop an emissions trading scheme that is fair and rational; one that rewards good behaviour and makes polluters pay. Forestry is clearly one of the good guys of climate change. But it is little wonder that many in our sector have lost confidence in the ETS."
He says the decision to set an emission charge for biofuels follows hard on the heels of a signal from government that NZ carbon credits may not be tradable outside Australasia if the government aligns its emission trading scheme with Australia's. "If forest owners are limited to selling their credits on the Australasian market, emitting industries in Australia and New Zealand will be the only buyers. Given that our major emitters are being featherbedded for the foreseeable future, there will be little demand for the credits and their value will be well below the world carbon price."
"Since forest owners at harvest will have to repay at the full world price for the credits they earned while their trees were growing, why would they accept anything less than the full market price if they sell? Unless this changes, new forests won't get planted and forest credits won't be offered for sale."
(Source: NZ Forest Owners Association)
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Ocean Freight Index
The Baltic Supramax Index (BSI) closed yesterday at 2257 points, an increase of 19% or 357 points since last months report.
The BSI (Baltic Supramax Index), published by the Baltic Exchange, is the weighted average on 5 major time-charter routes. It is based on a 52,454 mt bulk carrier carrying commodities such as timber.
(Source: Cotzias Shipping)
Business Management of Logging - Don't Miss Out!!
Copies of “Business Management of Logging”, published by Future Forests Research and marketed by FICA, have been selling like hotcakes. The entire first print run has sold out and we have re-ordered stock already.
If you want one - you really need to order it NOW – they are available to FICA members for $50 + $10(p&h) + GST or to non-members for $100 + $10(p&h) + GST. Non-members must pay on ordering – All major credit cards are accepted.
Download an order form here.
NZ Super Fund Kaingaroa Holdings Update
In October 2006 the Guardians of New Zealand Superannuation (Guardians) announced an agreement with the Harvard Management Company to acquire a minority interest in the Kaingaroa forest. Since then the Guardians have acquired additional shares with the result that as at 30 June 2009 our interest in Kaingaroa is 40%.
The Guardians’ interest is in the tree crop rather than the underlying land, which is owned by local iwi. United States-based GMO Renewable Resources is the investment advisor for both Harvard and the Guardians, and Rotorua-based Timberlands Ltd manages the forest.
Kaingaroa is the Guardians’ largest single investment. Timber as an asset class is attractive to the Guardians due to its long-term nature and relatively low levels of volatility compared with some other asset classes. Kaingaroa is widely recognised as one of the premier softwood plantations in the world given its attractive growth rates, location to markets and port, extensive infrastructure and low cost structure. Kaingaroa is located in the Central North Island of New Zealand between Taupo and Rotorua. It covers around 178,000 hectares of planted forest, the bulk of which is Radiata Pine, with a small quantity of Douglas Fir. The estate is managed in an environmentally sustainable manner and is registered under the strict international Forest Stewardship Council (FSC) certification standard. Kaingaroa provides direct employment for several hundred people from local communities, and this will increase in the medium term as harvest levels increase from the current 1.6 million m3/year to a sustainable level of around 4 million m3/year.
In June this year the New Zealand Government announced the ‘Treelords’ settlement, which transfers ownership of a quantity of land including the majority of the land underlying the Kaingaroa forest, from the Crown to a collective representing 100,000 Maori from eight iwi. Previous settlements have occurred on the remainder of the land. To the Guardians this simply means a change of landlord for Kaingaroa from the Crown to local iwi. We have established a positive and useful dialogue with iwi representatives and are discussing with them options for replanting the land once the forest is harvested.
(Source: New Zealand Superfund Annual Report)
Government Invests in Improving Competitiveness
A3P welcomes the Australian Government’s investment in six forest and wood products industry projects announced by The Hon Tony Burke, Minister for Agriculture Fisheries and Forestry. “These projects will help improve the competitiveness of the companies involved and this will in-turn provide some certainty and security for employees, dependent businesses and the communities in which these projects will operate,” said A3P CEO Richard Stanton. “The Government support is particularly welcome in the current financial environment where it is very difficult for businesses to access the necessary funds even for relatively low risk projects.”
The $9 million Forest Industries Development Fund (FIDF), a commitment from the 2007 federal election, provides up to 30% of funding for projects that add value to Australia’s forest and wood products industry. Companies who are awarded FIDF funding still have to finance at least 70% of the cost of the project from their own funds or by borrowing.
Australian sawmills, panelboard and paper product manufacturers currently face stiff international competition in both the domestic and export market and the resurgence of the Australian dollar has made the situation even more difficult for Australian manufacturers and exporters. Compounding this challenge is the fact that competing manufacturers in many countries are receiving subsidies worth billions of dollars in various forms, including low or no-cost finance, lower regulatory standards and very generous support for business-as-usual renewable energy generation. Australian manufacturers do not have access to such subsidies and therefore must continue to innovate and improve their efficiency to maintain their competitiveness.
“A3P would like to thank Minister Burke for his support and commitment to addressing the challenges facing the forest and wood products industry, and urge him to move as quickly and as prudently possible to finalise the second round of funding grants under the Forest Industry Development Fund.” said Mr Stanton.
(Source: A3P)
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Gunns Outline Pulp Mill Progress at AGM
Gunns Ltd is in talks with Swedish forest products company Södra about its investing in Gunns' planned AU$2.2 billion pulp mill in Bell Bay, Tasmania, confirmed chairman John Gay, The Mercury reported on Wednesday. In a statement to the Australian Stock Exchange (ASX), Gay said he was also in discussions with "a number of other parties" interested in investing in the controversial pulp mill planned for the Tamar Valley.
Sodra is a co-operative of southern Swedish forest owners with 52,000 members. It operates five pulp mills in Sweden and Norway, with annual production of more than two million tonnes. Sodra also operates saw mills and is a major player in interior wood and biofuel.
Gay told the Annual General Meeting this week that the cost of the pulp mill had risen from AU$2.2 billion to AU$2.5 billion over the past year. He expects international joint venture partners to provide about 40% of equity financing for the mill. Gay acknowledged that difficulties in obtaining financing delayed mill construction start-up by two years, but did not specify a start-up date.
Meanwhile, pulp mill opponents have claimed in the media this week that Gunns is also about to enter a major partnership arrangement with a Japanese pulp and paper company to fund the mill. Bob McMahon, spokesperson for TAP into a Better Tasmania, said his group received reliable information late Tuesday about the pending partnership financing. Gay did not mention a potential Japanese partner in his ASX statement on Wednesday the Mercury reported.
(Source: www.forestweb.com)
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Nine New Forestry Graduates Ready for Work
Nine trainees from the first Northland Straight 2 Work Forestry Skills Training industry partnership venture graduated last Friday. The initiative between Ngati Hine Forestry Trust, Forestry Industry Training Education Council (FITEC), Hancocks Forest Management, Harvest Pro and Work and Income has had extremely positive results with nine out of the ten trainees ready for work. All nine graduates are likely to be offered full-time employment with Harvest Pro. Two women are among the graduates who are excited about a career in forestry.
“I have been really impressed with the students. I’ve challenged them physically and mentally, and they’ve all responded admirably. No days off and all on time for pickup, positive feedback from logging crew workers, they have fitted into their roles with real credit”, said FITEC Contract Careers Consultant, Jack Johnson.
The venture was born out of the Northland Economic Summit when Managing Director of Hancock Forestry Management, Rowan Struthers, advised of the up and coming growth in the forestry industry and the urgent need for skilled forestry workers particularly over the next 5 year period. A main focus has been to train Maori youth from the Moerewa community to enter the industry equipped with skills required to work sustainably in the forestry industry.
(Source: Work and Income)
Those Who Lose Their History, Lose Their Soul
The Australian Forest Contractors Association is recognising the pioneers and legends of the timber industry through the creation of the "AFCA Contractors Hall of Fame". This recognition will be through the presentation of framed Certificates and Plaques and admittance to the Hall of Fame that will be created and recorded in an appropriate manner.
There will be three categories of recognition. Admittance to the Life Members Roll, and then induction as "Legends" and "Icons". Following the initial round of admittance and induction, additional personnel will be inducted biannually, and in a process that is similar to many other Hall of Fame processes, nominees can be elevated from "Legend" to "Icon" status.
Criteria for Selection
To be nominated for admittance to the Hall of Fame Life Members Roll, contractors must have been working in the industry for at least 25 years. To be elevated up to "Legend" and "Icon" levels they must have made a significant contribution to the forest industry and have been recognised as a leader in ingenuity and improvement.
A national panel of experienced people has been appointed to seek out nominations and select a number of contractors and industry personnel who will be recognized. In addition to being acknowledged as a "Life Member" or "Legend", a select few will be elevated up to the category of industry "Icon" which will acknowledge additional outstanding contributions and achievements
Nomination Process
All nominations need to be made on the official Nomination Form. This form is available from David Drane (AFCA Manager), either by telephoning 0413 997 257 or by sending an email to david.d@vic.australis.com.au
Induction Process
The inaugural nominees will be inducted at a gala AFCA Contractors Hall of Fame Dinner to be held at the Novotel Resort in Coffs Harbour News South Wales on Thursday 3 June 2010.
Inquiries
All inquiries in relation to these awards should be made to : David Drane (AFCA Manager), phone 0413 997 257 or email david.d@vic.australis.com.au
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US Softwood Lumber Demand and Prices Poised to Rise
The worst is almost over for the North American softwood lumber market as improving demand in 2010 is expected to breathe some life back into a beaten up industry, according to International WOOD Markets Group. While the coming winter will likely be a tough one, rising housing starts, lean distribution channel inventories and some lingering government stimulus programs should kick-start lumber demand and even prices. After facing declining markets and prices since 2006, the 2010 outlook predicts that there will be enough building blocks in place to allow for some much needed market improvement. But it is in 2011 - and especially in 2012 and 2013 – that a real housing recovery is forecast to take hold, creating higher prices with significant price volatility occurring as sudden demand surges catch the lumber market by surprise.
There are many wild-cards expected to impact lumber prices. “A big element impacting the lumber price outlook will be the industry’s schedule or strategy for putting curtailed or even closed sawmill production back online, not to mention the log inventories companies can, or are willing to, build,” commented President of WOOD Markets, Russell Taylor. “How it balances or doesn’t balance with lumber demand will show up in how lumber prices move in the next five years. But by 2012 and especially 2013 when demand should outstrip supply at various stages, stud and dimension lumber prices should climb to average an incredible US$200/Mbf or so higher than 2009 levels!” The prospects of higher prices will be welcomed by all players in the North American lumber sector, but cost pressures such as rising log costs may not directly translate into major windfalls.
Total U.S. lumber consumption is forecast to increase from 32.8 billion bf in 2009 to over 50 billion bf in 2013 — a 50+% increase from 2009. Total North American lumber production peaked at 75 billion bf in 2005 and will bottom out dramatically lower at near 43 billion bf in 2009. Steady rises are forecast in output, to well over 60 billion bf in 2013.
(Source: International WOOD Markets Group)
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Pro-forestry BC Government Invests in Industry
B.C. will spend $5 million more in the coming year to market wood products in China, focusing on near-term commercial opportunities, while continuing to develop longer-term projects such as promoting multi-storey wood-frame construction. It's now a $13-million effort.
Ainsworth and the United Steelworkers will soon begin talks on finding ways to restart the company's Lillooet and Savona operations. Ainsworth closed the sawmills that manufacture concrete forming products in June, laying off 250 workers. It blamed a rising Canadian dollar and poor markets.
$3.2 million will be spent to improve 440 kilometres of Forest Service roads in the Hazeltons and surrounding areas - part of a $20-million resource road upgrade program launched by the Ministry of Forests and Range.
The provincial government introduced its Wood First Act in the Legislature last week. The intent of the Act is to set out new rules requiring provincially-funded construction projects to use wood as the primary building material. Forest Minister Pat Bell said the act is just one step in a series by the government to "promote a stronger wood culture" across Canada that will benefit the industry, forest-dependent communities and the climate.
Thirty eight pulp and paper mills across Canada found out last month they will each get a share of Ottawa's $1-billion Clean Energy Fund under the Pulp and Paper Green Transformation Program, introduced last June to counter U.S. pulp mill subsidies. Under the program, mills can apply for a credit of up to 16 cents per litre of a pulp by-product called black liquor that they burn to create energy. Only mills producing black liquor between January 1 and December. 31 this year are eligible for funding from the program.
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...and finally...the Irish council contractors...
There were two Irishmen working for the city council. One would dig a hole, he would dig, dig, dig. The other would come behind him and fill the hole, fill, fill, fill.
These two men worked furiously. One digging a hole, the other filling it up again.
A man was watching from the footpath and couldn't believe how hard these men were working, but couldn't understand what they were doing. Finally he had to ask them.
He said to the hole digger, "I appreciate how hard you work, but what are you doing? You dig a hole and your partner comes behind you and fills it up again!"
The hole digger replied, "Oh yeah, that must look funny, but the guy who plants the trees is sick today."
Buy and Sell
...and finally, finally...asking for trouble...
At a wedding I went to recently the bride came down the aisle and when she reached the altar, the groom was standing there with his golf bag and clubs at his side.
She said, "What are you doing with those?"
He looked her in the eye and said, "This isn't going to take all day, is it?"
And on that note, enjoy the rest of your week. Cheers.
John Stulen
Innovatek Ltd Rotorua Office
PO Box 6160
Rotorua 3043
New Zealand
Ph:+64 7 921 1382
Fax:+64 7 348 1420
Web page: www.innovatek.co.nz
This week's extended issue can be viewed at www.woodweek.com
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