WoodWeek – 9 December 2009
Greetings from Wellington. This week we have good news in the final market report for the year. China continues to be the locomotive for global recovery from the recession - at least for now. Market signals continue to be positive which bodes well for 2010. As this year draws to a close we would like to say a big THANK YOU to TPT Forests for their monthly market reports - by all accounts it is a real highlight for our readers. Also this week we have a story on surging commodity prices - showing the effect that a high NZ dollar is having on local prices compared to the huge lift in the world price index.
We are pleased to highlight an environmental award won by HP Contractors recently - congratulations to Joe Potter and his crew! Across the Tasman the report from Forestry Tasmania puts things in perspective with a muted annual result - operating conditions for contractors in that state are far more constrained than the market would like.
Finally, for those of who are still trying to figure out what's going on in Copenhagen (here's a clue - a lot of hot air ...), there is a summary of the potential implications. And the last story shows that the forestry folks in Canada have some extra safety issues around this time of year - bears! Next week will be the final instalment of WoodWeek for the year.
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This week we have for you:
Contractors' Key Indicators
Kiwi retail fuel prices remained unchanged during the month of November, the first static month since June 2007 according to AA PetrolWatch spokesperson Mark Stockdale. "It's also the longest run without a price change since April 2009, when prices were stable for six weeks," he said. Diesel has remained stable in December, however, petrol rose 3 cents per litre after the kiwi dollar dropped against the US dollar.
NZ CONTRACTORS' KEY INDICATORS
9th December 2009 | | Interest Rates | Diesel Price Watch | | NC | 90-day bill rate = 2.77% | NC | Average (excl GST / all regions) = $0.96 | | Exchange Rates | NC | Change (month) = 0% |  | NZD/USD = 0.7137 |  | Change(quarter) = +3% | | NZD/Yen = 63.82 | | Change (year) = -8% | | 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
9th December 2009 | | Interest Rates | Diesel Price Watch | | 90-day bill rate = 4.09% | NC | VIC (excl GST) = $1.06 | | Exchange Rates | NC | NSW (excl GST) = $1.04 | | AUD/USD = 0.9133 | NC | TAS (excl GST) = $1.12 | | AUD/Yen = 81.17 | NC | SA (excl GST) = $1.07 | | Wage Price Index - All Industries | Consumer Price Index | | Sep 09 quarter = 102.0 | | Sep 09 quarter = 168.6 | | Change (quarter) = +0.9% | | Change (quarter) =+1.0% | | Change (year) = +3.4% | | Change (year) =+1.3% |
TPT Forests Export Market Report
The year is starting to draw to a close and there are some encouraging signs coming out of the markets which should put things in good shape for the next few months. The changes identified since last month’s report are the increased demand coming from China for imported softwood logs, and the continued slowdown of Russian supply to the markets, notably China. These two issues are linked and the movement of sawmilling capacity out of northern China into the eastern coastal areas is very encouraging.
The Russian softwood supply appears to be down 40-50% with hundreds of sawmill lines being closed down and either relocating, or already moved to imported softwood regions which are basically on the east coast. Radiata pine now appears to have processing capacity of over 500,000 m3/month. The autumn building season is traditionally a busy time in Asia and this year is no exception with consumption data coming through suggesting that included in the seasonal lift, is also an underlying recovery in demand. This is probably approximately 5% at this early stage which is consistent with consumption trends globally as the construction sector recovery gets underway, albeit at a slow pace.
The issue to consider with these changes is that basic global log and lumber production has been reduced to balance with falling demand experienced from January this year out of the global financial crisis, and therefore any lift in demand is likely to tighten up the markets until supply balances the equation. The US PNW still has some supply capacity up its sleeve in both log and lumber form. All things being equal NZ and Australia are expected to reduce supply of export logs in 2010 as the domestic market recovers and gross production volumes remain about flat. Russia is looking like supplying less than 13 M m3 into China during 2009 and many believe 2010 will be under 10 M m3, which would be first time since 2001 that supply has dropped under 10 M m3. With China, Japan and Korea all seeing modest improvements in demand, which is expected to run well into 2010, there is looking like a strong run starting to form in the markets on the basis that this reduction from Russia occurs. This is quite a turn-around from earlier expectations when caution has been the name of the game.
The number of Chinese saw millers heading to the coastal regions to saw imported logs is a sign that the Chinese sawmilling industry is starting to structurally change softwood log sourcing patterns. Once this capacity shifts to the eastern sea board of China it is going to be quite difficult for Russian supply to increase by land quickly, as the logs will need to travel by rail down to the Chinese coast to get processed which will drive up marginal prices.
The graph above illustrates volumes of NZ and Russian logs over the last 10 years with 2010 being an estimate. NZ supply volumes are tracking along at about 800,000 m3/month level. Xmas is looking like being the thick end of 3 weeks off for most which will help keep the markets tight. Australia remains at the about 50,000 m3/month mark making ~ 850,000 for Nov in total, then Dec – Jan dropping to about 650-700,000 m3/month from both countries.
This general reduction in supply will put some real strain on the market towards the end of December. As a result prices are likely to push upwards over this period. However, freight and FX continue to be the big unknowns and both are expected to firm in the short term impacting on the NZD$FAWG levels coming into the Christmas/New Year period.
As we all know the key to this whole market lies with Chinese demand and robustness. And so far it’s looking good and it is expected that there will be even stronger demand in 2010 for imported soft wood logs which will come from NZ, Australia, Canada and US.
So in general it’s a 180 degree turn around from this time last year, and instead of staring down the barrel of a very tough time ahead and a long Christmas holiday, things are certainly looking on the up. There’s only one more report before Christmas, and so let’s see what the end of year brings, but it’s all good news at this point and a Christmas and New Year break will be well appreciated by most for sure.
HP Contractors Honoured for Environmental Performance
The Wellington region’s top environmental schools, businesses, consent holders and community groups were honoured at an evening function earlier this month with groups from the Hutt Valley, Wellington and Kapiti Coast sharing the spoils.
Among the winners was logging contractor and FICA member, Joe Potter’s company, HP Contractors. They won the Nikau Compliance Award. Other winners of the Greater Wellington's Environmental Awards were Waikanae Estuary Care Group; Peter Reimann of Trelissick Park Group; Booker-Spalding ; Wellington City New World; Owhiro Bay School; Rowena Johnstoneof Owhiro Bay School and Alsco Wellington.
Greater Wellington Regional Chair Fran Wilde said the awards were about giving back to the people helping Greater Wellington to protect the region’s environment and make it a better place to live. “This is the third year we’ve run our awards and once again the standard of entries was high so the judges had to make some tough decisions. All the groups who have participated in our awards this year are doing a fantastic job in protecting and enhancing our region’s environment. We all owe them a debt of gratitude because they are out front setting an example that everybody in time will come to appreciate.”
HP Contractors, Nikau Compliance Award - Under site manager Joe Potter HP Contractors have implemented and maintained erosion, sediment and slash control measures above and beyond consent requirements. Operating at their Fernhill Forest site near Pauatahanui Inlet and surrounded by sensitive streams, Joe takes his environmental responsibilities seriously. His crew received environmental training before commencing works, and Joe visits the site during heavy rainfall to ensure that erosion and sediment control measures work effectively. Site audits show that HP Contractors is continually meeting consent requirements that are the toughest of any forestry site in the region. The judges were impressed by Joe’s attention to detail, site management and his crew’s awareness of environmental issues.
(Source: Greater Wellington Regional Council)
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Commodity Prices Surge
Commodity prices surged last month for their first annual increase since August 2008. The ANZ Commodity Price Index climbed 10.5% in November from October, and advanced 17.4% from the same month a year earlier, led by rising international dairy prices, which surged 22% last month.
Eight of the 11 commodities tracked increased, while three declined. Wool prices climbed 8.8% on a global price basis, while wood pulp, aluminium, sawn timber, beef and skins all rose between 3% and 4.5%. Logs also posted a price rise in November, lifting 0.7%.
The kiwi dollar was weaker through the month of November, and intensified the gains in New Zealand dollar terms to its biggest monthly increase in the series. Still, the currency is up about 45% from its sub-50 U.S. cents low in March.
(Source: ANZ Commodity Index)
| Commodity Exports - HS Code 44.0 - Logs, Wood and Wood Articles | | Month ended October | 3 months ended October | 12 months ended October | 2008
$(million) | 2009 P
$(million) | 2008
$(million) | 2009 P
$(million) | 2008
$(million) | 2009 P
$(million) | | 240 | 209 | 643 | 634 | 2,115 | 2,334 | | DOWN 12.9% | DOWN 1.5% | UP 10.4% |
(Source: Statistics NZ) (P - Provisional)
Summary of Forest and Wood Industry Census
During the second half of 2009 FITEC completed a survey of the New Zealand forestry and wood manufacturing sectors (excluding biosecurity and furniture). The objectives were two fold:
to understand the operations and processes where the workforce was employed at the various job levels and improve the understanding of the training requirements on a regional basis
to create a base data set to enable modelling of the impact of changes in regional and national wood flows on the industry’s labour market and numbers requiring training.
This effectively creates the most comprehensive survey carried out to date on the forest and wood industry in New Zealand. It is timely given the industry environment over the past few years.
Some 831 companies from within the forestry and wood manufacturing industries were identified and surveyed. Detailed results of the survey showing the total number of employees nationally working in various segments of the industry, a comparison of this survey to previous ones conducted by MAF and BERL, and the number of employees by occupation type are shown in tables in the attached PDF.
Anecdotal evidence has suggested that employee numbers have dropped in recent years and this is certainly confirmed within the wood manufacturing sector, which shows that it has contracted by an average of 10% from previous forecasts. This was also reinforced by the responses received where wood manufacturing companies indicated that that the number of employees had reduced due to the economic downturn. Forestry figures are more variable compared to previous statistics, probably reflecting the contracting nature of the business and the inherent fluctuations. However, a significant workforce is at least maintained.
Regionally the workforce is concentrated in the CNI (38%), which has the largest plantation forest area and woodflow with the clustering of large processing facilities in Tokoroa, Rotorua and Kawerau being a significant factor. The Southern North Island (10%), Nelson - Marlborough (10%), Northland (9%), and Otago - Southland (8%) are the other main regions of employment, generally reflecting the maturity of the industry in those regions.
On a skills basis the majority of the workforce is operationally focussed (72%). This reinforces the view that FITEC’s Levels 2 to 4 qualification structure is relevant and aligned with the needs of the majority of the workforce.
For the full report including specific results please see the PDF attached.
$9.3 million Operating Profit for Forestry Tasmania
Forestry Tasmania has reported an operational profit of $9.3 million for the 2008/09 financial year, up from $8.6 million for the 2007/08 financial year. The figures, which were publicly released in August, were tabled at the annual Tasmanian Government Business Enterprise hearings earlier this month.
Forestry Tasmania Managing Director Bob Gordon said the return was a solid result, particularly given the challenges of the global financial crisis. However he said the global downturn would make it difficult to deliver a similar result for this financial year. “So far Forestry Tasmania has been able to insulate its contractors from the worst effects of the downturn,” he said. “Our priority is to keep the work flowing, and our contractors are currently working at about 75 per cent of their quota.”
Mr Gordon said the effects of reduced worldwide demand for wood products due to the global financial crisis had been exacerbated by the strength of the Australian dollar, high shipping costs and negative perceptions generated by environmental campaigns. “Current indications are that any recovery will be slow and is unlikely to have much effect before the middle of 2010,” he said.
During the four months to the end of October this year supply of high quality eucalypt sawlogs and softwood sawlogs was at 80% of forecast levels. Hardwood pulpwood and domestic peeler logs were 70% and supply of lower grade eucalypt logs was 40% less than forecast.
Norske Skog’s conversion to 100% softwood has meant supply of softwood pulpwood has remained close to 95% of forecast levels.
Mr Gordon said Forestry Tasmania was investigating other export opportunities to provide extra work for harvesting and transport contractors and to offset the decline in pulpwood markets.
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Copenhagen: 14 Days to Seal History's Judgment
This week 56 newspapers in 45 countries took the unprecedented step of speaking with one voice through a common editorial. They do so because humanity faces a profound emergency.
Unless we combine to take decisive action, climate change will ravage our planet, and with it our prosperity and security. The dangers have been becoming apparent for a generation. Now the facts have started to speak: 11 of the past 14 years have been the warmest on record, the Arctic ice-cap is melting and last year's inflamed oil and food prices provide a foretaste of future havoc. In scientific journals the question is no longer whether humans are to blame, but how little time we have got left to limit the damage. Yet so far the world's response has been feeble and half-hearted.
Climate change has been caused over centuries, has consequences that will endure for all time and our prospects of taming it will be determined in the next 14 days. We call on the representatives of the 192 countries gathered in Copenhagen not to hesitate, not to fall into dispute, not to blame each other but to seize opportunity from the greatest modern failure of politics. This should not be a fight between the rich world and the poor world, or between east and west. Climate change affects everyone, and must be solved by everyone.
The science is complex but the facts are clear. The world needs to take steps to limit temperature rises to 2C, an aim that will require global emissions to peak and begin falling within the next 5-10 years. A bigger rise of 3-4C, the smallest increase we can prudently expect to follow inaction, would parch continents turning farmland into desert. Half of all species could become extinct, untold millions of people would be displaced, whole nations drowned by the sea. The controversy over emails by British researchers that suggest they tried to suppress inconvenient data has muddied the waters but failed to dent the mass of evidence on which these predictions are based.
Few believe that Copenhagen can any longer produce a fully polished treaty; real progress towards one could only begin with the arrival of President Obama in the White House and the reversal of years of US obstructionism. Even now the world finds itself at the mercy of American domestic politics, for the president cannot fully commit to the action required until the US Congress has done so.
But the politicians in Copenhagen can and must agree the essential elements of a fair and effective deal and, crucially, a firm timetable for turning it into a treaty. Next June's UN climate meeting in Bonn should be their deadline. As one negotiator put it: "We can go into extra time but we can't afford a replay."… more.
(Source: The Guardian)
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Opportunity For Central North Is. Forest Industry
A steady increase in regional wood availability will lead to new opportunities for the Central North Island (CNI) wood processing sector and the wider community, say the authors of the latest wood availability forecast report. On Monday the Ministry of Agriculture and Forestry released its CNI region Forest Industry and Wood Availability Forecasts Report, providing the economic and social context to the regions predicted increase in wood availability.
The current annual harvest level is around 9 million cubic metres. Future wood availability is forecast to be around 12 to 13 million cubic metres per annum leading into the 2020’s.
MAF Principal Analyst Paul Lane says the report aims to assist forestry industries, planning practitioners, and infrastructure and service providers to plan resources, maximise opportunities and identify issues related to the availability of wood. “There is the opportunity to expand wood processing in the region through the increased utilisation of existing processing plants facilities, developing new product lines or potentially through new plants.
“An increase in harvesting could also lead to more opportunities to grow both the industrial and residential use of wood as a source of bioenergy, particularly if energy prices continue to rise. Wood currently supplies about seven percent of total energy use in New Zealand. The region has two wood pellet plants and the wood pellet industry has experienced rapid growth internationally over the past few years.
“Beyond timber and wood values, people are increasingly recognising the environmental benefits of forests such as improving water quality and reducing soil erosion. Forests are also valued for the recreation and tourism opportunity they provide.”
The Central North Island Forest Industry and Wood Availability Forecasts Report is one of a series of publications on regional forestry industries and wood availability forecasts produced by MAF. It provides wood availability forecasts and associated commentary for the region, out to 2040, and outlines opportunities and constraints
facing the region's forest industries. The forecasts have been produced in association with the region's major forest owners.
A copy of the report can be found at: www.maf.govt.nz/mafnet/publications/wood-availability
A Goal to End Tasmania’s Conflict
Bringing an end to the conflict over Tasmania's forests is the aim of a new community organisation. The apolitical "Our Common Ground" coalition wants to find a compromise in the polarised debate between protecting jobs and protecting native forests. The group has raised several hundred thousand dollars for its campaign, although organisers won't be drawn on who their most generous donors have been.
Key ambitions are to protect timber workers' jobs while shifting forestry from being based on woodchips and native forests to an industry centred on plantations.
It has already met Timber Communities Australia representatives and is planning talks with organisations such as the Forest Industries Association and Forestry Tasmania. The group's ranks include former Labor forests minister Andrew Lohrey; former Tasmanian Liberal Party director Peter Skillern; well-known retired ABC broadcaster Judy Tierney and millionaire businessman and Wotif founder Graeme Wood. Environment Tasmania director Phill Pullinger and Wilderness Society pulp mill campaigner Vica Bayley are also founding members.
But all denied that it was just another group trying to end logging in old-growth forests, or that the timing of its imminent TV advertising campaign was driven by the looming state election. They said a key motivation was to respect the jobs, contribution and heritage of timber workers and their families, and their unique role in the Tasmanian community. …more.
(Source: The Mercury)
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Ngati Whare Deed of Settlement Signed
The Crown and Ngati Whare have signed a Deed of Settlement for the iwi’s historical Treaty of Waitangi claims, Minister for Treaty of Waitangi Negotiations Christopher Finlayson announced on Monday. “Ngati Whare has achieved a unique co-governance agreement which focuses on the Whirinaki Forest Park, bringing ecological and economic benefits to both iwi and all New Zealanders who will continue to enjoy this exceptional part of the country,” Mr Finlayson said.
The settlement also provides for a joint Ngati Whare-Crown regeneration project that aims to regenerate up to 640 hectares of the Whirinaki Crown Forestry Licenced land adjacent to the Whirinaki Conservation Park back to indigenous forest for all New Zealanders to enjoy.
The iwi is part of the Central North Island collective whose financial and commercial interests were addressed by the 2008 CNI Forests Land Collective Settlement.
Be Prepared, Bears are Getting Hungry
This time of year, black bears should be entering their dens for a long winter snooze. By consuming extraordinary amounts of calories through the fall, they have gained sufficient reserves to sustain themselves through the cold months ahead. Fat tissue will break down to supply water and up to 4,000 calories a day while muscle tissue will break down to supply protein. During this time, black bears will also recycle their body wastes and kidney function drops to almost nothing, a mystery that scientists are studying in hopes of assisting people with kidney failure. Unfortunately, in some urban areas where bears have come into contact with readily available non-natural food sources, they may be inclined to stay awake through the winter rather than follow nature's course and listen to the "nesting" instinct. The other outcome may be a bear that has decided urban life is more appealing than the woods and may find a suitable den location under your patio or front stairs.
(Source: Alberni Valley Times)
Buy and Sell
...and finally...jokes for any Sunday...
Jokes for any Sunday …
… one for the church-goers
"Anyone with needs to be prayed over, come forward, to the front at the altar," the Preacher says.
Leroy gets in line, and when it's his turn, the preacher asks: "Leroy, what do you want me to pray about for you."
Leroy replies: "Preacher, I need you to pray for my hearing." The preacher puts one finger in Leroy's ear, and he places the other hand on top of Leroy's head and prays and prays and prays, and prays for Leroy.
After a few minutes, the Preacher removes his hands, stands back and asks,"Leroy, how is your hearing now?"
Leroy says, "I don't know, Reverend, it ain't til next Wednesday!"
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… and one for the golfers
One fine day, Jim and Bob are out golfing. Jim slices his ball deep into a wooded ravine. He grabs his 8-iron and proceeds down the embankment into the ravine in search of his ball.
The brush is quite thick, but Jim searches diligently and suddenly he spots something shiny. As he gets closer, he realises that the shiny object is in fact an 8-iron in the hands of a skeleton lying near an old golf ball.
Jim calls out to his golfing partner in excitement, "Hey Bob, come here, I got trouble down here."
Bob comes running over to the edge of the ravine and calls out, "What's the matter Jim?"
Jim shouts back in a nervous voice, "Throw me my 7-iron! You can't get out of here with an 8-iron."
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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