Matariki Announces $167 Million Investment by Phaunos

Matariki Forests is pleased to announce that it has signed an agreement with Phaunos Timber Fund Limited for a NZD 167 million investment in the Matariki Forestry Group, subject to New Zealand’s Overseas Investment Office approval.

Phaunos Timber Fund Limited is a global timberland and timber related assets investor listed on the Main Market of the London Stock Exchange and managed by FourWinds Capital Management based in Boston.

Paul Nicholls, Managing Director of Rayonier New Zealand Ltd, forest managers for Matariki, said the company welcomed the Phaunos investment as it underlined the positive outlook for the company. He said the company was looking forward to working with the very experienced Phaunos team who bring with them considerable international timberlands investment knowledge.

Forest Products Technology Events Planned for 2010

Working from feedback from events over the past two years and forestry and wood products companies on both sides of the Tasman, the Forest Industry Engineering Association has designed it's technology events for 2010. The programme for the upcoming year is listed here for your own planning.

- Future Forestry Finance 2010
1-2 March 2010, Sydney, Australia
4-5 March 2010, Auckland, New Zealand
EARLY BIRD DEADLINE HAS BEEN EXTENDED UNTIL FRIDAY 22nd JANUARY
www.forestryfinanceevents.com

- Wood Supply Chain Optimisation 2010
Forest to Market - Innovations to Improve Logistics & Operations
19-20 May 2010, Melbourne, Australia
24-25 May 2010, Rotorua, New Zealand
www.woodsupplychain.com

- Wood Energy 2010
Reducing Energy Costs & Improving Energy Efficiencies
21-22 July 2010, Rotorua, New Zealand
26-27 July 2010, Melbourne, Australia

- Wood Manufacturing 2010
Profitable Wood Manufacturing - Tooling, Technology & Design
15-16 September 2010, Melbourne, Australia
20-21 September 2010, Rotorua, New Zealand

- ForestTECH 2010
Tools and Technologies to Improve Forest Planning & Operations
17-19 November 2010, Rotorua, New Zealand
22-24 November 2010, Albury, NSW, Australia
www.foresttechevents.com

Further details on each of the events can be found on the attached pdf. More information on each of the technology programmes will be given as we move forward to each series.

Wood Pellets Drive Sawdust and Wood Chip Prices Up

The wood pellet industry in North America has grown six-fold since 2004, reports the North American Wood Fibre Review. The dramatic expansion has resulted in higher costs for sawdust and wood chips in the regions with the greatest growth, including Western US and Canada.

There has been a rapid expansion in wood pellet capacity in North America the past five years, from just over one million tons in 2004 to over six million tons in 2009, according to a recent report from the USDA Forest Service. British Columbia was the first region to take advantage of inexpensive sawmill residues and to produce wood pellets for the fast growing European market.

Capacity in the western province of Canada has not grown much the past few years, so in 2009, it is likely that the US South will take over as the leading pellet-producing region in North America, according to the North American Wood Fibre Review. Much of the investment in pellet capacity in the US South has been driven by the export market in Europe. On the other hand, the second largest producing region in North America, the Western US, has so far only sold pellets into the domestic market.

In 2004, the pellet industry was practically non-existent in the US South and this sector has now grown and will reach a capacity of almost two million tons in 2009. These capacity numbers may sound impressive, the actual operating rates have been surprisingly low in both the US and Canada. In 2008, production was about 66% of capacity in the US and 81% of capacity in Canada, estimates USDA-FS. Major reasons for the low rates include start-up problems for newly built plants, financial difficulties for some companies and a lack of affordable wood fibre supply.

With increased demand for wood fibre, pellet manufacturers have increasingly had to accept higher-cost wood fibre sources than the commonly used sawdust from local sawmills. More pellet companies are now using wood chips that traditionally have been used by the pulp industry. Partly as a result of the expansion of the biomass sector, wood chip prices, sawdust prices and woody biomass prices have moved up in the US this fall.

In the US Northwest, sawdust prices have gone up substantially the past five years. In 2004, average sawdust prices were US$28/odmt as reported by the North American Wood Fibre Review. These prices reached a peak of US$74/odmt in late 2008 and have since fallen, averaging US$64/odmt in the 3Q/09. The price increases that have occurred in Western US are likely to be seen in other regions experiencing rapid expansion of their pellet industries.

(Source: Wood Resources International LLC)

Continuous Pyrolysis Moves a Step Closer for Sawmills

New Zealand sawmilling industry guru/pragmatist Doug Stewart has hit the mark again with another innovative step towards closing the loop with energy generation on sawmill sites. For sawmill managers it's an exciting and truly "green" technology development. Stewart's pyrolysis process for producing gas for site use from wood residues is rapidly moving closer to commercial scale operation and production. As of this week - continuous scale installation is now up and running in Rotorua.

Back in June this year at the FIEA Residues to Revenues Conference Series, delegates heard how the Lakeland Steel team had worked through the practical challenges to develop batch-process pyrolysis fed by green sawdust. Since then, a combined pyrolysis development team at Lakeland Steel Products in Rotorua have made practical improvements and have now successfully proven the continuous form of their process.

"We've ironed out the bugs from this scale model" said Lakeland's project manager Cory Leatherland, "and we know the scale of the by-products coming from our continuous process - the oil, water and biochar which the system generates in addition to the valuable syn-gas." Stewart added, "the knowledge we've gained in getting this continuous system fine-tuned means we know where to look when we scale it up again during 2010 and hook the gas supply up to a diesel motor and electricity generator."

Managing director Doug Stewart and project manager Cory Leatherland demonstrated the continuous process system to the Friday Offcuts team as they are now confident that the patent application process is near completion and the time is right to move another step closer to a commercial-scale operation. Stewart is confident that they have learned enough in building and operating a 1/20th scale model that they can now tackle the challenge of a larger scale plant that will be connected to a diesel generator to make electricity for their Rotorua workshops.

Given the vast practical experience Doug and his Lakeland Steel team have, it won't be long before they make the next announcement for commercial applications for sawmills. The commercial version will require an infeed of 200 kg/hour of green sawdust (some water content is needed for the process) and produce 200 kW in the form of a syn-gas supply.

Global Sawlog Prices Jump Almost 8%

In the 3Q/09, the Global Sawlog Price Index (GSPI) had the highest quarter-to-quarter jump in the 15-year history of the Index, according to the Wood Resource Quarterly. The Index increased for the third straight quarter and reached just over US$73/m³.

Global sawlog prices started to move up in the fall after having reached a bottom in many markets earlier this year. The recent upswing has been the result of a tighter log supply but also because of improved operating rates at many sawmills in both the US and Europe. The US, the Nordic countries, Central Europe the Baltic States and Russia have experienced the largest price increases (in the local
currencies) over the past six months.

The Global Sawlog Price Index (GSPI), which is based on conifer sawlog prices in 19 key regions worldwide, was US$73.30/m³ in the 3Q, up 7.6% from the previous quarter, as reported by the Wood Resource Quarterly. Much of the increase was because the US dollar weakened against most currencies in the WRQ regions, but there were also higher log prices in Europe in the local currencies. Despite the recent increase in the GSPI Index, it is still 15% lower than a year ago and 20.3% below the all-time-high in the 4Q/07.

The biggest declines in log prices (in US dollar terms) since the peak in early 2008, have occurred in the Baltic States, the Nordic countries and in Western North America. In these regions, prices are now more than 25% below their all-time highs. Log prices in the US South, Central Europe, Latin America and Oceania have fallen relatively less and are currently 5-10% below their peak about 18 months ago.

Log prices have probably reached their bottom in this cycle last spring and it can be expected that they will continue the recent upswing in 2010 because of increased demand for lumber in the US, Europe, Asia and Latin America. So far this year, Europe, Northern Africa and China have been some of the most rapidly growing markets for lumber exporters and this trend is likely to continue into next year.

There is also some good news coming out of Russia. Lumber exports increased slightly in 2009 compared to 2008 and might reach the third highest level on record. This is mostly thanks to the high demand for lumber in China. Softwood lumber shipments to China have been up almost 60% this year. The strong export lumber market has mostly benefited sawmills in Siberia and the Russian Far East.

(Source: Wood Resource Quarterly)

Port Trials New Lighting System to Beat Bugs

The Port of Tauranga is looking to fend off night raids by aerial attackers. The precious merchandise being protected from these invaders is sawn timber and logs destined for valuable overseas markets. A new lighting system being trialled at the Port of Tauranga aims to protect New Zealand’s export trade by reducing pest contamination of forest products in an environmentally-friendly way.

Scientists at Crown Research Institute Scion are pleased to be using the Mt Maunganui site to trial the new lighting system, which is designed to be less attractive to insects. Project leader Dr Steve Pawson says that the lights normally used by the port attract millions of insects every night, whereas certain wavelengths of light in the yellow spectrum are the opposite for some insects – completely unattractive. “For a busy port like Tauranga, being able to operate at night is essential but, as most people know from their own homes, standard light bulbs are highly attractive to insects. Unfortunately, the bright lights are like a ‘smorgasboard open’ sign to insects, such as the burnt pine longhorn beetle, who could end up booking themselves a free trip on forest product exports,” Steve explains.

The trial, beginning in January and running for six weeks, aims to identify which type of yellow light is most effective in deterring insects, thereby reducing insect contamination and the need for fumigation. Hundreds of millions of dollars worth of sawn timber and logs are shipped from the Port of Tauranga each year. Pest contamination can result in the loss of export markets so forest products are typically treated with methyl bromide to meet strict quarantine controls. “If New Zealand is going to reduce methyl bromide and other chemical use, we have to start by reducing pest populations at processing sites, which involves taking completely new approaches to pest control,” Steve says.

Provisional National Exotic Forest Description Released

The Ministry of Agriculture and Forestry made public the provisional data from its 2009 National Exotic Forest Description (NEFD) report in December. The NEFD 2009 provisional release provides a detailed description of New Zealand’s planted forests and forest activities such as harvesting statistics. The full report will be published in April 2010 once data is finalised, and will contain the 2009 deforestation and new planting estimates.

The NEFD is published annually to assist infrastructure and policy planning, and is complied from a survey of forest owners and forest managers. This is the first year that provisional results have been published prior to the full report, in response to requests from industry for data as soon as it becomes available.

MAF produces this information in cooperation with the New Zealand Forest Owners Association and the New Zealand Farm Forestry Association and it is now in its 26th edition.

Key facts from the provisional release show that at April 1, 2009:

Bell Bay Mill Changes to 100% Plantation Timber

The Gunns Limited Bell Bay Pulp Mill will begin operation with 100% plantation timber, following Gunns securing access to the Great Southern timber resource. Gunns Chairman John Gay said the appointment of Gunns as Responsible Entity for nine former Great Southern timber managed investment schemes gave the Company the security of supply it needed.

“The Bell Bay mill has always been planned and designed as a plantation based mill,” Mr Gay said. “However, with Gunns’ existing resources, it was not possible for Gunns to guarantee supply to the mill of 100% plantation timber until five years after commencement of mill operations. Securing the Great Southern resource is an exciting new development for Gunns that allows us to accelerate our plantation strategy to supply the Bell Bay mill with 100% plantation from mill start-up.

“Operation of the mill on 100% plantation from commencement will ensure that this project is fully consistent with other modern bleached Kraft pulp mills in South America that operate on 100% plantation supply, and this decision should mitigate any concerns of stakeholders regarding fibre supply to the Bell Bay mill.” Mr Gay also noted “This decision will also further enhance managed investment scheme and other private grower certainty to fibre markets for their resource into the future.”

Mr Gay said Gunns looks forward to working with non-government organisations, the State Government and other stakeholders in relation to this new development for the Bell Bay mill project. He said discussions with project equity partners and the banking syndicate were continuing positively.

BC Concrete Industry Opposes Wood First Act

BC's concrete manufacturers take issue with the government's new Wood First Act, stating it will create unfair competition in the construction industry and could make public buildings more expensive to build. A.J. Hustins is the general manager of Nanaimo's ABC Precast & Ready Mix Ltd, a supplier of ready-mixed concrete to the Nanaimo region for 35 years. He said the new policy requiring all provincially funded building projects in BC to use wood as the primary construction material will have little positive impact on the provincial economy if it simply "robs Peter to pay Paul."

His position is backed by the BC Ready-Mixed Concrete Association, which represents ABC and another 120 concrete plants across the province. President Bruce Willmer said the new policy will disrupt the construction industry, rebalance supplier relationships in favour of one sector and could have "unintended consequences that may not create the desired results."

However, Forest Minister Pat Bell said the new 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. He remains adamant in his support of the new policy…more.

(Source: The Times Colonist)

Buy and Sell

…and finally… some light-hearted wisdom…

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