WoodWeek – 3 March 2010

This week we have for you:

• Contractors' Key Indicators
• TPT Forests Export Market Report
• Yarder Makeover, Mill Success Story and Much More
• John Deere Joint Venture for Biomass Power
• FICA Events Coming Up in 2010
• Forest Enterprises Suspend Trading
• Search for Forest and Wood Industry Top Performers
• Loggers & Sloggers Golf Tournament
• New Zealand Log Exporters on a Roll
• Contractors Invited for ACoP Review
• Halt in Old Growth Harvesting Costly on Many Levels
• ...and finally...some bad puns...
• Buy and Sell
• …and finally, finally…the new employees…

Contractors' Key Indicators

Check out this week's Key Indicators here.

NZ CONTRACTORS' KEY INDICATORS 3rd March 2010
Interest Rates		Diesel Price Watch
	90-day bill rate = 2.68%	NC	Average (excl GST / all regions) = $0.99
Exchange Rates			Change (month) = -2%
	NZD/USD = 0.6996		Change(quarter) = +3%
	NZD/Yen = 62.37		Change (year) = +10%
Labour Cost Index - Ag/Forestry/Fishing		Consumer Price Index
	Dec 09 quarter = 1006		Dec 09 quarter = 1093
	Change (quarter) =+0.4%		Change (quarter) =-0.2%
N/A	Change (year) = N/A*		Change (year) = +2.0%

*Note:The LCI has been re-expressed on a June 2009 quarter base (=1000).

AUSTRALIAN CONTRACTORS' KEY INDICATORS 3rd March 2010
Interest Rates		Diesel Price Watch
	90-day bill rate = 4.17%	NC	VIC (excl GST) = $1.07
Exchange Rates		NC	NSW (excl GST) = $1.05
	AUD/USD = 0.8988	NC	TAS (excl GST) = $1.16
	AUD/Yen = 80.32	NC	SA (excl GST) = $1.08
Wage Price Index - All Industries		Consumer Price Index
	Dec 09 quarter = 102.7		Dec 09 quarter = 169.5
	Change (quarter) = +0.7%		Change (quarter) =+0.5%
	Change (year) = +2.9%		Change (year) =+2.1%

TPT Forests Export Market Report

As expected the year has got off to a great start for those involved in the export log game. The export markets are in pretty much the same shape prior to closing for Christmas/New Year; all markets hungry for volume, Russian supply continuing to be tight and NZ supply appears to be at almost maximum levels for now. All these factors are leading to increased activity dragging up USD$CNF prices to levels equivalent in most markets to the 2008 peak.

The MAF data reports that NZ finished the 2009 calendar year at 8.749 M m³ for export logs, which was a magnificent result, and certainly quite a radical change in market mix compared to previous years. Clearly the relative speed of China’s economic recovery compared to other economies, combined with the impact of reduced Russian supply has the doors wide open for increased NZ log supply to China. India has also continued to grow with underlying economic and infrastructure development over the year, and looks to continue to remain on the same direction. The mature markets of Japan and Korea have certainly taken a back seat in terms of their demand & relatively slower economic recovery and their ability to maintain price parity with the driver markets of China and India.

China and India, which where NZ’s 2^nd and 4^th largest markets in 2008, moved up the volume rankings to 1^st and 3^rd respectively – at the expense of Japan and Korea which both reduced volume.

There are two key questions at the current returns and activity levels:
1. Will there be more NZ volume available over the next 3-4 months?
2. Will volume continue to be diverted away from the domestic market due to the emerging price disparity?

Then, as usual comes the big 3^rd question - if this all happens is the markets appetite large enough to taking it?

There doesn’t appears to be too much more capacity lying around NZ at the moment to see significant increases in export volumes. In the CNI there is certainly a shortage of trucking capacity right now, and how much gear and people are still out there is always a bit of an unknown. On balance it appears there’s not much more out there. Therefore the main volume upside will be based on domestic supply diversion which will be sorted over the coming weeks as Q2 negotiations are fast approaching. Again, there isn’t expected to be a major correction in significant volume.

For the export markets themselves, it’s not expected that the market rankings in terms of volume will change significantly over 2010 which means log exporters are reliant on the developing economies of China and India which make up approximately 55% of the total demand. Continued volume growth is expected in both these markets while Korea should also pick up 3-5% in volume terms (although this increased may end up getting sourced out of the Pacific North West of the US), Japan is expected to remain flat and the other markets are largely in a similar position.

Therefore the rankings are probably going look as follows:

Market	2010 Forecast Volume (m3)	%
China	5,000,000	54
Korea	2,500,000	27
India	1,000,000	11
Japan	600,000	6
Others	170,000	2
Total	9,270,000	100

Yarder Makeover, Mill Success Story and Much More

The Harvestline yarder/loader has undergone a makeover and reappeared under the Woodsman brand – but is it what logging contractors in New Zealand need to fill the gap left by the demise of swing yarder makes like Madill? NZ Logger ventured into the Mamaku Forest to put the first new Woodsman yarder/loader, operated by Harper Logging, through the Iron Test and the results are in the March issue.

The quarterly NZ Timber section profiles the Nelson Pine Industries operation, which is now 25 years old and has expanded to three times its original size and the magazine asks why we don’t have more plants like this in New Zealand.

Plus in Breaking Out, the trials and tribulations of moving big harvesting equipment around the forests.

For all this and more head to the NZ Logger Website.

John Deere Joint Venture for Biomass Power

John Deere and ADAGE LLC, a bioenergy joint venture formed between AREVA and Duke Energy, have announced an alliance to bring technology and process innovation to the Fuel Supply for Sustainable Woody Biomass Power projects.

The first project to be developed as part of the alliance will be ADAGE's proposed facility in Mason County, 80 miles west of Seattle. The project involves collecting, bundling, and transporting branches and other wood debris from regional logging operations to the state-of-the-art ADAGE biomass power facility. Deere makes all of the forestry equipment used to gather and bundle the wood debris.

Through this and future projects, John Deere and ADAGE seek to expand the use of woody biomass and raise public awareness about its promise as an environmentally sustainable and beneficial energy source. "John Deere has a proud history of both innovative environmental stewardship as well as customer dedication, and we believe our alliance with ADAGE builds on both. For example, John Deere strives to promote a respect for the environment in the equipment it designs, including the efficient and low impact Biomass Harvesting Systems that will be used in the Mason County Project," said Domenic Ruccolo, Senior Vice President, Worldwide Construction & Forestry Division. "At same time, by working with ADAGE to support its biopower facility, we can help generate new opportunities to revitalize forestry communities and create sustained jobs for loggers and others that serve these communities."

"ADAGE came to Washington nearly one year ago because of the great potential in the region for sustainable biomass. This alliance and the Mason County project are an extension of that vision and can become a new economic engine for the state," said Reed Wills, President of ADAGE. "The project will combine state-of-the-art biomass power technology with innovative forestry equipment that can make Washington a leader in the industry. We believe that building a vibrant biomass industry means new jobs, healthier forests, and a stronger energy portfolio for Washington."

The Mason County project will deploy ADAGE's reference plant design which employs advanced environmental controls to minimize air emissions and water usage. The proposed 55 megawatt facility will provide enough power for more than 40,000 homes. The $250 million initial investment will create more than 400 direct jobs during construction and more than 100 direct jobs during permanent operation. ADAGE plans to begin construction in late 2010. ADAGE and John Deere anticipate executing a formal contract later in 2010.

For more information check out www.adagebiopower.com or www.deere.com

(Source: BiofiberBusiness)

FICA Events Coming Up in 2010

In 2009, FICA once again ran a series of successful regional events throughout New Zealand, which were all very well attended by a wide range of members, sponsors, partners, spouses and also non-FICA Members. With the positive feedback we have received, we have now scheduled a diary of events for 2010.

The most up-to-date list of planned events for this year can be found HERE – PLEASE HIGHLIGHT THESE DATES IN YOUR DIARIES.

For event updates please read the monthly FICA page in NZ Logger Magazine and/or keep an eye on the events listed on WoodWeek.

Everyone is welcome to attend FICA events and we look forward to welcoming you to them. For more information on any event, or if you would like to participate please do not hesitate to contact Gordon or John at FICA on 07 921 1384 or email gordon.thomson@innovatek.co.nz

Forest Enterprises Suspend Trading

The Tasmanian forestry group, Forest Enterprises Australia, announced on Friday that it has breached two of the financial covenants relating to its performance during last year and has provided a certificate of default to its financiers. FEA shares have been suspended from trading so discussions with the company’s lenders could continue.

FEA reportedly owes about $240 million to the Commonwealth Bank and ANZ. The company had been attempting to renegotiate the financial covenants that apply to its debt. In an announcement on the ASX last week, the company said a restructuring plan submitted to the banks on January 29 had been rejected.

After reporting a $14m loss last financial year, as higher than expected operating costs associated with its new sawmill caused a decline in new sales of its managed forestry investments, the future of FEA is up in the air until a resolution can be reached with the company’s bankers.

Search for Forest and Wood Industry Top Performers

The time is now to nominate the best and the brightest of the forest and wood industry in the annual FITEC National Training Awards. Nominations are now open and companies have until the end of May to put forward their outstanding candidates including Modern Apprentice of the Year, Trainee of the Year and Training Company of the Year.

“The FITEC awards lift the profile of our industry and the winners have been great industry ambassadors” says Ian Boyd, FITEC Chief Executive. “It has been interesting to watch the successful career paths of previous winners and this is indicative of the overall success of forestry and wood industry training.”

“Past winners of FITEC awards have gone on to do great things and we’re looking forward to seeing the quality of this year’s nominees. Each year’s finalists go from strength-to-strength, and it’s inspirational to see the best of our forestry apprentices, trainees and companies get the recognition they deserve.”

There is also a general industry award for Outstanding Business Performance through People Development and a FITEC award to celebrate their best Training Leader of the Year.

Last year’s winner of the Modern Apprentice award for forestry, Warren Ropiha of HB Forestry, says the FITEC Award literally changed his life. “My son was in and out of hospital in the first year of his life as we could only rent a cold, damp house,” says Warren. “Winning the Apprentice of the Year Award gave me the training and qualifications I needed to get a great job and afford a much healthier home for my family. My son’s doing great!”

Other forestry winners from last year were Anthony Murray for top trainee and Sobieski Contractors for the company category. Tenon Manufacturing Ltd in Taupo won the 2009 Training Company of the year – Wood Manufacturing.

Winners of the National Training Awards for 2010 will be announced at a gala dinner and ceremony in Rotorua on 9 September, with category finalists and their guests attending.

The nomination form, eligibility and criteria are available by going to www.fitec.org.nz/awards.

Separate to the Training Awards, FITEC is also awarding four scholarships a year in its Emerging Leaders Scholarships, which aims to identify emerging leaders, promote excellence and encourage a higher level of career development. Scholarship winners can choose between an eight-day Outward Bound Navigation Course, worth $4,000, or a $2,000 three-day NZ Institute of Management Leadership, Motivation and Team Building course.

Loggers & Sloggers Golf Tournament

WHERE: Waiotapu Golf Course, East Road, Reporoa
WHEN: 10.00AM Sunday 18th April, 2010
COST: $25.00 per head includes lunch

There will be heaps of prizes (any donations are appreciated) for all golfers and non - golfers and the trophy will be on offer again

Don’t worry if you can’t make up a team of 4 – we will match you up on the day.

Registrations must be accompanied by entry fee by 6th April 2010 so we have numbers for catering etc.

Download a registration form here.

Phone Paula 0274 517 956 or Diane (07) 376 5508
Fax: 07 376 8504
Email: paula.safetworks@xtra.co.nz
Or post to P.O.Box 2360, Taupo

Look forward to seeing you there !

New Zealand Log Exporters on a Roll

One of the (few) remarkable things happening recently in the global forest products industry has been the astonishing expansion of both the number of players and the volume of log exports from New Zealand. New Zealand forest owners started shipping logs to Japan in the late 1960s, but for decades exports were restricted by government policy (from Government forests) and by domestic log demand. However, when the Government sold its forests to private interests in the 1990s both the volume and market spread increased.

Total log exports increased from 1.3 million cubic metres in 1980, to 1.9 million cubic metres in 1990 and to 5.9 million cubic metres in 2000. A surge in Korean log demand in the first decade of the new century lifted exports up to a peak of 7.8 million cubic meters in 2002, but total exports had then fallen away to less than 7.0 million cubic metres in 2008, before a major surge hit the sector in 2009. Total 2009 exports should be more than 9.0 million cubic metres. Of this more than 50% will be shipped to China. In contrast, the demand from Japan has fallen away to less than 10% of total shipments.

The log export boom has attracted a growing number of exporting companies. The industry now has at least 16 companies plying the trade. This compares with only about 5-6 log exporting companies left on North America's West Coast. Several new-entrant Chinese companies are now in the game. The very high prices bid for some stumpage sales in late- 2009 raised eyebrows, with conjecture that Chinese economic stimulus package money is behind such bids, and with volume more important than price.

In early 2010, some New Zealand sawmills report log shortages as the log export boom continues. But, knowing China, it can stop as fast as it started.

(Source: 2010 New Zealand Forest Products Industry Review. DANA Ltd. See www.dana.co.nz or contact jan@dana.co.nz)

Contractors Invited for ACoP Review

A project is being run this year to review the Department of Labour Approved Code of Practice for Safety and Health in Forest Operations and 18 FITEC Best Practice Guidelines.

This project is being run by:
FITEC – Forest industries Training and Education Council
FOA – Forest Owners Association
FICA – Forest Industry Contractors Association
DoL – Department of Labour
ACC – Accident Compensation Corporation
Southern Wood Council
Eastland Wood Council
Northern Safety Forum

As part of the process to determine the format and content of the various documents, the project team has designed a survey to see how much the documents are used, what they are used for and how they could be used in the future. They are keen to get feedback from as many industry people as possible to ensure this review results in a set of documents that will be of value to all users.

Please take 10 minutes to complete the survey by clicking here

The project steering committee would like to thank you in anticipation for your time and expert input.

Halt in Old Growth Harvesting Costly on Many Levels

An independent report shows that a cessation of logging in old growth forests currently allowed in a limited way under the Regional Forest Agreement (RFA) will result in the loss of more than 2000 Tasmanian jobs, cause sawmill closures and dramatically increase the cost of sawn timber. The report - prepared by Symetrics Business Intelligence for the Forest Industries Association of Tasmania (FIAT) - says ceasing the harvest of logs from forest coupes defined as ‘Old Growth Coupes’ and the non-replacement of this lost resource in the hardwood processing chain, would result in an overall 22% reduction in sawmill processing throughput. The reduction in wood from State Forests alone would be 40%.

This would result in a loss of profitability in sawmilling businesses, leading to closures and reduced investment, as well as significant job losses. The Symetrics Report puts the potential job losses at 2080, with majority in forestry and timber processing.

It also predicts that dressed timber costs would rise by more than 27%, industry productivity and timber recovery rates would fall and the capacity of Forestry Tasmania to generate sufficient revenue to manage State Forests would be reduced. FIAT says while the scenario examined was inconsistent with the RFA, it was an outcome that anti-forest industry sources were seeking. FIAT Chairman Dr Julian Amos said the report only looked at the effect of a halting of harvesting in old growth coupes and did not consider the wider impact of stopping all native forest harvesting as proposed by The Greens and some anti-forestry environmental groups.

“The job losses and economic impact of this would be substantially greater, but that is what the industry opponents are campaigning for,” Dr Amos said. “For this reason, we are launching a campaign outlining the importance of being able to continue to harvest in our sustainable native forests.”

Dr Amos described the campaign to stop all native forest harvesting in Tasmania and to replace it with timber grown in plantations as “totally naive and ill-conceived”. “Plantation timbers can and do play a valuable role, but the high quality timber from our sustainable native forests is required to produce high-value furniture, joinery and flooring products from signature Tasmanian species. These timbers are not grown in plantations, and yet supply local furniture manufacturers, craftsmen, boat builders, joinery shops and the home-building industry. These businesses could not survive without access to the unique high-quality timbers sourced from our native forests.” …more

(Source: Forest Industries Association of Tasmania)

...and finally...some bad puns...

1. I thought I saw an eye doctor on an Alaskan island, but it turned out to be an optical Aleutian.

2. She was only a whiskey maker, but he loved her still.

3. The butcher backed into the meat grinder and got a little behind in his work.

4. No matter how much you push the envelope, it'll still be stationery.

5. A grenade thrown into a kitchen in France would result in Linoleum Blownapart.

6. Atheism is a non-prophet organization.

7. I wondered why the baseball kept getting bigger. Then it hit me.

8.. A sign on the lawn at a drug rehab center said: 'Keep off the Grass.'

9. A chicken crossing the road is poultry in motion.

10. Don't join dangerous cults: Practice safe sects!

Buy and Sell

…and finally, finally…the new employees…

A big corporation recently hired several cannibals. "You are all part of our team now" said the HR rep during the welcoming briefing.

"You get all the usual benefits and you can go to the cafeteria for something to eat, but please don't eat any of the other employees." The cannibals promised they would not.

Four weeks later their boss remarked, "You're all working very hard, and I'm satisfied with you. However, one of our secretaries has disappeared. Do any of you know what happened to her?" The cannibals all shook their heads no.

After the boss had left, the leader of the cannibals said to the others, "Which one of you idiots ate the secretary?" A hand rose hesitantly, to which the leader of the cannibals continued, "You fool! For four weeks we've been eating managers and no one noticed anything, but noooooo, you had to go and eat someone important!"

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