WoodWeek – 9 June 2010
Greetings from Rotorua. With winter well and truly making its presence felt, we have the TPT Export Markets Report to keep you warm this week. The market message is exactly that - lukewarm - which is not bad when you consider the recent volumes of log exports that our fine industry managed to load out from every NZ wharf imaginable during the past fine spell of our summer and autumn. Here's hoping (and that seems to be the main strategy) that markets continue to be receptive to NZ's harvested wood volumes. Winter volumes will be somewhat tempered by the oceans of rain we've had lately.
Meanwhile on the FICA activities calendar we have a Logging Costing Workshop to be held on Wednesday afternoon on 30 June in Tokoroa at the Waratah headquarters in Tokoroa. The workshop will be preceded by a FICA members' update meeting to discuss current and upcoming issues. The members' meeting will start at 9am followed by the workshop at 12.30. Meanwhile on 25 June the FICA Network for Women in Forestry will meet in Rotorua- see this issue or upcoming ones for more details of all meetings and venues.
Meanwhile across the Tasman things are quite different with contractors needing an assistance package to keep afloat. Also this week, we report on a horror story from Canada involving Chinese owners of a pulp mill and the local mayor.
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This week we have for you:
Contractors' Key Indicators
Check out the latest changes in diesel prices, interest rates and exchange rates on both sides of the Tasman in this week's Key Indicators.
NZ CONTRACTORS' KEY INDICATORS
9 June 2010 | | Interest Rates | Diesel Price Watch |  | 90-day bill rate = 3.01% | NC | Average (excl GST / all regions) = $1.05 | | Exchange Rates | NC | Change (month) = -4% |  | NZD/USD = 0.6838 | | Change(quarter) = +2% | | | NZD/Yen = 63.32 | NC | Change (year) = +11% | | Labour Cost Index - Ag/Forestry/Fishing | Consumer Price Index | | Mar 10 quarter = 1006 | | Mar 10 quarter = 1097 | | Change (quarter) =+0.2% | | Change (quarter) = +0.4% | | N/A | Change (year) = N/A* | NC | Change (year) = +2.0% |
*Note:The LCI has been re-expressed on a June 2009 quarter base (=1000).
AUSTRALIAN CONTRACTORS' KEY INDICATORS
9 June 2010 | | Interest Rates | Diesel Price Watch | | | 90-day bill rate = 4.83% | NC | VIC (excl GST) = $1.11 | | Exchange Rates | | NSW (excl GST) = $1.11 |
| AUD/USD =0.8156 | NC | TAS (excl GST) = $1.19 | | AUD/Yen = 74.43 | | SA (excl GST) = $1.12 | | Wage Price Index - All Industries | Consumer Price Index | | Mar 10 quarter = 103.6 | | Mar 10 quarter = 171.0 | | Change (quarter) = +0.9% | | Change (quarter) =+0.9% | | Change (year) = +2.5% | | Change (year) =+2.9% |
TPT Forests Market Update
The markets have largely behaved as expected during the month. In general inventories are slowly reducing from the build-up experienced over Chinese New Year as usage improves across at least some of the markets. Supply remains broadly in line with the previous 3-4 months with a continued strengthening trend as production has remained strong with the winter months slow in coming - but hasn’t it come in a hurry over the last couple of weeks! Softwood supply lines from all around the world (NZ, Australia, Canada and the US) are responding to increased demand and reasonable price levels in Asia. There has been a steady increase in volume growth across all these sources. China remains the driver of these endeavors with current CNF pricing levels converted to a stumpage basis providing top quartile returns for forest owners based on last 10 year averages – even though Free at Wharf Gate prices have fallen due to the recent price correction and strengthening freight.
Across all these supply points there is a similar pattern of domestic sawlog pricing being dragged up by competing prices and demand for export logs. Lumber demand domestically in the export softwood log source countries remain flat to slightly improving, assisted by seasonal requirements to fill depleted supply chain inventories. The construction sectors within these countries largely remain impacted by structural issues with price and inventory.
It is worth reminding ourselves that this ‘tension’ in the markets driven by China is caused by two key issues; 1) highly priced Russian logs reducing in volume into Asia, and 2) growth in China created in essence by central government stimulus spending in combination with the underlying growing economy. While it is true that the reduction in Russian log supply has also been caused by reduced demand as uncertainties regarding tariff changes motivate saw millers to seek alternative sources, price has also played a considerable part. The Russian prices were relatively high during 2009 due to the required production costs + government export tax being above what alternative sources were content with on a stumpage/market alternative basis during the same period.
Relatively low bulk freight levels were a big part of this equation. This situation now however is reversing, and with USD$CNF pricing currently being ~USD$50-$60 higher than early 2009, the Russian equation is different in economic terms and they can compete now in the market again. There are issues around impending tariff increases and dependability of supply etc, but NZ needs to be mindful that the market has now largely reached equilibrium and unless there is significant change on either the demand or supply side of the equation prices will sit for the time being. Supply pressure from non Russian sources into Asia in both log and lumber form is expected to continue for the balance of 2010.
NZ supply recorded new highs in April with 966,000 m3 shipped over the month. Inventories are still sitting in the ~550,000 m3 mark which indicates that production has now reached over 900,000 m3 per month. NZ is getting close to the magic 1 million m3 mark although the last few weeks of winter weather will have likely put the brakes on that – which is actually a good thing in terms of market supply/demand – not so good if in the forest up to your arm pits in mud!!
As a result of the strong supply situation NZ needs around 30-32 vessels per month to keep up, and with only 6-8 inbound cargo’s (coal, fertilizer, palm kernel etc) the log trade not only in NZ but also other supply regions is now estimated to be tying up about 40% of the handy size fleet in the Pacific Rim. As a result freight rates are getting pushed up and combined with commodity growth in China, this is not a situation which is expected to turn soon.
Radiata inventories in China were highlighted as an issue last month. However as expected consumption has increased during the month, and radiata log consumption topped 500,000 m3 for the first time in history, which has seen radiata inventories drop as deliveries during the month were 360,000 m3. However, it is expected that these head back up as deliveries continue to be stronger during May and June. This is likely to see inventory in the ~6-7 week level reached again in China which may put pressure on domestic prices which in turn will flow into import levels. The offset to this is the traditionally strong summer building season which will see usage increase, so the net balance will reveal itself over the next 2 months. So in summary consumption is good, but continued increasing supply could spoil the party if continuing to increase beyond current levels (unless of course demand steps up another level).
Korea and Japan remain on track with demand lifting slightly as expected (3-4%). India remains in good shape with usage lifting as forecast earlier in year to the +1.0 M m3 pa level. These markets (non-China) are basically running at ~ 400,000 m3 / mth so NZ needs China to continue at the + 550,000 m3 level based on current production levels to maintain the supply/demand in equilibrium. This should be double, and as our good friends in Asia say “no problem subject to price”. In all seriousness, although freight rates and recent price corrections have seen FAWG levels retreat from where they were, the ability to crank up USD$CNF prices to offset these adverse movements for the time being has passed.
On a macro economic level global growth prospects remain on a firm but modest footing, however what is being experienced in Europe (as a result of Greece going side-ways) is a salient reminder that the global credit markets are far from ‘normal’. Economic prospects in the Asia Pacific region remain firm and are largely without the banking and financial institutional issues which are hampering economies in Europe and North America. Central bankers in the Asia Pacific region are starting to normalise monetary policy with interest rate rises occurring in an attempt to curb inflation amongst economic growth.
The next few months are likely to see prices sit largely where they are currently with the next movement being dependant on which is the bigger of supply and demand growth. Seasonal adjustments aside it is expected that the market will largely trade sideways for the next month or so but keep an eye out for changes in FX and freight which will have differing impacts on competing supply points.
So once again, the crystal ball is a little murky as the fog falls heading into winter and there’s a dollar each way on the good and bad out there. However on balance we remain somewhat cautious while inventories remain high at these levels and supply competition across all the supply countries is back and increasing. It won’t take too much more of an oversupply situation to turn the balance. Accordingly this bad bout of weather experienced in NZ and the PNW is actually doing us all a favor in slowing down supply, to allow the market to digest what has been a heavy supply few months.
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Tasmania Government Stumps up for Contractor Assistance
Government officials in Tasmania have agreed to a forestry contractors assistance package of some $3M for logging contractors and AU$600,000 for silviculture contractors. The money is to be used to boost incomes of contractors suffering from low volumes of contract pulpwood work in the state by allowing them to work in more distant coupes which have higher proportions of sawlogs.
Industry representatives and government officials are expecting the new arrangement to deliver an 25,000 extra cubic metres of sliced veneer logs, sawlogs and rotary peeled veneer logs to Tasmanian manufacturers. "The lower quality wood will be used by Forestry Tasmania to supply growing markets in China, especially for peeler logs.
Forestry Tasmania would manage the new program on behalf of the Government. The Tasmanian Forest Contractors Association Chief Executive Ed Vincent said he was delighted the government agreed to the new plan.
A government spokesman said the contractor assistance package would mean that most harvesting and cartage contractors would be working for the next six to ten months at around 70 per cent capacity.
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FICA Members Meeting and Logging Costing Workshop in Tokoroa
On Wednesday 30 June FICA will run a logging costing workshop in Tokoroa at the Waratah factory on SH1. The workshop will run from 12.30pm beginning with a lunch then two interactive sessions on machine & operations costing. The "Business management of logging" handbook is included and will be used to work through practical examples. See the attached PDF document for information.
Please complete and return by fax or email to FICA - places are strictly limited so register ASAP to make sure you don't miss out.
NZ Commodities Record New High in May
The ANZ Commodity Price Index hit another record high in May. The World Price Index registered its fourteenth consecutive monthly rise, increasing by 2.5 percent. It follows up upwardly revised 5.4 percent increase in April (originally reported as a 4.9 percent increase).
Prices for eight of the thirteen commodities in the index rose. Dairy prices continued to climb, rising 4 percent and are up by nearly two-thirds compared to 12-months earlier. Large monthly increases were evident for the prices of skins (up 12 percent) and kiwifruit (up 11 percent). Increases were also recorded for wood pulp (up 6 percent), wool (up 5 percent), lamb (up 3 percent), venison (up 2 percent) and logs (up 1 percent). Seafood prices were unchanged on the previous month.
| Commodity Exports - HS Code 44.0 - Logs, Wood and Wood Articles | | Month ended April | 3 months ended April | 12 months ended April | 2009
$(million) | 2010 P
$(million) | 2009
$(million) | 2010 P
$(million) | 2009
$(million) | 2010 P
$(million) | | 201 | 270 | 554 | 727 | 2,263 | 2,527 | | UP 34% | UP 31.1% | UP 11.7% |
(Source: Statistics NZ) (P - Provisional)
ACC Update for Contractors
ACC Practical Information for Contractors/Employers
Top-Line…. Return to Work, Stay at Work, Better at Work…..all aim at the same result – developing an effective plan so an injured employee can get back to their full functionality as early as possible.
• Return to Work is ACC’s rehabilitation aim. 65% of work injury claims achieve full recovery and work resumption within 70 days.
• Stay at Work – is a workplace contact or workplace based assessment by a professional e.g. Physio or Occupational Therapist, to develop and communicate to the injured worker; medical / treatment provider/s, the employer and ACC barriers to and solutions for early work resumption e.g. limited duties; limited or graduated hours; suitable workplace changes to accommodate the workers loss of function; suitability of other suitable duties at the workplace.
• Better at Work is a trial programme ACC is introducing with treatment (GP) practices to emphasise the value of an injured person’s workplace in their rehabilitation. ACC are endeavouring to achieve a higher level of ‘Fit for Selected Work’ medical certificates or shorter ‘fully unfit’ certification for time off work. Better@Work is currently delivered through West Auckland, Hawkes Bay and Taupo Primary Health Organisations (PHO), supported by Better@Work coordinators. The goal is to use a combination of best practice medical certification for time off work and active communication between injured people and you their employer, to keep people at work through the recovery period.
There is now a ‘Managers Toolkit’ at www.habitatwork.co.nz to help guide you with information about prevention, early reporting, and maintaining the work ability, participation and safety of injured employees in your workforce.
At a Glance... ACC have introduced a new way to manage information from incoming calls from employers. It is envisaged this new process will streamline directing information to ACC Case Managers, and improve the process of support for injured employees when they are either partially able or unable to work as a result of injury.
How does it work? : Call ACC’s Claim Inquiry Service Centre on 0800 101996 – where 85% of calls are answered within 30 seconds – and ask for an Employer Assistance Task to be set up for the Case Manager. You will need to provide the employee’s ACC45 number or Claim number. You can outline any concerns about the case and most importantly, advise any suggestions about options for supporting the employee’s recovery at work e.g. availability of suitable transitional, modified or alternative duties.
(Source: Peter Musk, ACC)
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Nightmare in Broad Daylight - Could this Happen Downunder?
A goodwill gesture by the mayor of Port Alberni to connect potential foreign investors with Catalyst Paper, one of the central Vancouver Island community's biggest employers and taxpayers, seems to have blown up in his face.
Ken McRae, in an attempt to help attract some new investment to help the financially beleaguered forest company through the difficult times in the industry, introduced Catalyst executives to business officials from Yancheng, China, in February, but the new relationship appears to have gotten more cozy than the mayor intended.
Instead of investing in Catalyst, which conducted a tax revolt this year against Port Alberni and three other Island communities while claiming taxes were too high, the Chinese are proposing that the company take their Port Alberni mill apart and ship it to their country for reassembly where they claim Catalyst would receive much fairer tax rates.
The Chinese want Catalyst's paper manufacturing to be done in Yancheng City with the raw materials for the production to be shipped from Canada. While Catalyst has indicated that it has no plans to shut down its Island operations - at least not right now - the company has been beating McRae over the head with the offer and leveraging it as a warning to Port Alberni and other forest-dependent communities of what could happen if they don't lessen their industrial tax rates and become more business-friendly.
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URS Report on Australian Timber Market
*Latest Timber Market Survey shows upward price movements in key structural products*
Earlier this week URS Forestry released the March quarter 2010 issue of the Australian Timber Market Survey (TMS) report. This quarter's survey of softwood products showed that:
• The price of the structural products MGP 10 and MGP 12 experienced upward movements this quarter. The MGP 10 price has now moved beyond late-2008 levels.
• The price of panel products also increased across nearly all products surveyed, returning particleboard and MDF prices to a long term upward trend.
• The price of engineered wood products continued to fall reinforcing a downward trend experienced since the global financial crisis.
The improving price trends for many softwood timber products are indicative of growth in the housing construction market in Australia. Through 2009, housing construction commencements showed a strong recovery from the fall in commencements in the second half of 2008 during the global financial crisis. This increase in activity has recently been flowing through to building activity (including timber purchases).
Imports of softwood sawn timber into Australia have increased strongly recently. Over the March quarter, import volume rose by 11.5%, resulting in the fourth consecutive quarter of import growth. Although New Zealand continues to be Australia's largest source of imported softwood timber, recent extra volume has been acquired from Canada and eastern and northern European countries. The rise in imports has been assisted by Australia's strong dollar although the current volatility of the dollar adds some uncertainty to the trade outlook.
The TMS is a quarterly publication reporting the latest price trends in timber, panel, and engineered wood products in eastern Australia. TMS price data is collected from a range of timber market wholesalers in Queensland, Victoria and New South Wales and is Australia's only regular and publicly available source of timber product price data.
For further details on the latest TMS data and to obtain a copy of the latest report please visit the TMS webpage at http://www.ap.urscorp.com/Sectors/Forestry/TimberMarketSurvey/
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Facts On Australian Plantations
The Plantation 2020 Vision program has assumed responsibility for the Plantation Facts website, previously hosted by Willmott Forests. National Plantation Strategy Coordinator David Thompson has updated the information on the site with the latest statistics, and added some new information, particularly on environmental aspects. The site provides a quick reference source for facts on key issues including wood production levels, employment, plantation areas, forest areas broken down by state/territory, environmental facts, wood processing information, socio-economic impacts, with references to more detailed information sources. The site can be accessed at www.plantationfacts.com
(Source: A3P - Australian Plantation Products and Paper Industry Council)
Taupo for New Tigercat Skidder Launch
Taupo is THE place to be for the launch event THIS FRIDAY, 11th June for the NEW series of Tigercat skidders. EVERYONE is welcome with a BBQ and drinks from 3:30pm at 66 Rakanui Road, Taupo.
On show will be the first "D" series skidder in New Zealand a Tigercat 630D at the Taupo branch. The New Tigercat "D" series skidders have many new features including the turn around seat and joystick controls.
Pinus Car Plate Deemed too Suggestive
A tree lover who wanted to honor Michigan's state tree with license plates bearing its Latin name has had his plans nixed for fear the tags could cause offense. Sierra Club forestry expert Marvin Roberson had hoped for PINUS (PY'-nus) vanity plates, representing the white pine whose Latin name is pinus strobus. The Department of State panel that vets vanity plate requests has voiced concern that the name could be confused with a word for the male sexual organ.
(Source: Charleston Gazette via Tree Frog Daily Forestry News)
Buy and Sell
... and finally ... A Recent Global Survey Failed ...
Last month a world survey was conducted by the UN.
The only question asked was :
"Would you please give your honest opinion about solutions to the food
shortage in the rest of the world?"
The survey was a HUGE failure because of the following:
1. In Eastern Europe they didn't know what "honest" meant.
2. In Western Europe they didn't know what shortage meant.
3. In Africa they didn't know what "food" meant.
4. In China they didn't know what "opinion" meant.
5. In the Middle East they didn't know what "solution" meant.
6. In South America they didn't know what "please" meant.
7. In the USA they didn't know what "the rest of the world" meant.
8. In Australia they hung up as soon as they heard the Indian accent.
And on that note, enjoy the rest of your week. Cheers.
John Stulen
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