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WoodWeek – 21 July 2010

Greetings from Rotorua! Many people in the industry will be pondering the state of log export markets/conditions, particularly as the much-predicted rainy winter has not been a constraint in the last month. One analyst has plucked an interesting predictor out of the market indicators generally (meaning not just forestry) - and that is the Baltic Dry Index - which can be a strong leading indicator of commodity export activity - and it is diving fast. With forestry often bucking the overall general economic trends this could keep returns positive for forest commodity exporters.

Meanwhile, there is a view in this week's issue from experienced market commentators in global wood trade - the team at International Wood Markets Group in Vancouver - that long-term wood demand in China will benefit many key exporting countries including New Zealand. That will be reassuring to many - except local sawmillers.

This week FICA members in Whangarei will be meeting and attending the Logging Costing Workshop. The day kicks off tomorrow with a logging field trip - we will meet at the Kingsgate Hotel at 12 noon, before heading out to visit two Rosewarne logging crews in the Hancock forest estate. All members are then invited to meet for networking and drinks at 5:00pm at the Kingsgate Hotel. See full details in the story below.

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This week we have for you:

Contractors' Key Indicators Now Monthly

Please note that "Key Indicators" will return next week and from now on will continue on a monthly update frequency.

If you would like to see any changes to the indicators we report on, or indeed the frequency, we would welcome your letter/comments to the editor.


Efforts to end Tasmanian Forestry Conflict

It's been reported recently that the Australian Government has offered to finance a potential breakthrough between environmentalists and forestry companies to end the decades-long conflict over native forest logging in Tasmania. In meetings in Tasmania last week, Forestry Minister Tony Burke is understood to have told negotiating parties some federal money is available for an agreement. He has asked for a deal to be presented to him by early this week.

Over recent months, representatives of the timber industry and the environmental movement have been working towards a negotiated agreement. The environment movement is understood to want an almost immediate halt to logging of high- conservation-value forests and a phased end, over a number of years, to almost all native logging throughout the state except in rare circumstances. In return, the Tasmanian timber industry is looking for a restructuring package to help industry move towards certified plantation timber, financial help for new infrastructure and roads and support for Gunns' stalled Bell Bay pulp mill.

Earlier this week, election commentators quizzed Australian prime minister, Julia Gillard on whether the federal government had a role in a Tasmania forestry restructuring package, but she suggested, without discounting any federal role, that it was too early to tell.



FICA Northland Meeting/Workshop this Thursday/Friday

The FICA regional field trip happens tomorrow leaving from the Kingsgate Hotel in Whangarei soon after meeting there at 12 noon.

The FICA Members and Sponsors regional meeting will be held from 6:00pm on Thursday night at the Kingsgate Hotel in Whangarei. This will be followed by dinner at 7:00pm - which is complimentary for FICA members and sponsors (there is a cost for guests attending). Please call John on 027 275 8011 if you have not already registered for the evening meeting and dinner.

There's just ONE SEAT left on the FICA Workshop this Friday. Every month these FICA Logging Costing Workshops have been a hit with regional groups of contractors. The content follows a mix of Mark Blackburne's list of 'must-know' key costing issues for logging contractors - in addition to some excellent references to the newly revised handbook for logging costing knowledge - the Business Management for Logging book.

The whole handbook was revised recently and includes an excel worksheet to make it easy to do some costing case studies for your own business - once you've been on the course. See the attached PDF for details of the Whangarei workshop.

Date: Friday, 23rd July
Location: Kingsgate Hotel, 9 Riverside Drive, Whangarei
(Tel 09 438 0284)
To download the registration PDF CLICK HERE



NZ Forest Scheme Reduction Draws Criticism

National chops scheme in half: Government budget documents show that National will downscale the Afforestation Grant Scheme from $4m to $2m per year over the next three years before eventually ceasing it, according to a news release from Labour's forestry spokesperson Stuart Nash. The Afforestation Grant Scheme is a contestable government fund designed to encourage the planting of new forests.

Nash said that the axing of this scheme is foolish for three reasons.
1. Planting of trees is vital to New Zealand meeting its Kyoto commitments. The only reason New Zealand doesn’t have any international carbon liabilities is because of the amount of forests planted after 1990. Forestry will play a significant role in ensuring that New Zealand plays its part in mitigating the effects of global warming, and to cut a scheme that encourages people to plant forests defies logic.

2. Forestry has the potential to be a large employer at a time when unemployment figures are still high due to the difficult economic times. Why would the Government end a scheme with such potential to create jobs at a time of economic hardship?

3. The scheme has a high component of regional focus and initiative. Half of the funding is available to regional councils to help them meet their sustainable land management objectives. For example, the Hawke’s Bay Regional Council has proactively marketed the Afforestation Grant Scheme as an opportunity for Hawke’s landowners to establish new forests.

Nash said “The scheme encourages regional economic development and promotes an activity in forestry where everyone wins: the landowner, the region and the country. Sadly, given that there are so many winners, the scheme is now going to gone within 3 years."



BC Forest Industry Sees Positive Trend in Safety

FATALITY AND INJURY RATES DOWN IN FORESTRY INDUSTRY - The average number of fatalities in the harvest industry has been cut in half since 2004/2005. That according to BC Forest Safety Council CEO Reynold Hert.

On average there are 11 deaths per year in the industry in the BC industry. Hert says industry leaders got the ball rolling, by stating the amount of injuries and deaths on the job is far too high. He says the industry and it's leaders have now realized that they can make a change to make their workplaces safer without affecting productivity, and have done so.



Employment Law Changes Considered Moderate

Planned changes to employment legislation are thoughtful, moderate, and will be more likely to foster productivity, says BusinessNZ Chief Executive Phil O’Reilly. “The changes will relieve pressure points currently experienced by many of the parties involved in employment relations, including employers, employees, labour inspectors, union reps and mediators."

“And far from being skewed in favour of employers, the changes will put stiffer requirements on employers in a number of areas and increase penalties for employer non-compliance in others. “Overall, the changes demonstrate fairness to all parties.”

Mr O’Reilly’s comments on some of the key changes are:

  • Extending trial periods to all workplaces: Will give employers more confidence to hire, particularly people at the margins of the workforce
  • Union access requiring employer consent, which cannot be unreasonably withheld: Fair to both parties, demonstrates good faith; still substantially more permissive than in other countries we normally compare ourselves with
  • More focus on substance rather than process in personal grievance cases: For employees, will help bring clarity around dismissal cases; for employers will reduce vexatious and opportunist personal grievance claims
  • Simplifying Holidays Act: Will make it easier for employees to understand their rights; will make it easier to comply, especially for small firms, reducing payroll administration costs
  • Holiday pay and other entitlements calculated based on the average of an employee’s pay over the past year: Will make it easier for employees to understand their rights; will remove incentives to ‘game’ entitlements
  • Employees able to cash in the fourth week of annual leave, at employee’s request only: Employers commonly report requests for this ability; this will make the option available
  • Employers and employees able to agree to transfer the observance of public holidays to another working day: Will increase flexibility; recognises cultural diversity in the workplace
  • Employers able to ask for proof of illness or injury more quickly, at employer’s expense: Will reduce pressure on employees to cover for others
  • Early mediation services without representation, prior to any formal mediation; Will help the parties involved assess the risks involved prior to formal mediation; will help bring faster resolutions at less cost
  • Removing reinstatement as the primary remedy in dismissal cases: Recognises that reinstatement is often not realistic
  • A code of ethics for employment advocates: Will address some questionable practices, including no-win-no-fee ‘fishing’ cases
  • Formal definition of the role of Labour Inspector: Will help foster professional practice, however, must be accompanied by adequate training and resourcing
  • Allowing Labour Inspectors to issue improvement notices: Will help achieve compliance without litigation
  • Allowing employers and employees to communicate directly during collective negotiations: Will help foster better understanding and communication and will reduce misunderstandings during bargaining



    Forestry Tasmania to End Portside Fumigation

    Forestry Tasmania says it will no longer fumigate its logs with methyl bromide in Tasmania, after a storm of controversy over a shipment that departed Burnie last week. There was some opposition in Burnie when locals found out state-owned enterprise planned to fumigate a shipment of logs bound for China with methyl bromide at the Burnie port.

    It eventually decided to conduct the process offshore, before sending the shipment last week. Forestry Tasmania's general manager of operations Paul Smith said they had learned from the incident. "We have listened to the community and decided that in future we will avoid the use of methyl bromide in Tasmania," Mr Smith said on Monday.

    To read the full story click HERE

    (Source: Sydney Morning Herald)



    Logging Career Promotion Wins US Media Award

    The Telly Awards is an international competition that recognizes the work of media professionals in the Advertising, Broadcast, Online and Multimedia fields. Much like the Academy Awards, the entries are judged by industry peers and past winners and evaluated on messaging and production values. The Telly Awards receives over 11,000 entries annually from ad agencies, production companies, TV stations, cable companies, interactive agencies and corporate video departments. In this, the 31st annual Telly Awards, the Pacific Forest Foundation's new video "This Is My Office" was entered into the category of Online Recruitment and was awarded the Silver Telly, the highest award offered in the competition.

    The video traverses the forests of California, Oregon, Washington and Canada to capture the sights and sounds of what foresters and loggers do every day and package it in an entertaining and informative way aimed at attracting young people into our industry.

    To see the "This Is My Office" DVD visit PFF's website at www.pacificforestfoundation.org

    (Source: Pacific Logging Congress)





    China Wood Deficit Tipped to Benefit Exporters

     
    Wood deficit in China to create major opportunities for Pacific Rim exporters: Big winners expected to be BC and Russian lumber, and New Zealand and West Coast North America logs. A new five-year outlook report quantifies China’s growing demand for imported wood and shows how tight supplies will drive prices higher for exporters.

    China’s potential fibre-supply gap (the difference between total demand and total domestic supply) is projected to reach approximately 150 million m3 (roundwood equivalent) by 2015 — or a volume that is more than the entire Canadian timber harvest in 2009 — a strong indication that China’s wood imports must continue to rise in the short- to medium-term period to match with projected consumption.

    China’s surging wood products industry is becoming raw material constrained due to its heavy dependence on logs from Russia (65% of China total log imports over the last four years). Russian logs have become more expensive and scarce with the imposition of the Russian log export tax (currently 25% on softwood and 40% on hardwood sawlogs). The global supply of incremental logs is not large enough to replace the declining Russian log supply in the short term. China needs to grow its raw material supply at 8-10% per year to achieve its desired growth rate, but WOOD MARKETS forecasts a potential global log (export) supply that will only allow China to grow its import supply at just a 3%–4% annual growth rate after 2011.

    As a result of these dynamics, there are four exporting regions that should see the greatest benefits from the projected tightening of the wood supply and rising prices in China:

  • Canada (mainly British Columbia) has increased lumber exports to China by almost 800% in the last four years. With a tightening global export supply of low priced softwood logs available to China, low grade softwood (and now higher grades) of BC lumber imports have surged. The outlook is for rising volumes and higher prices for BC interior SPF and coastal lumber species.

  • Russia has increased lumber exports by about 185% in the same four years as a result of new Russian and Chinese sawmill capacity installations in Eastern Russia.

  • New Zealand has benefited from the reduced Russian log imports – its radiata pine log exports have grown by almost 400% in the last three years to attain 22% of China’s softwood logs imports (4.4 million m3) in 2009 and radiata exports are forecast to increase even further over the next five years.

  • The US Pacific Northwest, Coastal BC and Alaska have recently seen substantial increases in log exports and this is expected to more than double in the next 2-3 years (albeit from low levels).

    (Source: International Wood Markets Group, Vancouver, BC)



    US South a Biomass Source for Europe

     
    Energy companies in Europe show increased interest in sourcing biomass from the US South, reports the North American Wood Fiber Review. Woody biomass in the US South is attracting interest from European energy companies in their search for long-term, reliable and competitively priced supply sources, reports the North American Wood Fiber Review. The increased competition for wood fiber has pushed pine pulpwood prices upward in the Southeastern states this past year.

    Demand for woody biomass, in the form of wood chips, wood pellets and torrified pellets will increase substantially in Europe over the next ten years, exactly how much though, is unclear as the size of the increase depends on policies and subsidies implemented by governments in individual countries within the European Union. The cost of locally sourced biomass on the continent has gone up for many energy plants, resulting in increase interest in importation of wood chips and pellets from neighboring countries or from overseas.

    The US South is on the top of the list as a long-term biomass supply source for a number of energy companies. This is because the region has a stable supply of pulpwood, a well- functioning infrastructure, and competitive wood fiber costs as compared to most other markets in the world. According to the Wood Resource Quarterly, only Chile and the Western US had lower softwood pulpwood prices than the US South during the 1Q/2010. Hardwood wood fiber prices were well below the global average hardwood price index (GHPI).

    Two large-scale, export-oriented pellet plants are currently on the drawing boards. German company RWE has a plant in southern Georgia under construction with plans to commence production in the 3Q of 2011. Magnolia Biopower has announced plans for an export wood pellet plant to also be sited in Southern Georgia.

    This expanding green energy sector is situated within a stronghold of the traditional southern pulp industry with seven pulpmills within this Southeastern sub-region. The high concentration of wood fiber consumers within a fairly limited area has pushed wood costs higher the past few years. Pine stumpage prices have increased faster in this region than the average price across the South. In the 2Q/2010, prices were more than 50 percent higher than two years ago. With the expected increase in wood consumption by the energy sector in this sub-region it is likely that pulpwood costs will continue to be higher in this sub-region than the average for the US South.

    (Source: Wood Resources International)




    Buy and Sell

    ... Bless me Father - I have sinned ...

    'Bless me Father, for I have sinned. I have been with a loose girl'.

    The priest asks, 'Is that you, little Seamus Murphy?

    'Yes, Father, it is.'

    'And who was the girl you were with?'

    'I can't tell you, Father. I don't want to ruin her reputation'.

    "Well, Seamus, I'm sure to find out her name sooner or later so you may as well tell me now. Was it Mary O’Sullivan?

    'I cannot say.'

    'Was it Tamara Dickson?
    'I'll never tell.'

    'Was it Aine O’Brien?'

    'I'm sorry, but I cannot name her.'

    'Was it Catherine Reilly?'

    'My lips are sealed.'

    'Was it Peggy Kelly, then?'

    'Please, Father, I cannot tell you.'

    The priest sighs in frustration. 'You're very tight lipped, and I admire that. But you've sinned and have to atone. You cannot be an altar boy now for 4 months. Now you go and behave yourself.'

    Seamus walks back to his pew, and his friend Paddy slides over and whispers, 'What'd you get?'

    'Four months vacation and five good leads.'


    That's all for a Wednesday - hope your week is a prosperous one - Any contributions are welcomed to the Editor
    Cheers

    John Stulen


    We welcome comments and contributions on WoodWeek. For details on advertising for positions within the forest products industry or for products and services, either within the weekly newsletter or on this web page, please contact us.

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