WoodWeek – 1 February 2012
Greetings from your WoodWeek team. This week we've got the TPT Export
Market Report, which shows how good fortune has been with us in the log
export trade for quite some time now. For those of you wanting a more in-depth update, now is the time to register for the Future Forestry Finance
Conference running early in March, where we will have at least 3
international wood market commentators giving detailed updates on global
wood trade and expectations. Check out the website or download the
programme now from the event website. Registrations have
been pouring in - so we're expecting a good crowd and plenty of valuable
networking. Next week we will announce our after dinner guest speaker for
this event as well.
Outside of the log export business there is some good news for Gunns in
Tasmania as their financial backers have shown faith in the company -
undervalued though its share price may be. Back on this side of the Tasman
more bad news with a regional sawmill being put up for sale after drastic
measures had to be taken with loss of markets - not a good look for when
domestic and export lumber markets recover - and that is very much still an
"if" statement - not necessarily "when" - well that's my opinion.
Also this week we've got some positive news regarding biomass and the
global woodchip trade. And we've got some great photos of what a man and
a chainsaw and a LOT of time can produce. Check it out!
FICA members and other logging contractors are invited to register for our
Cable Logging Workshops in the various regions. See the attached flyer in this
week's issue below. We will also be running a FICA members meeting on the
23 February in the Gisborne region. We invite all logging contractors to turn
out for this meeting where we will discuss the future of yarder tower
inspections, implications for contractors with ACOP changes and upcoming
changes in FITEC training issues. The Cable Logging Workshop runs on 24
February also in Gisborne this month.
Finally, what's all the fuss about selling 16 dairy farms to one wealthy Chinese
man? - it is indeed one man who owns 99% of the company. Forestry seems
to operate successfully with 72% overseas ownership
of the commercial crop. According to an analyst's estimate from 1999 35% of
the crop is owned by
Americans, 12% by Asians. Indeed, I can't recall much of a public outcry when
any of the Crown forest sales took place. Its a storm in a milk cup really when
you hear that apart from this sale of 9,000 hectares (ha), a further
360,000 ha of other NZ land was sold to foreign buyers from a host of
countries in the past 12 months anyway - most of which went unnoticed.
This week we have for you:
TPT Export Market Report
2011 has proven to be another strong year for NZ log exports, with 11.9 million jas shipped
from NZ ports over the year. This is a 12% year on year volume increase over 2010’s 10.6
million jas. NZ’s harvesting/transport and port infrastructure have managed this increased
well, albeit not without some signs of stress, but will have ongoing challenges if export
volumes continue to rise at rates seen in recent years.
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The Chinese market had a strong finish to 2011, with some 60% of NZ’s log exports heading
in to this market over the year. Reduced Chinese inventory levels have allowed for a positive
start to 2012, but as is normal for the period preceding and during Chinese New Year; the
market has now slowed down and is expected to remain this way until late February.
Generally the March/April period shows a surge in demand, but with Chinese log inventories
now increasing and the housing market cooling, 2012 could well see more of the
supply/demand volatility seen last year. Looking back at 2011, much of the increase in
demand for imported softwood logs was due to a massive increase in new log processing
facilities across the East Coast. This spurred demand as sawmills filled their yards with logs
not necessarily linked to demand for finished product. As a consequence the Chinese market
built up and then shed inventory throughout the year, with variations of over 2.0 million m3
between cycles.
This surge in newly built facilities is over, at least for the time being, and many of these new
plants haven’t yet seen sufficient demand to run at full capacity. Even with a government
programme of new house builds that runs into the tens of millions p.a. there is enough global
availability of softwood to over-supply current Chinese demand levels, which is growing at
approximately 8% p.a. This situation is likely to remain unchanged until new house builds and
domestic demand for lumber increases within the US.
Market conditions in Japan remain stable, but with activity currently subdued due to winter
conditions. The situation is much the same in Korea where New Year holidays are also being
celebrated. Neither of these mature markets experience the supply/demand peaks and
troughs seen in the developing markets of China and India. The outlook for NZ log demand in
Korea and Japan is likely to continue with the levels of demand seen in recent years at 2.3
million jas and 700,000 jas respectively.
The outlook for the Indian market is unchanged, with potential for strong growth on the
horizon, but with significant infrastructural issues restricting the rate at which log
consumption and supply can expand. Consumption of NZ pine is approximately 20% of
Chinese usage, but has been expanding at a similar percentage rate to Chinese growth in
recent years. India ended 2011 with high inventory levels after a doubling of NZ vessels
arrivals late in 2011. This inventory is expected to take some months for sawmills to work
through, with the outlook for Q2 looking more positive for a return to the more regular 4
vessels/month seen in 2011.
Shipping rates have fallen consistently over recent months, but are now stabilising. Current
charter rates mean that returns for ship owners are now at the levels where vessels are being
anchored up instead of operating at a loss. As a result there are signs that the number of
vessels available for spot charters is tightening. The expected up-turn in demand following
Chinese New Year may yet prompt an increase in freight rates.
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Kiwi Contractors Key Indicators
Check out the latest changes in diesel prices, interest rates and exchange rates for New Zealand in this
week's Key Indicators. We will post Australian data in a fortnight.
NZ CONTRACTORS' KEY INDICATORS
1 February 2012 | | Interest Rates | Diesel Price Watch |  | 90-day bill rate = 2.76% |  | Average (excl GST / all regions) = $1.36 | | Exchange Rates | |
Change (month) = -4% | | NZD/USD = 0.8232 | | Change(quarter) = 4% | | NZD/Yen = 63.15 | | Change (year) = 12% | | Labour Cost Index - Ag/Forestry/Fishing | Consumer Price
Index | | Sep 11 quarter = 1030 | | Dec 11 quarter = 1158 | | Change (quarter) =+0.4% | | Change (quarter) =
-0.3% | | Change
(year) = +1.6% | | Change
(year) = +1.8% |
*Note:The LCI has been re-expressed on a June
2009 quarter base (=1000).
Cable Logging Workshops Planned for 2012
Forest contractors will welcome the chance to get their key hauler crew team leaders
alongside
other professionals in the business for a field-day of learning new tools and techniques for
getting the most from your team on the hill. FICA acknowledges the support of
Brightwater/MADILL to make this series possible.
FICA ran a pilot workshop last year in the Coromandel/Thames region - thanks to FICA board
member Ross Davis and his team. We have taken feedback from that event and are using it to
design a more structured day out for team players who are open to learning new ways from
each other and from very experienced loggers out in the scrub.
Dates and venues for this workshop series are as follows:
24 February, Gisborne
30 March, Northland
27 April, Nelson
27 July, Tokoroa
23 November, Balclutha
To register your interest in any of these workshops please call or text Lisa Forrest on 021 275
8011 or email lisa.forrest@fica.org.nz. Places
will be limited and a small fee will apply to cover some course costs.
Click here to download the event flyer.
Gunns gets Reprieve from Bankers
Embattled forest company Gunns has been granted
a 10 month reprieve by its group of bankers.
The company said its 10 bankers have agreed to extend the terms of its syndicated debt
facility (currently $340 million) and primary working capital facilities until December 31 this
year.
Gunns said the debt facility's balance was expected to be reduced progressively in the course
of the 2012 year as the company completes asset sales currently in progress and finalises the
Bell Bay pulp mill project investment in northern Tasmania. The company is in the process of
settling the $120 million sale of its Green Triangle Forest Estate, which will go towards debt
reduction.
To read the full article click here.
Sawmill Sale Blamed on Dollar
A Feilding sawmill that had already laid off 48 staff is
now on the market with a "skeleton" crew of workers.
Operations at the New Zealand Sawn Products site in Maewa Rd were wound down last year.
Just five people now work at the plant – down from 53 six months ago. In July, 20 staff were
made redundant, with 28 more workers being let go from September last year.
Seventy-five per cent of the Feilding mill's production of weatherboards and other lumber
products was exported.
The sawmill started as a family-owned operation known as the Stewarts Mill in the 1960s. In
2002, the Feilding Lumber Company sold the sawmill to New Zealand Sawn Products, a
partnership between an American company and the New Zealand-owned Ribbonwood group.
To read the full article click here.
Easy Guide to Reading WoodWeek
Thanks to all of our readers for your interest, feedback and contributions. Over the weeks,
months and years we've added things just because readers have asked for them. Something
which you may not be aware of is that we have weekly features designed to provide you, your
management team and your crews with useful and pertinent information.
Each month we stick to a general schedule that looks a bit like this:
- Week 1: TPT Log Export Market Report and Contractors' Key Indicators for NZ contractors.
- Week 2: Agrifax Log Prices Report, New Zealand Commodity Price Index, Overseas Merchandise and Trade Data and what's up in the latest New Zealand Logger magazine
- Week 3: Contractors' Key Indicators for Australian contractors, the Ocean Freight Index and the Network for Women in Forestry Newsletter.
- Week 4: Safety Corner - Alerts and Near Miss Reports for crews to use at tailgate meetings
Beyond that we try to provide you with the news that's worth noting for everyone who has a
role to play the forest and wood products industry - and who appreciates a good joke with
their news every week as well!
Do you pass WoodWeek on to your mates? Tell them to sign up to get directly each week -
it's free - just click on our about us page and it's easy AS!
ForestWood 2012 less than 2 months away
ForestWood 2012 is less than 2 months away. Register today!
Following on from the success of the first joint conference, ForestWood 2010, held in October 2010, ForestWood 2012 is being held on Wednesday 21 March, World Forestry Day!
ForestWood 2012 is a fantastic opportunity for organisations and individuals, with a keen interest in forestry, to engage with decision makers and professional specialists from the forestry industry. The conference will focus on new thinking, highlighting new ideas around how the industry can move forward.
The ForestWood 2012 Conference programme has been developed around the conference theme "A New World in Wood”. We’ve secured exciting presenters to focus on current issues. The conference programme is available online.
Early bird registration is now open until midnight Friday 17 February 2012.
For full conference details head to the event website.
Union Concerned over Sawmilling Capacity
Building work needs to pick
up to keep workers in employment and ensure local sawmills stay in business, a union for
wood processing workers said this week.
Building consents data for the 2011 calendar year out this morning shows a decline in
residential and non residential building consents from the previous year, despite a small pick
up in December. The continued lack of consents is probably also a factor in the
announcement of a mill sale in Feilding - of NZ Sawn Products’ sawmill - where staff numbers
are down to 10% of what they were a year ago.
“The low housing starts news is bad for both workers and wood processors,” said Robert
Reid, General Secretary of FIRST Union (formerly NDU).
“A healthy construction industry helps keep workers in construction jobs and ensures that
New Zealand’s wood processing industry has a market for its goods, in addition to its
exported products.”
“We are still not reassured that New Zealand has enough wood processing capacity to fill the
demand which will come from the Canterbury rebuild over the next few years. It would be a
travesty if Canterbury were to be rebuilt using Chilean and Canadian timber, while local
sawmills lay off workers and downsize.”
“We need stronger leadership from the government to ensure the survival of the wood
processing industry, including a more strategic approach to procurement for the Canterbury
rebuild and looking at a lower domestic log price to enable wood processors to manufacture
in New Zealand.”
The FIRST Union represents 28,000 workers including 1,600 in wood processing.
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Wood Chip Trade Positive in Latin America
Wood chip exports from Latin America reached a record high in 2011, with pulp mills in Japan
and Europe being the major export destinations, reports the Wood Resource Quarterly.
Global trade of wood chips has gone up substantially the past two years. Hardwood chip
export from Chile, Uruguay and Brazil was up 43 percent in 2011 compared to 2009, as
reported by the Wood Resource Quarterly. A clear majority of the increase was Eucalyptus
chips destined for pulp mills in Japan and Europe.
Wood chip exports from Latin America are on track to reach a record high of
almost eight million tons in 2011, reports the Wood Resource Quarterly. This would be an
increase of seven percent from last year and of almost 60 percent higher than in 2006.
Chile is by far the biggest exporter, accounting for two-thirds of the total shipments from the
continent, while Brazil and Uruguay both account for about 16 percent each. In 2011, Chile
was the world’s second largest supplier of hardwood chips after Vietnam.
Latin America’s hardwood chip export volumes accounted for approximately 50 percent of
globally traded wood chips, a share that has grown from 34 percent five years ago.
Historically, between 80-90 percent of the exported wood chips from Latin America have
been destined for Japanese pulp mills, but there has been a diversification of consumers over
the past few years. Although shipments to Japan have gone up by over 30 percent from 2006,
the share of total exports has declined and is currently around 70 percent.
The biggest change from five years ago is that pulp mills in Europe have been buying much
more Eucalyptus chip, particularly from Chile and Uruguay. In 2011, total shipments to
Europe reached almost 1.7 million tons, which was slightly lower than 2010 but more than a
doubling from 2009, according to the WRQ. The three major importing countries in Europe
are Spain, Portugal and Norway. In addition, there have also been a few shipments to Finnish
and Swedish pulp mills the past few years.
New destinations for Eucalyptus chips from Latin America the past five years include Morocco,
Turkey and China. There are expectations that Chile will increase its shipments to China in
the coming years because of higher demand from new pulp mills in the country.
Global timber market reporting is included in the 52-page quarterly publication Wood
Resource Quarterly (WRQ). The report, established in 1988 and with subscribers in over 25
countries, tracks sawlog, pulpwood, lumber and pellet prices and market developments in
most key regions around the world.
One Man and His Chainsaw
Its amazing what you can do with a chainsaw!
Head to the FICA website for more
insight into the AMAZING things this man can do with his saw - it's magic!
Enormous UK biomass power plant nears full commercial operation
The world’s largest wood pellet-based biomass power plant will be fully commissioned and
producing electricity early 2012.
RWE npower’s Tilbury, England facility will produce nearly 750 MW using wood pellets
produced at RWE’s Waycross, Georgia facility. The facility has already begun running two out
of three biomass boiler units, with the third set for operation at the end of January.
The facility has been using coal but by 2013, RWE npower plans to operate the facility
exclusively on biomass. At 100 percent capacity, the plant will use roughly 2.3 million metric
tons (2.5 million tons) of wood pellets by the time the plant switches only to biomass, a
switch that Dan Meredith, corporate public relations manager for RWE npower, said would
account for 10 percent of renewable energy output for the UK going into 2012.
Based on legislation enacted in 2008 aimed at large, older coal-fired power plants, the
Tilbury facility was faced with the choice of either investing in improvements, or operating for
another 20,000 hours before closing. The Tilbury plant decided not to make the upgrades,
but chose instead to finish those 20,000 hours using biomass. RWE will then determine if it
will continue operating the plant with biomass feedstock, make the upgrade investments, or
shut down. Meredith declined to speak about the company’s plans to operate the facility
using biomass past 2013.
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Jobs
Buy and Sell
... And Finally ... Career Change Capsize
Italian Cruise ship captain Francesco Schettino began his new job as a bus driver yesterday ...
but once again things didn't go so well ...
That's all for our mid-week wood news roundup.
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Have a safe and prosperous week.
John Stulen
Editor
PO Box 6160
Building X91, Scion Campus, 99 Sala Street
Rotorua, New Zealand
Tel +64 27 275 8011
Web www.woodweek.com
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