WoodWeek – 25 October 2017

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Greetings from your WoodWeek news team. Today’s good wood news comes on a macro and micro scale along with some necessary political angles from both the new coalition government and industry leaders. Given the leap into the political limelight for forestry, today’s issue is a bumper one.

The forest and wood processing industry says it is looking forward to greater use of timber in New Zealand with the coalition government now in place. The Wood Council Chair, Brian Stanley, says they also need to introduce a wood-first policy for government buildings.

Moving to news on the micro-scale, a world-first scientific breakthrough that could revolutionise the forestry industry was announced at the Forest Growers Research Conference last week. Scion scientists revealed on Tuesday that they have completed a ‘draft assembly’ of the radiata pine genome that will mark the beginning of "a new era of precision forestry for a critically important species."

Further industry comment today comes in the form of an opinion piece from NZIF President James Treadwell. His editorial on the commentary potential conditions of the new governing coalition is illuminating. He is, of course, referring to speculation about our forest industry and the idea of forcing forest owners to supply domestic mills.

Finally, moving some trade facts to finish today’s issue – in the first half of 2017, China imported 6.2 million cubic metres of logs from New Zealand valued at US$802 million, a year on year increase of 10% in volume and 21% in value. Over the same period China imported 192,100 cubic meters of sawn wood from New Zealand valued at US$49.35 million, year on year increase of 14% in volume and 16% in value. When you do the numbers that’s $129 per cubic metre for our log products and $257 per cubic metre for the sawn wood.

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Jones gets forestry portfolio

Shane Jones Minister for 100 million trees - Shane Jones will be the Minister responsible for spending $1 billion a year on New Zealand's regions.

Newshub reported this morning that Jones will also be in charge of the new Forestry Service, which will plant 100 million trees a year - with the goal of planting a billion over 10 years.

The goal is to take jobs to the regions with roles in planting and nurseries.

It is understood that about 50 million trees are already planted in New Zealand each year, meaning the new Government's planting will double that.

The plan will require 1000 stems per hectare, over 100,000 hectares.

There is an environmental element to the plan, as forests planted on Department of Conservation land will be native trees acting as permanent "carbon sinks" to counter climate change.

Trees will also be planted on Maori-owned land and there will be a big emphasis on getting Maori into jobs.

The new Government department's headquarters will be based in Rotorua.

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Source: Newshub

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More wood in public buildings

New Government needs to take extra step for wood use – The forest and wood processing industry says it is looking forward to greater use of timber in New Zealand with the coalition government now in place.

But WoodCo Chair, Brian Stanley, says the new government needs to introduce a wood-first policy for government buildings as well.

“We’ve got a new drive from the top for more plantings, a greater thrust for forestry in regional development and a commitment to use trees for carbon sequestration. The missing link though is the government specifying wooden construction as the first choice for its new buildings.”

“Developments in wood engineering, such as cross laminated timber, are enabling medium and high rise buildings to be built with timber as their primary component. This is happening around the world. We are being left behind, with only some recent examples, such as Sir Bob Jones’ 12 storey office tower in Wellington, or the Nelson Airport terminal.”

“Wood construction has many benefits, such as sourcing locally, use of a renewable resource and quicker construction. But New Zealand architects and specifiers are not familiar with how to use modern wood. We need the government to take a lead.”

“The Rotorua Lakes Council is so far the only local government body to adopt a wood-first policy. Others who want to use a modern and efficient resource already at their doorstep could learn from Rotorua.”

Brian Stanley says the forest and wood industry is not looking for preferential treatment, because he says if wood is objectively considered as a building material it can clearly and frequently outperform other traditional building construction, particularly in earthquakes where the in-built flexibility of wood makes this natural material a class performer.

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Source: Woodco, Radio NZ & Otago Daily Times

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Scion-tists reveal ground-breaking research

World first ground-breaking research announced for forestry industry – A world-first scientific breakthrough that could revolutionise the forestry industry was announced at the Forest Growers Research Conference in Christchurch.

Scion scientists revealed at the conference on Tuesday that they have completed a "draft assembly" of the radiata pine genome that will mark the beginning of "a new era of precision forestry for a critically important species." A genome is an organism's complete set of DNA, including all of its genes. Each genome contains all of the information needed to build and maintain that organism.

With the new knowledge, the forestry industry could breed trees with desired characteristics, doing away with selective breeding which can take decades to produce superior trees, said molecular breeding scientist Emily Telfer.

"We could breed a whole range of different trees, from construction timber to biofuels" Telfer said. "Thanks to genomics we will be able to identify genes with drought and disease resistance and establish them much faster."

Another advantage will be in reducing the effects of climate change and disease.

"As environments alter with climate, diseases not found in New Zealand may establish and threaten our forests," said Telfer. She said the completion of the genome assembly meant scientists now had an "instruction book" for how a radiata pine grew. It was the foundation needed to begin the task of deciphering how each of the base pairs of DNA related to the trees' physical terms.

Scion research team science leader Heidi Dungey said the genome was a "very complicated beast."

"It's over 25 billion base pairs in length which is eight times bigger than the human genome."

The genome will be the foundation for applying genomics in forestry, she said.

"Achieving a genome opens the door for applying genomic technologies across the board, not only for production reasons, but also for environmental reasons.

"There are still a large number of sequences that we still need to discover. But genomes are always a work in progress.

"First of all, we will be using it to understand how markers that are associated with different traits in the radiata pine population can help forest growers and improve their production and profitability.

"We will also be using it to understand how genes work - to pick into the function of the gene and how it is operating." The genome assembly began in 2013 and was completed in September using a high-capacity computer server.

Radiata pine is the "backbone" of New Zealand's forest industry, but it is also the most domesticated pine in the world and is grown commercially in Australia, Chile, Spain and South Africa.

Source: Stuff News and Forest Growers Research

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Those who own the logs set the price

Guest editorial from James Treadwell, President of the NZ Institute of Forestry: Looking back over recent weeks, as we waited for a Government to be formed there has been much commentary on what may or may not be the conditions of coalition.

The major discussion around forestry has been the idea of forcing forest owners to supply domestic mills. This idea has been discussed on both TV1 and TV3 as well as on Radio National and various written publications.

Whilst I am sure there are some who think this is good idea I struggle with it. Presumably being forced to sell to the domestic mills means ‘at a discount’ and this, I am afraid, is very short sighted. Almost all of New Zealand understands we need new and increased planting to meet many of our environmental objectives, yet this one idea would do more to stop new planting than almost anything else the Government could suggest. I know no other investment where the Government legislates the investor must sell to a processor. Where this has partially occurred (e.g Fonterra) it has occurred with the growers agreement and with the goal of improving returns to the grower, not reducing them.

It has been suggested he Government could start investing in planting in its own right. At a limited scale, on Crown lands and in conjunction with iwi, this makes sense. But as we know new planting ties capital up for a long time. Any direct Government investment into new planting must compete for the tax dollar with infrastructure, health, education and social welfare. Current investment in New Zealand forestry is around $30 billion. It is totally unrealistic for the Government to be able to replace this investment. Private investment is required to ensure we have a vibrant forest sector.

I am a strong supporter of the need for a vibrant and strong domestic processing sector. As a sector we need this, and most forest owners recognise the need. Many large forest owners ensure they are meeting their commitments to the domestic sector before they export, and the produce they do export is mostly the grades our domestic sector do not want. What will happen to these grades, is the suggestion we force the domestic processors to take them, even if they know they will struggle to process and on sell profitably?

Let us also consider our NZ Super Fund. It has a pretty significant investment in a CNI forest which has been giving them some impressive returns, partially on the back of the ability to export grades which the domestic mills don’t want. It would be a pity for all New Zealanders if this particular golden goose was strangled. What this particular forest manager does is ask the domestic consumers what logs they want, then they supply them what they ask for and the left over (approximately 35% of total volume) is exported. The export volume allows this forest to be flexible with their domestic customers. Without this flexibility then I am sure this forest manager would be asking their domestic customers for a take or pay obligation, which potentially means they could be worse off with no ability to reduce input when the local markets are performing poorly.

But let us consider the many Mum and Dads, iwi and farmers who have a small block of trees ready for harvest. As the large owners already have their commitments to the domestic processors sorted and they are long term, these poor small owners will be disproportionally effected by the requirement to supply the domestic processor as the processor will see this supply as ‘additional’ and therefore will not pay full price.

I wonder if the New Zealand public would support regulating apple orchards so they can’t export their apples and have to sell them to the cider brewery down the road and should Watties really stop harvesting those baby peas and grow them on to full size for the good of the nation? We need to start turning our collective minds to how to encourage people to plant trees, not disincentivise!

If New Zealand feels strongly the wood domestic processing sector needs support, then this support should come from the tax payer in general, rather than from one part of the economy (the forest owners). There are other options to help these processors including accelerating the depreciation on machinery, the removal of overseas tariffs on sawn lumber and some of the non-trade barriers our wood processors face when exporting processed wood products.

A strong domestic processing sector is imperative for all of us. However this should not be at the expense of the grower. As a sector we need to work together to ensure a strong processing industry exists and, in general, we do. Is it perfect? Of course not; but forcing growers to supply processors at a discount by regulating or taxing log exports will not solve the problem. In fact if this happens, in 25 years there may be very little forest to supply to any mills.

James Treadwell (pictured)
President - NZ Institute of Forestry (NZIF)

Source: NZIF Newsletter

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New Zealand - China trade agreement

New Zealand and China to expand timber trade - Recently a memorandum of understanding was signed between the New Zealand Wood Products Manufacturing Association (WPMA) and the China Timber and Wood Products Distribution Association (CTWPDA) aimed at promoting timber trade and technology cooperation.

In the first half of 2017, China imported 6.2 million cubic metres of logs from New Zealand valued at US$802 million, a year on year increase of 10% in volume and 21% in value. Over the same period China imported 192,100 cubic meters of sawnwood from New Zealand valued at US$49.35 million, year on year increase of 14% in volume and 16% in value.

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Australian log price report released

The latest Australian Pine Log Price Index for the January-June 2017 period has just been released. The Australian Pine Log Price Index is compiled by KPMG using data provided by Australian softwood growers. The Index documents changes in pine log prices achieved by large-scale commercial plantation owners selling common grades of plantation softwood logs to domestic processors.

KPMG updates the Index biannually, with the two reporting periods being January to June and July to December. The Index has a base period of January to June 1998. KPMG acts as the independent Index manager and collects confidential data on log volumes and stumpage values for all sales, including long and short- term contracts and spot transactions, at the end of each reporting period. Quantity information on export sawlogs and export pulpwood is also provided.

This report presents a summary of the results of the Index report released for the period January to June 2017. The findings in this report are based on data provided by HQPlantations, Forestry Corporation of NSW, HVP Plantations and OneFortyOne Plantations.

The report is attached here for your information.

Source: KPMG
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Employment law set to change

Winston Peters and New Zealand First have announced their decision to form a new government with Labour and the Greens. The announcement can be found here.

New Zealand’s employment law landscape is now set to change and employers need to be ready to adapt. At this stage it is unclear exactly what policy changes will be implemented over the next three years, although some guidance can be gleaned from the policies proposed by each of the coalition parties leading up to the election. Some of the major employment policy changes announced during the campaigns are set out below.

The Labour Party’s campaign manifesto set out that in the first 100 days it would:
  • Replace the 90-day trial period framework with a new trial period system;
  • Pay all workers in core public sector services at least the Living Wage;
  • Increase the minimum wage to $16.50 an hour and base future increases on the real cost of living for people on low incomes;
  • Extend paid parental leave to 26 weeks;
  • Restore reinstatement as the primary remedy for employees who have been unjustifiably dismissed; and
  • Reform collective bargaining in New Zealand.

The Labour Party’s campaign manifesto also proposed that within the first 12 months it would:
  • Begin consultation on improving minimum redundancy protections for workers affected by restructuring;
  • Introduce statutory support and legal rights for ‘dependent contractors’;
  • Investigate options for ensuring that people who work over 40 hours a week receive adequate remuneration;
  • Increase the number of and resourcing for Labour Inspectors;
  • Introduce Fair Pay Agreements that set “fair and basic” employment conditions across an industry; and
  • Investigate measures that improve job security for people in precarious forms of employment (e.g. labour hire, casual, seasonal, contracted or sub-contracted workers).

The Green Party proposed to:
  • Implement annual adjustments in the minimum wage to ensure that it equates to no less than 66% of the average wage;
  • Increase protection for casual, seasonal, fixed term, temporary and event-based workers;
  • Introduce statutory protections for independent and dependent contractors;
  • Establish a minimum statutory entitlement to redundancy compensation;
  • Establish a task force to investigate the economic and social effects of a 35-hour working week; and
  • Extend entitlements to paid sick leave and bereavement leave, and establishing a separate domestic leave entitlement.

The New Zealand First Party proposed to:
  • Increase the minimum wage to $20 per hour;
  • Review the practice of ‘short-term’ employment contracts;
  • Ensure that hiring New Zealanders is a priority; and
  • Ensure enough workers are being trained in the area of aged care to cope with New Zealand’s ageing population.

It is likely we will see a mixture of the above proposals (or variations thereof) implemented in the coming years. Importantly, there are some common ideas that each of the coalition parties share. These include raising the minimum wage, increasing protections for casual, fixed term, seasonal and other short term workers, and introducing statutory protections for contractors. Employers will need to be alert to these proposed policies and be ready for change. Rest assured, we will be keep you updated with any changes as they develop.

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WPMA welcomes time for change

Time for change in the New Zealand wood industry - The NZ Wood Processors and Manufacturers' Association (WPMA) congratulates the NZ Labour Party, NZ First and the Green Party on successfully joining together to form the next government.

Mr Brian Stanley, Chair of WPMA, notes that, "this is a very important result for the NZ wood processing and manufacturing sector. The coalition parties have campaigned vigorously in this election on the need of our sector and the communities depending on it for jobs to get a much fairer deal. I thank them for this and agree with the incoming government that neo-liberal policies do not sit well with this industry. "As WPMA have advocated for on many occasions, the 30 years or so since privatisation of the NZ forestry sector and our exposure to (so-called) global free markets has, in fact, resulted in sector decline, high losses of jobs and contributed to regional economic deterioration."

WPMA contends that current markets are not working because NZ wood processors and manufacturers face unfair competition from overseas rivals who get government subsidies.

Mr Stanley says that he is heartened by the coalition's desire to see the NZ wood industry thrive by remedying these grossly unfair trading conditions.

"We must stop NZ logs being siphoned off overseas to manufacturers receiving government handouts at the cost of jobs in our regions and our ability to add value."

"We look forward to working closely with the new government to urgently bring about these much needed changes."

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Ginseng from forest set for export

MPI funding to get high value ginseng exporting - A South Waikato ginseng producer is ready to approach potential investors to increase its production and exports with the help of funding of up to $40,000 from the Ministry for Primary Industries (MPI).

Maraeroa has 20 hectares of high value wild simulated Asian panax ginseng growing on the forest floor of its 5,550 hectare pine plantation. The group is looking to double the size of its ginseng plantation by raising capital and having a purpose designed processing factory built at Pureora.

Maraeroa C Incorporation is using its MPI funding to compete an investment information memorandum and business plan for potential investors.

“The economic return from ginseng will contribute to Waikato’s economic, social and cultural growth. Growing ginseng under their existing pine tree canopy has the potential to optimise Maraeroa’s return from the land for its 1,200 shareholders,” says Ben Dalton, Deputy Director General, Sector Partnerships and Programmes at the Ministry for Primary Industries.

“This has been a long-term investment for Maraeroa. Growing Ginseng started out as a trial for them in 2006 and they had their first commercial harvest in 2016. The growing conditions turned out to be right for them which is exciting as Ginseng is valued at more than $400,000 per hectare,” he said. Maraeroa’s funding comes from MPI’s Maori Agribusiness fund and contributes to regional economic growth.

The Incorporation has started looking for potential investors with existing distribution channels to China. The company currently works with a small number of Chinese distributors and retailers who sell their products around New Zealand and in Hong Kong.

Maraeroa’s Chief Executive Glen Katu said increased exporting would require additional local staff to be hired for ginseng production, processing and distribution.

“We’ll need to hire more qualified and skilled local staff to handle larger product volumes and manage exports and distribution. There’s also an opportunity for further investment in research and development to expand into new ginseng product lines and build greater awareness in China about the quality of New Zealand ginseng products.

“There could be some huge long-term benefits for other forestry operators by growing ginseng. Recent studies have shown that the Central North Island forests are an ideal place to grow good quality ginseng and there is demand for wild simulated ginseng in China. We want to provide sustainable revenue for our shareholders and their families while ensuring the land is handed onto the next generation in as good, or better condition than it was received,” says Mr Katu.

MPI’s Maori Agribusiness team helps Maori make the most of their primary sector assets from production and processing, through to exporting via tailored support.

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Labour's forestry plans during election campaign

Growing our forestry sector - Wood and wood products are our third largest export industry. Our wood sector is innovative, from better forestry practices, to new manufactured products.

Recently, however, there has been a trend away from value-added wood processing and manufacturing towards simply shipping raw logs overseas.

Since 2008, the wood processing and manufacturing industry has lost 3,000 jobs. Wood processing and manufacturing exporting has fallen in real terms, while raw log exports have tripled. Local wood processers often say they struggle to get the logs they need while raw logs are sent overseas, with the jobs and value-add being captured in other countries.

The shift away from value-added to raw exports has led the chairman of the Wood Council to say the goal of lifting exports to $12b by 2022 isn’t going to be achieved. Government can do its part to help coordinate the needs of foresters with the processing and manufacturing industry.

Increasing both commercial and native forest area in New Zealand is an important part of doing our bit to combat climate change.

Labour will:
- Establish a New Zealand Forest Service in Rotorua to help coordinate forestry companies and manufacturers by developing a National Forestry Strategy. The Forest Service will also:
    o Plant commercial forests itself on Crown land and other land to provide certainty of supply to businesses investing in processing and manufacturing
    o Provide consultancy services for iwi and private owners to help them establish forests on their land
    o Be co-located with Scion, renamed the Forest Research Institute
    o Establish regional offices where required
- Support wood manufacturing and processing by favouring wood for new government building projects, including KiwiBuild
- Allocate up to $20m to help construct a new prefabricated housing plant in Gisborne
- Help keep forestry in New Zealand hands by requiring the sale of logging rights on land over 50 hectares to be approved by the Overseas Investment Office for overseas purchasers
- Work with the tertiary education sector to get more young people qualified to work in the forestry sector
- Employ young unemployed people under the Ready for Work programme to carry out riparian tree planting to block run-off and serve as a carbon-sink.

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Source: New Zealand Labour Party Manifesto 2017

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Awaken yonder farmer - to the wonder of trees

Transport, trees key factors in climate change response - New Zealand’s most effective actions on global warming in the short to medium term would be to focus on energy and transport, and improve current policies to better reward those who want to plant trees, Federated Farmer says.

The Federation’s climate change spokesperson, Andrew Hoggard, said the new report "Our Atmosphere and Climate 2017" provides a useful update on the nation’s greenhouse gas emissions.

"It confirms a lot of what we already know, including that agriculture is a significant contributor to emissions. Federated Farmers acknowledges the incredible amount of work going on to address climate change, and to reduce greenhouse gases.

"However, we need to be mindful of the international perspective. Greenhouse gases don’t recognise nations’ borders; this is a global equation.

"As some of the most efficient protein producers on the planet, if a New Zealand farmer doesn’t produce a kilo of milk or meat, then it will be produced elsewhere in the world and most likely more emissions will be released into the atmosphere," Mr Hoggard said.

The Paris Agreement acknowledged that "…safeguarding food security and ending hunger" is also a fundamental priority, so it is illogical to include NZ agriculture in the ETS when other producer nations don’t do so.

Scientists here and overseas are working hard on ways to reduce biological agricultural emissions (methane and nitrous oxide). Good information is starting to come through on changing animal diets, and breeding for animals that emit less methane.

"Farmers eagerly anticipate confirmed results, and our record as efficient producers shows we are early adopters of practices and technologies that work."

Even more exciting is the prospect of methane inhibitors or vaccines, that unfortunately are still five to seven years away from market release. There’s a good case for more investment in this scientific research if it accelerates progress, Mr Hoggard said.

As the Ministry for the Environment/Statistics NZ climate change report highlights, the greatest increase in New Zealand’s emissions since 1990 have come from road transport (mostly carbon dioxide), up 78 per cent.

"That’s an area we should target. How can we accelerate the switch to electric vehicles?"

The report echoes earlier recommendations of Net Zero and former Parliamentary Commissioner for the Environment Jan Wright that planting more trees can offset emissions to meet Paris Agreement deadlines and while we await science advances.

"Farmers are very open to discussions about policies, including reducing red tape and current complexity, that could increase the rate at which trees are planted."

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Plans for London’s soaring timber tower

London’s soaring timber tower could be a game changer for CLT - The world might not be quite ready for soaring timber skyscrapers but one architectural firm is getting headlines for a proposed wood tower that would be the tallest building in London.

The conceptual 80-storey building called Oakwood Timber Tower "is the largest use of cross-laminated timber (CLT) in the UK and in Europe," Kevin Flanagan said at the recent Green Building Festival in Toronto.

Flanagan is a partner at London's PLP Architecture which is behind the tower that would have as many as 1,000 residential units in about one million square feet in the heart of London. PLP has partnered with engineering firm Smith and Wallwork and Cambridge University's Centre for Natural Material Innovation on the project.

The tower is engineered in a series of quadrants or bundled columns, much like Chicago's 1,450-foot-tall Willis Tower, formerly the Sears Tower, Flanagan said.

As big city cores such as Toronto's are pressured to intensify, CLT could prove to be a prime building material for residential towers, he said.

"Rather than create CO2, by harvesting the renewable timber you can reduce CO2 (emissions) and actually go negative," he explained.

Flanagan said wood towers could create a building industry comprised of "new types of contractors" assembling buildings from modular prefabricated panels.

Interest in CLT for housing is growing in Europe, Flanagan reported to the designers and builders in attendance and that "there is enough material in Canada to house a billion people, according to Cambridge University."

Flanagan said the energy required to produce timber building materials is substantially lower than steel or concrete — about 90 per cent of the energy is in the drying and seasoning process.

Timber is comparable in strength to steel and stronger than concrete by weight, he claimed.

Another benefit of CLT is it requires fewer site deliveries than concrete — a big plus in dense urban settings where construction disruptions can significantly impact surrounding businesses, he added.

Flanagan explained that CLT could prove ideal for structures proposed on top of existing masonry or steel buildings.

Because it is light, it would require little if any reinforcing to existing concrete foundations.

"This is what is happening in Europe and in London. People are realising they can build high (on top of buildings) if they can build light," he said.

Among the challenges to building tall with wood is how to face or cover exterior timber to prevent weather damage such as moisture that will cause it to expand.

"Every material has its downside but to date there are no show-stoppers," Flanagan told delegates.

He said in Toronto "quite astonishingly" about 80 per cent of construction material specified for towers is concrete.

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Source: Daily Commercial News

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Buy and Sell

... and finally ... where we're going ...

We don't need roads - look at this innovative new peddling machine!
Perhaps something for the Christmas list?

More information >>

That's all for this week's wood news.

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John Stulen
Innovatek Ltd
PO Box 1230
Rotorua, New Zealand
Mob: +64 27 275 8011
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