WoodWeek 1 November 2017
Continuing with the positivity, OMF’s Nigel Brunel is suggesting the price of carbon in the New Zealand emissions trading scheme could reach $20 a tonne by Christmas.
This week, the Ministry of Primary Industries released its latest 'Situation and Outlook for Primary Industries' report. It shows China is, by far, our biggest trading partner for the basket of primary industries products we export, including logs and wood products. More details in next week's issue.
Looking to other broad trade indicators: China’s National Bureau of Statistics shows that the manufacturing purchasing managers index (PMI) for September marked the 14th consecutive month of expansion and the highest reading since April 2012. PMI is recognised as a leading indicator of economic activity.
Finally, it’s port reporting season in New Zealand and as expected logs are helping most ports achieve good financial results up and down the country.
This week we have for you:
NZFOA on tree planting challengesMore trees optimistic but achievable - Forest owners say they are looking forward to working with the new Minister of Forests Shane Jones to meet what forest owners call a huge challenge to double the annual forest planting rate. Forest Owners Association President Peter Clark says the new government’s target of an additional 50,000 hectares of planting a year is ‘optimistic but achievable’. “For most of the 1990s, the new planting rate was more than 50,000 hectares a year. In 1994 it was 100,000 hectares beyond keeping up with replanting.”
“We’ve been talking with Shane Jones about what can and can’t be achieved and he is in no doubt about some of the difficulties of getting more plantings going after more than a decade of no growth.”
“In particular we do need to build the labour force to do the planting. At the moment we are struggling to plant enough trees to maintain the present area. We hope that Shane Jones being Minister of Regional Development will help in that respect.”
Peter Clark says the idea of a separate Forest Service sounds like a good idea.
“We don’t know what functions it will have, so we have to wait for that. But with forestry under the Ministry of Primary Industries we weren’t getting the attention an industry should get when it earns six billion dollars a year in exports.”
“The forest sector won’t be completely disconnected from MPI though. As well as agriculture, Damien O’Connor has a biosecurity portfolio, and that is a huge priority right across the primary sector,” Peter Clark says.
“There are a number of pests and diseases which we don’t have, but which would have a huge impact right across agriculture and forestry if they ever got into New Zealand.”
Peter Clark says James Shaw taking on the role of the Minister of Climate Change is significant.
“As Green Party leader, his influence will keep the government focus on doing something practical about climate change. The only practical solution is planting more trees. That’s the only currently available technology to significantly pull down our level of carbon emissions.”
Peter Clark believes the just announced partial introduction of agriculture into the Emissions Trading Scheme will also give a boost to forest planting on farms.
“The initial major planting will be on Crown and Maori land. But if the government gives farmers an option of growing trees to absorb carbon and offset the greenhouse gas emissions from their stock, then I’m sure we’ll see farmers planting out woodlots with a view to getting a return on eventually harvesting those trees.”
Forestry key for Maori landownersThe Minister of Regional Economic Development is calling for Maori landowners in Northland to make their lands available for forestry. Following the announcement of one billion dollars of funding per annum to the regions, Shane Jones says the initiative will address needs that have been put to the side for many years such as long-term unemployment.
Jones told Te Kaea, "I'm calling on our relatives who own land to make it available to plant trees. This will provides employment here in this region for our children. In addition to that, we're going to upgrade the railway from Auckland north to Ruakaka.
The Minister says the funding is direct from the cabinet with a full audit to be carried out on the various regional projects under consideration.
Longtime Northland businessman Stan Semenoff says, "I travelled up from Whangarei tonight and I've got a pretty modern vehicle but the roads are rubbish and we need to spend more money on infrastructure and get our people employed and get our people skilled. It'll take time but don't shy of it. This is our one and only chance lets make a good boot of it."
While the Minister was receiving flack over comments he made in relation to creating employment in the forestry sector, Mr Jones foresees future prosperity for the people of Northland by generating businesses where saplings are grown annually from seed to include not only pine but native species such as pohutukawa and puriri where schools and whole communities can also get involved in developing the industry.
He added that it cannot be achieved in a year but the new government has allocated funding to pay off the debt-ridden railway and upgrade the line from Auckland north to Ruakaka.
Source: Maori Television
Profit-takers stall carbon - but $20 in sightThe price of carbon in the New Zealand emissions trading scheme is nudging $19 a tonne and could reach $20 a tonne by Christmas, says the director for financial markets at OMF, which operates a carbon trading platform.
However, with carbon prices hitting their highest price in six-and-a-half years, the OMF's Nigel Brunel said profit-takers were emerging despite the prospect of "much, much, much higher carbon prices" emerging as a new Labour-led administration looks to tackle climate change more aggressively than the National Party-led government of the last nine years.
The price of NZ Units (NZUs) - equivalent to a tonne of carbon - have reached as high as $18.95, having closed last Friday before the long weekend at $18.90.
"The market is probably pausing, unnecessarily in my view," said Brunel, whose firm does not trade carbon but executes trades for a range of NZU traders, including large industrial greenhouse gas emitters, forest owners and traders who provide liquidity in the local carbon market, which has experienced a prolonged gestation in the absence of settled long term policy on climate change reduction plans. Until 2015, the acceptance of low-quality, low-cost European carbon credits had pushed the carbon price below 50 cents a unit before they were banned.
A price above $15 a tonne is a rule of thumb level at which planting forests to create carbon sinks becomes commercially worthwhile, although many foresters have been reluctant to commit to investment in new carbon farming initiatives until long term carbon charging policy is settled.
While Labour introduced the ETS in 2008 and National continued to develop it over its nine years in office, both Labour's partners in the newly formed government - the Greens and New Zealand First - oppose the ETS. The Green Party advocates a flat rate carbon tax, pitched initially at $30 a tonne, to spur climate change action and went to the Sept 23 election with a policy to plant one billion trees over time.
NZ First has said it would incentivise climate change mitigation initiatives rather than have the "pointless" ETS and would encourage New Zealand-based manufacturing based on local timber. Labour has also said it would reintroduce a government forestry service. Details of the coalition agreement are contained elsewhere in this newsletter.
"I've been quite bullish on the carbon price for a long time," said Brunel. "In the longer term, I think we are going much, much, much higher," he said, citing calculations based on the 2015 Paris climate change accords that could justify a global carbon price at US$70 a tonne.
"It's looking pretty good, even looking a bit cheap but I don't know when it will hit $20 (a tonne), maybe by Christmas, but I would be buying."
Valuable years lost to grow forestryValuable years lost for forestry means unified approach needed - The Forest Owners Association says the priority put on new forest plantings by New Zealand First entering the coalition presents an enormous challenge to the new government and industry alike.
Forest Owners President Peter Clark says issues such as diminishing log supply in Northland and road infrastructure stress in Poverty Bay and elsewhere need to be addressed by government and industry working together.
“We need to find solutions which will benefit all parts of the forest and processing chain, as well as local communities.”
“I’m concerned about the recent rhetoric of the evils of neo-liberalism, when most of these issues can be resolved around the table by the players with central and local government support and encouragement.”
“It’s been clear that both Stuart Nash from Labour and Shane Jones from New Zealand First would make an informed and active Minister of Forests. Both understand the need for a clear sense of progress around the difficulties in our industry.”
“We’ve lost valuable years when there should have been more trees planted out to provide another income option for pastoral agriculture on marginal land and to increase wood supply for sawmillers. We’ve also had plenty of notice that trees are the only immediate lever the government has available to significantly offset industry and agriculture carbon emissions.”
“The Ministry for the Environment Report yesterday painted a gloomy picture of New Zealand’s greenhouse gas emission status. Getting back to more trees being planting than harvested is vital.”
“So it’s a breath of fresh air, almost literally, to get a government expressing a priority on afforestation.”
Peter Clark say both Maori land owners and farmers will play a key role in meeting afforestation targets.
“Federated Farmers has just issued a statement supporting more trees for carbon absorption and wanting to get recognised for making this contribution right down to a small scale woodlot. This is important, as is making sure farmers are well advised on silviculture so they can grow good trees and maximise the profits they will make at harvest time.”
Peter Clark says it will not be easy to get planting up to the levels the new government is thinking of.
“The nurseries will take time to gear up production and there is a chronic shortage of seasonal labour, especially in planting, in our sector already.”
“The government has to make some critical decisions as to how to support the forest expansion they are promising. They could make a good start by getting some trees in on Crown land.”
“I’d also assume whoever is Minister will be talking to iwi very soon, especially in the North, to get some early planting going.”
NZ Logger - Son of ThorNorthland used to be known for its really big wood, but not anymore. As piece sizes have shrunk in recent years, so has the need for equally large machinery to harvest it, as demonstrated when Rosewarne Cable Loggers downsized to a pair of new generation John Deere 3156G tracked swing machines, fitted with upgraded SouthStar QS630 heads for processing, a combination that is Iron Tested in the November issue of NZ Logger magazine.
Other features include Brian Reader's celebration of 50 years in forestry and how he got started in native logging.
The magazine also reports on the WoodTECH conference in Rototura, where new ideas to boost sawmilling and wood processing were discussed, as well as how technology is shaping the industry from the Forest Growers Research conference in Christchurch.
Plus much more, in the November 2017 issue of NZ Logger, now on sale at selected service stations, or to subscribe for either the printed version and/or the digital version, visit www.nzlogger.co.nz.
Strong growth at Port of TaurangaThe Port of Tauranga has just reported first quarter trade volume growth of 15% on the previous corresponding period.
Overall container numbers grew 26%, due to a significant increase in transhipment (containers transferred from one ship to another at Tauranga) in the three months to 30 September 2017. Log volumes increased by 13% compared with the same period last year.
Port of Tauranga Chairman, David Pilkington, says the first quarter results are further proof that Tauranga has cemented its role as New Zealand’s hub port.
“The trend to larger ships, and those ships making Tauranga their only Australasian call, has led to a significant increase in transhipment,” he says. “Transhipment of cargo from other New Zealand ports to Tauranga has quadrupled in the past year.”
The largest container vessels to ever visit New Zealand have been able to call at Tauranga since the September 2016 completion of a major dredging project and $350 million expansion programme.
Mr Pilkington says the (unaudited) group net profit after tax is up 15% on the prior corresponding period.
“Based on the first quarter’s performance, and notwithstanding any significant market changes, we expect full year earnings to be between $88 and $92 million,” Mr Pilkington says. This compares with net profit after tax of $83.4 million for the year ended 30 June 2017.
Port of Tauranga Chief Executive, Mark Cairns, says the port has ample headroom to handle increasing volumes. Of its 190 hectares of land, the Port has approximately 40 hectares of land still available for cargo growth.
“This will allow us to handle around three million TEUs (twenty foot equivalent units) without any further reclamation,” he says.
New Forests purchasing California forestsNew Forests to Acquire California Timberlands from Roseburg Resources – New Forests have just announced an agreement to purchase a 170,000- acre timberland estate in northern California from Roseburg Resources Co. The properties will be acquired by Shasta Cascade Timberlands LLC, an investment entity managed by New Forests. Settlement is expected in early 2018.
Following the acquisition of two other California forestry estates in 2016 and 2017, the Shasta Cascade Timberlands acquisition will bring New Forests’ total US timberland under management to 186,000 acres. The acquired forests include high-quality stands of Douglas-fir, ponderosa pine, and other mixed conifers stretching across four major blocks from Redding north to Mount Shasta.
Globally, New Forests manages more than 2 million acres of forestry, land, and conservation investments, including more than 450,000 acres of forest carbon projects for third-party landowners in the continental US and Alaska.
“The launch of Shasta Cascade Timberlands reflects New Forests’ commitment to expanding our US investment program based on a climate-smart forestry strategy, which seeks to deliver competitive timberland returns with additional exposure to revenue from climate mitigation,” explained New Forests’ CEO David Brand.
“Investors can secure high-quality forestry assets with exposure to well- established timber markets, while also benefitting from the shift toward a low- carbon economy.”
New Forests’ US Director Brian Shillinglaw added, “New Forests looks forward to building on Roseburg’s long tradition of sustainable land stewardship and production forestry in Northern California."
"As we work toward completion of this transaction in early 2018, New Forests is dedicated to ensuring continuity of operations and retaining the local knowledge that underpins and supports the sustainable management of the timberlands. We also look forward to deepening our engagement with the communities located around the Shasta Cascade Timberlands.”
China's manufacturing PMI rises14th consecutive rise in Manufacturing PMI - A press release from China’s National Bureau of Statistics (NBS) shows that the manufacturing purchasing managers index (PMI) for September marked the 14th consecutive month of expansion and the highest reading since April 2012.
The NBS says the manufacturing sector maintained a stable performance and good growth momentum. Factories increased output to take advantage of firm domestic demand and high prices driven by a building boom.
The impressive performance of China's manufacturers comes despite moves by the government to close low tech and high polluting industries. Some analysts comment that news of major cuts in capacity can be misleading since overall output is still rising.
Source: National Bureau of Statistics, China
Source: ITTO TTM Report
Port of Taranaki logs big increaseBuoyant forestry industry plugging dairy's economic dip - In Taranaki, logs are a growing business for the ratepayer-owned port and they're rolling in and out in record numbers.
That's meant the port has had to adapt its operations to meet the needs of its forestry customers.
According to the port's 2016 annual report, 357,000 JAS (Japanese Agricultural Standard tonnage) were exported during that financial year. That was well up on the 209,000 JAS shipped overseas in 2015.
As a result, log revenue soared 80 per cent, which helped offset a fall in commodity imports and exports. That growth is showing no sign of easing. According to the Port of Taranaki's latest annual report, its "log business continues to grow exponentially."
The report states that "favourable market conditions, low inventory levels in China, and large numbers of harvest-ready trees in our catchment area have combined to produce another year of record growth."
In the last financial year 486,000 JAS passed across Port Taranaki's wharves. That's a jump of 36 per cent, which saw revenue generated from logs surge 29 per cent.
It's meant the port is having to change the way it stores logs. As well as stacking them higher, it's also investigating developing more land at the former power station site to store logs.
I suspect the growth in log exports has meant more trucks on our roads. But that might not always be the case.The port is "examining means to extend our forestry catchment area and service the growing demand by developing a combined road- rail transport mode for logs."
With rail facilities on-hand the port says it has the infrastructure to make this practical and economically viable. The log business is providing a lifeline for the port during a challenging period.
Both revenue and profitability are down on the previous year. One reason is fall in farmgate milk prices. Farmers had less money to spend and the ripple effects were felt across the New Zealand economy, including here in Taranaki.
Good growing conditions for grass and crops over the summer and autumn, combined with tight cashflows, saw revenue for the port's dry bulk livestock feed business plunge 25 per cent.
With the milk payout up and a wet spring – I suspect those figures will rebound this year because feed companies have been struggling to keep up with demand.
The latest figures follow a report published in March by the New Zealand Institute of Economic Research on the plantation forest industry, which highlighted its value to the economy.
It found the forestry and logging sector is worth $1.4 billion to the national GDP. It's hugely important to provincial economies like Gisborne and the surrounding area, injecting $96 million annually.
That's nearly 5.55 per cent of that region's GDP. In Taranaki, the figure for logging and forestry was only $8 million. But wood product processing pumps $50 million into the region's economy.
The Ministry of Primary Industries forecasts that forest product export returns will reach $6.15 billion by 2020, with increasing returns form sawn timber, wood panels and pulp and paper.
China is our biggest customer, followed by Korea, India and Japan. China buys a lot of raw material such as logs, but Japan is by far our biggest market for fibreboard.
Source: The Farmer
Biosecurity WeekBiosecurity Week 2017 kicks off - Pests and diseases from offshore can cause serious harm to New Zealand's unique environment and primary industries; and the Port of Tauranga is one of many potential gateways.
Biosecurity Week activities highlight the importance of biosecurity and the role that everyone in the Bay of Plenty can play in managing unwanted biosecurity risks says Kiwifruit Vine Health Chief Executive Barry O’Neil.
“We’re looking forward to talking to people who work on and around the Port about biosecurity – it’s such an important issue and one that really does affect everyone.”
“People who own and work at local businesses remember what Psa has done to the kiwifruit industry. There are bugs and pests that we don’t want here in New Zealand because of the devastating effect they will have not only on kiwifruit, but on the whole of our horticulture industry and environment.”
“A good example is a particular type of bug we’re concerned about – it’s one of our most unwanted and called the Brown Marmorated Stink Bug. It’s a major nuisance that attacks fruit when it feeds and ruins it. It infests homes and in the USA we’ve seen it stop people from being able to sit outside their homes and have a simple BBQ.”
Port staff, transitional facilities, associated industries (such as transporters and other logistical operators), and biosecurity experts will be meeting at several events over the next six days to raise awareness and understanding of the importance of managing biosecurity risk.
Special guest Ruud 'The Bug Man' Kleinpaste will also be attending several industry and community school group presentations during the week to discuss the vital role of everyone who works and lives in and around the Port and local community in keeping unwanted pests and diseases out of New Zealand.
Throughout the week there will also be discussions with post-harvest facilities and transitional facilities to learn more about the frontline biosecurity systems they have in place.
Biosecurity Week is part of the biosecurity excellence partnership between Port of Tauranga, the Ministry for Primary Industries, Kiwifruit Vine Health, NZ Avocado, Dairy NZ, Forestry Owners Association, NZ Customs and Bay of Plenty Regional Council.
The award-winning partnership aims to build a port community committed to biosecurity excellence, with an ambitious goal of no biosecurity incursions coming through the Port of Tauranga. It is a successful regional example of the Ministry for Primary Industries, local industries and regional government, partnering to build a biosecurity team of 4.7 million New Zealanders.
It also benefits from strong engagement with the science community, including a formal partnership with the New Zealand’s Biological Heritage national science challenge and the B3 (Better Border Biosecurity) science collaboration. This has been boosted by a $1.95 million co-funded research project with B3 to trial new tools and technologies in the port environment, monitor biosecurity awareness amongst the local community, and measure the impacts of changes on biosecurity risk.
Port of Tauranga Chief Executive Mark Cairns said the week provides a good opportunity to strengthen the significance of biosecurity within the Port community.
“Effective biosecurity awareness is critical to us running a successful business and being able to continue to service the Bay of Plenty region. The various events we’re holding for our staff, contractors and local businesses who regularly interact with us and our facilities will give us the chance to show people what they should be looking out for and what to do if they find anything.”
“It’s an opportunity to demonstrate the good work that happens here at the Port, day in day out, to keep an eye out.”
“Our people are at the frontline – they’re the ones most likely to first notice an unwanted pest on cargo, vehicles or equipment moving off the port. By knowing what to look for and reporting unfamiliar insects or suspicious looking pests they help protect everyone’s livelihood and the future of the kiwifruit, avocado and forestry sectors.”
Gordon Campbell on the fear of changeRe-inventing the Forest Service - One of the litmus tests for the rhetoric from the new government will be the commitment to re-create the NZ Forest Service.
This is largely (but not only) a New Zealand First initiative, and will (presumably) be under the ministerial leadership of Fletcher Tabuteau Shane Jones and head-quartered in Rotorua.
The initiative embodies NZF’s aims for regional development. It will see the Crown actively involved in ensuring the greater domestic use of forestry resources, in adding value to our wood exports, in creating jobs in the regions and in integrating forestry within our responses to climate change.
For obvious reasons, the new Forest Service won’t be the same sort of entity that planted, owned and managed the nation’s forests, including in their recreational and conservation roles – all of which supported the jobs that were once the lifeblood of communities like Kawerau. That horse has since been encouraged to bolt. Cutting rights in much of those forests have been sold on 35 year rollover leases to foreigners who stripped out many of the formerly subsidised milling operations and jobs.
Some 54% of logs cut here are now exported. Some of those foreign firms with cutting rights have been cutting down young trees while others have allegedly been reluctant to offer the work to local processors, in areas like Northland.
Ardern has already said – with respect to irrigation – that she will respect existing commitments. In similar fashion, the new government may struggle to restrict the latitude granted under the existing forestry leases. Some of the land on which cutting rights have been sold have become part of Waitangi Tribunal settlements.
The Maori owners may need to be convinced about the value of foregoing their existing passive pattern of rental returns for the risk involved in adopting a shared (and ultimately more lucrative) form of investment in the likely returns from forestry, over time.
In other words, change will not come easy, or overnight. Arguably though, a more active form of forestry management could see useful gains from (a) a ‘wood first’ policy in say, the construction of government buildings (b) an enhanced role in replanting on government-owned land that would create employment, (c) counter the effects of land erosion evident in many parts of New Zealand (d) enable a greater amount of value-added local processing for export and (e) enable the better integration of forestry with this country’s looming commitments on climate change.
As in so many other areas, the period of laissez fair and market solutions is over. We’re living in interesting times. There will be a lot of media and market resistance from those with a vested interest in the status quo. But having voted for change, we’ll also need the courage to embrace it when we see it.
Paperful office? Pulp & paper two decades onPaperful Office - An overview of the global forestry, pulp and paper industry - Back in the old days, everybody would buy newspapers and magazines. Some would buy dailies, others would buy weeklies, while millions more would buy monthlies. And no one would quibble about having to pay for them, probably because most people sense that a physical, tangible object has a greater intrinsic value than a digital one.
That old print media reading culture has all but gone now, thanks largely to the internet and the worldwide web making all manner of information available largely free of charge. No one expects, or wants, to pay for news and content any more, probably because most people think digital media should be free because they know how easy it is to make copies of digital files.
There are still many printed publications doing very well and selling in large quantities, and a list of some of the top 10 is offered below, but even the Japanese daily Yomiuri Shimbun – which holds the world record at 13 million copies sold in one day – has lost huge numbers of readers.
Although the Wall Street Journal and others have seen increases over the past five years, the majority of newspapers in Europe and America have lost significant numbers of readers.
A similar pattern is to be found across the entire print media industry, in all segments, and it’s a downward trend which started around two decades ago.
The consequences of this for the global forestry, pulp, and paper industries probably don’t need to be spelled out, but there’s been a corresponding downward trend there too.
According to RISI, a research company specialising in the forestry, pulp, and paper industries, more than a quarter of the world market for one particular paper product has “simply disappeared”.
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... and finally ... on the way home ...
Have a safe and productive week.
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