WoodWeek 8 November 2017
After much pre-decision posturing and positioning by politicians in both countries, the US Department of Commerce imposed final tariffs averaging 20.83 per cent against Canadian lumber, down from 26.75 per cent in the preliminary findings.
Across the ditch, Australia has rapidly become a major exporter of softwood logs and was the world’s sixth largest log exporter in 2016. In the first half of 2017, the upward trend continued with shipments being 17% higher than the same period in 2016.
Innovatek is set to launch its successful forest technology conference series into Canada in March 2018. The well-supported ForestTECH conference series is running in Rotorua and Melbourne from next week. The launch of our latest international version of this conference begins next week as well. ForestTECHX 2018 will be running on March 6-7th in Richmond, BC, near the Vancouver International Airport. See www.foresttechx.events for details.
The Oregon Group, that manages a New Zealand portfolio of businesses for Malaysia's Tiong family, expects record earnings in 2018 on rising prices for forest products and the completion of apartments in its land development unit. Their current year’s net profit fell to $41 million from $95 million a year earlier, but Thomas Song said that masks the underlying performance of the company.
This week we have for you:
Farm foresters welcome new targetForesters welcome Government's ambitious tree-planting target. Farm foresters have joined forest owners and timber processors in welcoming the new Coalition Government's plans to revitalise forestry as a shot in the arm for the industry.
The New Zealand Farm Forestry Association believes the Government's commitment to plant one billion trees over the next 10 years is an achievable target and that farm foresters have a role to play.
But association president Neil Cullen says this ambitious target presents a number of challenges - sourcing enough seedlings, having enough people in the right areas to plant trees and finding enough suitable land.
"New Zealand needs to reverse its growing greenhouse gas emission status, it needs to plant more trees than are harvested for a growing industry and it needs to cloak eroding hill country in trees," Cullen said.
He said New Zealand's total forest estate had shrunk in recent years, so the Government's commitment to plant more trees was encouraging for the industry, especially for processors who were concerned about sourcing logs in future.
"It will give them some confidence to invest in mills and infrastructure and gives the whole industry a boost," he said.
However, it would take nurseries a while to gear up.
"Nurseries have just planted their crop for next winter, so there won't be anything like that number available for the next planting season, but they have got the capacity to increase seedling numbers significantly.
"The problem will be getting the people to plant them, I think," he said.
Cullen believed the Government may have to look at planting trees on Crown or Maori-owned land in the first few years to meet its planting targets.
"We only have a broad sketch of what they are intending. We don't know the details yet and what incentives they are going to use to get people to plant those trees."
Forestry was a profitable and rewarding land use that was the best option for large areas of New Zealand, he said.
USA finalises Canada softwood lumber tariffsAfter much pre-decision posturing and positioning by politicians in both countries, the US Department of Commerce imposed final tariffs averaging 20.83 per cent against Canadian lumber, down from 26.75 per cent in the preliminary findings.
The rates fell for West Fraser, Canfor and Tolko and rose for Resolute and Irving. Other Canadian producers will pay 20.83 per cent. Meanwhile, Nova Scotia is excluded from tariffs while New Brunswick now has to pay.
Although the rate reduction brought lumber futures down from their 2-decade high, the range of reactions include:
> A positive step forward for the US industry (Jason Brochu, US Lumber Coalition)
> One step closer to getting hard-won relief (Ron Wyden D-Ore)
> Softwood scuffle isn’t over (Susan Yurkovich, Council of Forest Industries)
> Unfounded and unfair (Roger Melanson, New Brunswick Minister)
> A ‘Groundhog Day’ loop (John Horgan, BC Premier)
> Any level of softwood lumber duties is unfair trade (Jerry Dias, Unifor)
> Unfair, unwarranted and deeply troubling (Chrystia Freeland & Jim Carr, Canadian Government)
China market good for Australian exportersLucrative log markets in China have resulted in a tripling of softwood log export volumes from Australia in the past four years, reports the Wood Resource Quarterly (WRQ).
Australia has rapidly become a major exporter of softwood logs and was the world’s sixth largest log exporter in 2016. During the 1H/17, the upward trend continued with shipments being 17% higher than in the 1H/16. In 2012, Australia’s annual exports totalled only 1.2 million m3. Just four years later, in 2016, exports had tripled to a record high of 3.6 million m3, of which 96% was destined for China. If the upward trend seen this far in the first six months of 2017 continues, export volumes will end up totalling over four million m3 in 2017, which represents approximately 25% of the total softwood timber harvest in Australia.
Obviously, exportation of logs has become an attractive alternative to domestic sales for timberland owners in Australia. Analysts at WRQ report that in 2012, there were minimal price premiums for exported logs over domestic logs, but by 2016 and 2017, premiums had surged to between A$35-50/m3. Despite these recent price increases, Australia is still considered to be a low-cost log supplier in the Chinese market as compared to other suppliers such as New Zealand, Russia and North America, mainly because of higher domestic sawlog prices in those markets.
Higher log export volumes have occurred at the same time as domestic log demand has gone up over 20% in four years, from 3.6 million m3 of lumber in 2012 to an estimated 4.4 million m3 in 2016. Although sawmill production fell slightly in 2016 from the previous year, the output from the Australian sawmill sector reached record high levels the past two years thanks to healthy domestic demand for softwood lumber.
Source: Wood Resources International
Napier port forestry trade growsNapier Port says the volume of wood shipped through it's docks will double for almost a decade. Dubbed "The Wall of Wood", it is the result of a spike in planting in the 1990s when log prices soared.
Most wood is exported as logs, mainly to China, and Napier Port has made changes to the way it operates to accommodate the increase, including the ability to load logs from four berths.
Port commercial manager Andrew Locke said the volume had quadrupled since 2000. "We have gone from 400,000 tonnes to 1.6 million tonnes," he said. "Within eight years we will be at 3 million tonnes and I think that is a very conservative number."
The majority of logs arrive by truck but the port is exploring other options including extending its rail freight service.
"About 95 per cent of what we handle via Napier Port is on the truck and last year about 200,000 tonnes on rail. We think that will grow.
"We are working with the Wairoa rail option at the moment to try and take some trucks off the road. We think long term, we might get 300,000 to 350,000 tonnes on rail."
The wood sector has faced criticism about its lack of wood processing facilities in the region, but Mr Locke said it was a major economic contributor.
"The latest number is $100 million that the forest sector brings to the Hawke's Bay community."
He said the largest forestry company, Pan Pac, which produces timber and wood pulp, ships 800,000 tonnes of cargo through Napier Port annually and employed more than 45 people.
"The multiplier effect is a very large number."
Silviculture industry meeting next weekSeveral of FICA contractor members working in silviculture have asked FICA to arrange a pan-industry meeting with members of the Forest Owners Association (FOA) to discuss several aspects of their industry that are undermining their business sustainability.
We are planning this meeting to be held in Rotorua on the afternoon of 14 November at the Distinction Hotel. On behalf of FICA members, the main aim is to bring together parties to discuss pain points and seek to agree on a small action group to consider and implement possible solutions.
Please register your interest to attend now by contacting FICA on 0800 34 22 69 or email@example.com. If you have any issues to raise before the meeting please call or email the FICA office. We look forward to your input and attendance.
Event Details >>
Subscribers: Don't miss out from 30 NovemberAs you, our loyal subscribers may be aware, if you are using email services from Vodafone in New Zealand, their decision to discontinue those services after 30th November 2017 may impact your WoodWeek or Friday Offcuts service.
What you may not be aware is many other providers ultimately use the Vodafone system. These include: clear.net.nz, es.co.nz, ihug.co.nz, paradise.net.nz, pcconnect.co.nz, quik.co.nz, vodafone.co.nz, vodafone.net.nz and wave.co.nz.
If your email services are managed by your employer or IT services in your company, then you probably do not need to do anything.
If you manage your own email services directly, you may be affected by this change so you could consider changing to another provider such as Google and Microsoft. For absolute certainty to ensure you don't lose your current WoodWeek subscription you may well have to look at changing the email address through which you are currently receiving your weekly wood news from us.
As the changeover is coming soon … yes, 30 November … if you are using an email address linked to the Vodafone service, the easiest way will be for you to continue to receive this newsletter is to unsubscribe to the current newsletter (just beneath the editorial) with your current address and then re-subscribe with your new email address.
APEC forestry ministers meet on trade issuesMinisters Seed Sustainable Forest Product Trade - Ministers from APEC member economies are stepping up their push to salvage the majority of the world’s dwindling forests and the livelihoods of millions of people that depend on these resources as consumer demand in the region surges.
Ministers meeting in Seoul launched growth-friendly actions for realizing their ambitious goal of increasing forest cover by at least 20 million hectares by 2020 across APEC. Together, APEC economies account for half the world’s forests and 80 per cent of global timber trade.
A viable step towards mitigating climate change, the move sets the tone for the APEC Economic Leaders’ Week in Da Nang on 6-11 November that will aim to improve trade-driven growth in the region and the sustainability and equity of its economic and social outcomes.
“The huge increase in the middle class in APEC made possible by greater connectivity and trade is driving a consumption-led growth recovery but also putting pressure on high demand resources like wood and timber products,” explained Dr Alan Bollard, Executive Director of the APEC Secretariat.
“APEC economies are enacting measures to boost legitimate trade flows that weed out illegally harvested wood before they hit consumer markets and undercut legal producers,” Dr Bollard continued. “Eliminating price distortions caused by illicit timber could have a major impact on forest preservation and the large numbers of jobs they support.”
Ministers are focused on raising governance and transparency standards among APEC economies for the trade of timber and wood products such as lumber, paper, flooring and furniture, in coordination with Interpol, industry and conservation groups.
This includes building on work administered by the APEC Experts Group on Illegal Logging and Associated Trade to enhance customs inspections of timber and wood products at borders, implement timber legality methodologies and establish efficient lines of communication with law enforcement agencies.
Parallel measures to be taken forward by APEC economies center on facilitating sustainable forest management practices and community support needed to help forests re-germinate and promote emerging business and employment opportunities.
“The growth potential of sectors such as agriculture, education, healthcare and tourism depends in no small part on forest resources in APEC,” concluded Dr Bollard. “The progress of efforts to create sustainable supply chains could go a long way to ensuring the future of the region’s forests.” The Seoul Statement endorsed at the conclusion of the Meeting of Ministers Responsible for Forestry outlines the actions to be advanced by APEC member economies towards this objective.
Source: Scoop News
Inquiry: Prepare for life after native loggingPrepare for life after native logging, VicForests inquiry recommends -The state of Victoria, Australia must develop a transition plan to help its timber industry move from native logging to plantation timber, a group of state MPs has recommended.
The Inquiry into VicForests by a group of cross party MPs made seven recommendations to the State Government, including the call for it to establish an industry transition plan and work with VicForests, and the Forest Industry Taskforce to consider “supporting innovative industry players (and) …. how current forestry-dependent communities can be actively supported through any transition plans”.
Nationals MP Luke O’Sullivan was the only MP on the committee to vote against the recommendation for a transition plan.
The report also recommended calling on the Government to explain the Forest Industry Taskforce and deliver tighter oversight of VicForests, and the way it manages the resource.
The taskforce was a Labor Party election commitment, which brought together leaders from the forestry, conservation and union sectors.
Formed in 2015, it went into recess earlier this year before it made any formal proposals to the Government.
Source: Weekly Times
Sustainable Timber Tasmania Annual ReportForestry Tasmania released their annual report late last week. - Forestry Tasmania’s comprehensive result for 2016/17 was a loss of AU$24.1 million, a significant improvement from the AU$65.4 million loss in 2015/16. Both of these results however were significantly impacted by non-cash items, namely the revaluations of the forest estate and superannuation liabilities.
“The Board, management and staff of Forestry Tasmania have been very focussed over the last year on the transition to a new operating model” said Mr Rob de Fégely, Chairman of Sustainable Timber Tasmania’s board.
“We have completed a range of projects including negotiating sawlog price increases, implementing new contracts for southern residues, completing an organisational restructure, conducting an internationally competitive plantation sale process, moving several offices into more appropriate accommodation, and completing the sale of the Tahune Airwalk business.”
“These significant changes have been necessary to ensure we have the right structure, systems and skilled people to deliver our ongoing legislative obligations, while also meeting the Government’s clearly stated expectations for our new business. These expectations include being leaner, financially sustainable, and more focused, efficient, innovative and accountable.”
“We did this while continuing to supply 50 customers with about 1.43 million tonnes of forest products from Permanent Timber Production Zone land, despite the challenges created by a heavy rain and major floods which impacted our operations. This included over 117,000 m3 of high quality sawlogs.”
The report describes the focus on increasing revenue and reducing expenses during this transition year provides a solid foundation to transitioning to a financially sustainable business. The improvements in 2016/17 as a result of the transition projects will underpin future gains in ongoing cash earnings of at least AU$7.5 million per year.
“At the end of the financial year we had net borrowings of AU$26.1 million which have now been retired with part of the proceeds from the hardwood plantation forestry right sale. A highlight of the year has been obtaining Forest Stewardship Council® Controlled Wood certification for our plantation operations - a significant step in our journey seeking FSC® Forest Management certification.”
The full annual report was tabled in Parliament last Thursday, and is available on Sustainable Timber Tasmania’s website
Source: Sustainable Timber Tasmania
Forestry researchers awardedForest research awards cover range - Projects as different as growing thousands of beetles to sacrifice for science and knowing everything there is to wire ropes, earned their scientists recognition at the 2017 Forest Grower Research Awards in Christchurch late last month.
Awards were spread between researchers at Scion in Rotorua, Plant and Food at Auckland, Landcare at Christchurch, and University of Canterbury as well as the manager of Proseed at Amberley, north of Christchurch.
Hunter Harrell’s contribution to the University of Canterbury School of Forestry’s FGR Steepland Harvesting Programme won him the young scientist award.
His PhD thesis in 2014 was on “Improving Cable Logging Operations for New Zealand’s Steep Terrain Forest Plantations”. Evidence of his high output is the number of publications Hunter has either authored or co-authored. In the past year Hunter has had six FGR Technical Notes published and co-authoring one refereed journal article which has been published in the Croatian Journal of Forest Engineering.
Chris Phillips, from Landcare Research at Lincoln took out the Communication and Sector Engagement Award. Chris is a hydrology scientist working on stability mapping and the root development of different tree species on challenging terrain.
Chris is currently working on riparian buffer zones.
Richard Yao is an economist from Scion Research in Rotorua who won the award for enhancing sector value. His specialist work is to identify and quantity the economic value of forest ecosystem services, such as erosion control, biodiversity and water filtering.
He has been heavily involved in the development of Forest Investment Finder, a GIS spatial economic modelling tool that enables economic benefits from ecosystem services to be combined with wood production values at a forest/catchment or regional level.
Plant and Food Researcher at Auckland, Graeme Clare received the science of international quality for his working out ways to supply no fewer than 120,000 bark beetles for testing on fumigant options to methyl bromide.
This internationally ground-breaking science provides the necessary uniform insects to be kept fed and supplied on planned dates to the gassing team. The data from this research supports MPI in market negotiations with China and India. The research is being presented to two international conferences over the next three months.
Shaf Van Ballekom, the manager of Proseed Amberley, and winner of the research participation and implementation award has worked with the earlier research cooperatives, the Radiata Pine Breeding Company, the Dryland Forests Initiative and the Specialty Wood Products partnership programme.
Under Shaf’s leadership Proseed has also undertaken its own research and innovation projects with work on radiata attenuata hybrids being planted in colder parts of the South Island and chairing the Dryland Eucalypt research programme with the University of Canterbury.
Recognition of Carolyne Anderson’s management of tree measurement data from permanent sample plots over many decades resulted in her receiving the contribution to a science team award. Her Scion data base is world class and the envy of many countries.
As well as managing the Scion trial and data base, Carolyne manages the PSP and trials data base for many forest companies across New Zealand and her efforts to identify future plans for trials due to be harvested over the next five years is crucial for the scientists to get the most out of important research trials.
Record year expected for Ernslaw One ownersOregon Group expects record 2018 on forest products, land development - The Oregon Group, that manages a New Zealand portfolio of businesses for Malaysia's Tiong family, expects record earnings in 2018 on rising prices for forest products and the completion of apartments in its land development unit.
Net profit fell to $41 million in the year ended June 30 from $95 million a year earlier, but managing director Thomas Song said that masks the underlying performance of the company. That's because income in 2016 was boosted by a $124 million gain on the value of its forests, while the latest year had only three months of consolidated revenue from New Zealand King Salmon prior to the fish farmer's initial public offering in October 2016.
"2018 will be a record year as all forestry commodities have had a price upswing," Song said. "Land development will also assist with the expected completion of apartment building."
Oregon's 2017 results also don't include any biological gain on salmon stock in the water as King Salmon ceased being a subsidiary, having contributed a $30 million gain in 2016. The company's revenue in the latest year fell to $479 million from $532 million, while other operating income, which includes forestry revaluations, dropped to $21.7 million from about $180 million.
The breakdown of revenue was $343 million from forestry, $97 million from land development, a three-month contribution of $28 million from King Salmon and $11 million from plastic and brushware manufacturing, Song said in an email. Excluding a land purchase of about $33 million operating cash flow was about $3 million ahead of 2016.
The company's 100,000-hectare forest estate was valued at $774 million at June 30 from $781 million a year earlier, accounting for more than half Oregon's $1.41 billion of total assets. Oregon's $88 million of carbon credits were valued at $17.20 per unit at the balance date, up from $84.2 million at $17.85/unit price a year earlier.
It held $134 million of land for development, up from $120.6 million a year earlier. No assets were held for sale.
Oregon tends to fly under the radar but it owns a range of high-profile businesses in New Zealand including the country's fourth-biggest forest estate, Ernslaw One and its subsidiary Winstone Pulp International, 40.2 percent of King Salmon, Innova Products - better known for its ClickClack kitchen storage products, and property development company The Neil Group.
It also owns 50 percent of a joint venture Edible Forest Fungi NZ, 29 percent of NZ Marine Hatcheries, which isn't currently trading, and 100 percent of Talus Industries NZ, a brush making and plastic moulding company that Oregon is winding up "because of ongoing losses". Notes to its accounts say most of the staff at Talus were made redundant in August and the sale of assets was expected to exceed the carrying value of the business.
Neil Group sold its Lauriston Park Retirement Village, held under the Neil Group umbrella, for cash and shares to NZX-listed retirement village operator Arvida Group. As at balance date the shares were worth about $6 million. Its accounts show proceeds of $5.4 million from investments and $16.3 million from the sale of unlisted securities.
Pictured: John Hollows with crayfish established in Ernslaw One forests
Source: BusinessDesk via Scoop
ANZ Commodity Price IndexThe ANZ Commodity Price Index dipped 0.3% m/m in October (+10% y/y). The fall was largely attributable to the dairy group, where all components fell. All other major groups lifted, although there were differences at the subcomponent level. Most local exporters received a further boost as the NZD continued its descent. The NZD price index was up 2.5% m/m (14% y/y) as the NZD TWI fell to its lowest level in over a year.
Dairy prices were 3.1% m/m softer courtesy of rising milk supply in the US and Europe. Butter prices fell 6.5% as the supply-demand balance improved in Europe. Higher farm-gate prices and better weather conditions are now incentivising more milk in Europe. Combined with low seasonal demand post November and higher retail prices moderating consumption, this has seen butter prices come off record highs. Skim milk powder prices have been pressured by similar dynamics, as well as Europe’s intervention scheme closing in September and uncertainty on its future settings during next year’s seasonal peak. Whole milk powder prices slipped 2.8% despite a slow start to milk supply for NZ’s new season. Chinese demand has been solid, but not spectacular, for the free-trade window. To absorb higher seasonal supplies the slack has been taken up by Middle East and South-East Asian buyers, but their price point has been lower than Chinese buyers.
Meat and fibre prices eked out a 0.8% m/m increase. Beef prices performed better than expected through October, lifting 1.7%. Prices are being supported by tight Oceania and US supply, and good US retail and foodservice demand, given solid economic conditions. Seasonally higher supply from NZ and US cull cows from late October is expected to see prices ease into year-end. Lamb prices have been supported by low NZ supplies and robust demand from the main markets. There has been the usual lift in demand for chilled product for the EU/UK Christmas period. Chinese demand for the New Year celebration period has also been very strong, supporting both mutton and lamb prices. While seasonal supply from NZ is set to increase, the outlook remains buoyant into early 2018 with low frozen inventory levels and a solid demand backdrop expected to offset higher new- season supplies. Wool prices dropped again in October, down 7% as short- term buying interest from China reduced. Stocks remain high and solid seasonal supply will limit a sustainable recovery in prices.
Horticulture prices lifted 2.8% m/m. Higher prices for large kiwifruit sizes and a product mix that includes more of the premium gold variety underpinned the rise. Seafood prices lifted 0.4% m/m.
A lift in log and wood pulp prices pushed the forestry group up 1.9% m/m. Log export values underpin the market, as domestic processors must match overseas competitors. Domestic log values were stable through September and October, and anecdotal information to date indicates Q4 contracts were either unchanged, or marginally firmer than in Q3. The export market remains solid with Chinese offtake at the port-level preventing rising inventory levels. South Korean and Indian demand are both steady too. Wood pulp surged 8% on low inventories and strong Chinese demand.
Aluminium prices rose 1.9% m/m (28% y/y). Prices have surged recently as China’s aluminium production is expected to be cut by 30% as mandated cuts are put in place over the November – March winter period.
Strong NZD prices bode well for rural incomes and profitability, and this will support the economy over 2018.
Buy and Sell
... and finally ... helping hospitals work better
An old lady phoned the hospital and asked if she could check on a patient.
That's all for this week's wood news.
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.
Copyright 2004-2018 © Innovatek Ltd. All rights reserved