WoodWeek – 22 August 2018

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Greetings from your WoodWeek news team. In today’s issue we see how China’s credit growth helped drive post-GFC growth around the world. Their government has now acknowledged that the rate of growth was unsustainable. ANZ’s update on the world’s second biggest economy also shows how that credit growth is a good predictor of coming economic changes.

Staying with markets, we have an update from the Scion Log Price Outlook report. Log price outlooks remain stable. For the third quarter in a row, participants expected little immediate movement in log prices and anticipated a slightly higher future pricing.

Over the past two weeks our conference team has enjoyed delivering the Forest Safety & Technology conferences to over 350 industry delegates in both Rotorua and Melbourne. On behalf of FIEA we would like to thank everyone involved - delegates, speakers and sponsors. All of our speakers' messages were enthusiastically received. We also appreciated the wide support of many industry company and organisation leaders who worked with us to hold industry-wide meetings coinciding with the conferences. We are actively using delegate feedback to help us plan the next series. It will run again in 2020 with a greater focus on worker health, well-being, culture and motivation. See you again then.

Meanwhile, on the subject of planting other species than just radiata pine, a totara growing project could pave the way for sustainable native forestry in New Zealand. With last week's announcement two thirds of the One Billion Trees programme would be native trees and a focus on better ways to manage land prone to erosion, the steering group feel like the "stars are aligning" for their project.

Finally, OneFortyOne Plantations has received confirmation that the Overseas Investment Office has approved its purchase of Nelson Forests.

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China dials back on debt

China, the world’s second biggest economy, built up huge amounts of debt after the global financial crisis (GFC) and this acted as a locomotive to drive post- GFC growth while supporting investment markets.

Credit growth leapt to an annual pace of over 30 per cent in 2009, providing a huge boost for the economy.

"China’s government has acknowledged the earlier pace of credit growth was unsustainable.”

While the pace of growth has slowed since then, it has still outpaced the growth rate of the economy. As a result, the stock of debt has doubled to a little less than 250 per cent of gross domestic product (GDP).

All good things come to an end
China’s government has acknowledged the earlier pace of credit growth was unsustainable and after undertaking another economic stimulus program in 2015, which pushed credit growth to over 20 per cent, it has now more than halved to 8 per cent.

Such dramatic swings in credit growth will inevitably be important for the economy and markets.

The best way to look at this is how much the growth of credit changes, rather than simply the pace of growth. This is commonly referred to as a “credit impulse” measure.

Jon Anderson of Emerging Advisors Group calculates a series for China which looks at the changing growth of credit relative to the size of the economy.

It shows a dramatic rebound in growth in 2008, followed by a slowdown that troughed in 2014 before another dramatic rebound and sharp slowing in recent years.

The current reading puts the credit impulse at its weakest in a decade but with some signs of stabilisation beginning to emerge. However, credit leads the economy by around a year and flags a weakening in momentum for a while yet. But the impact appears to extend well beyond China’s shores.

Global impact
The China credit impulse series, with a lead of around a year, has correlated reasonably well with the Global Manufacturing Purchasing Managers Index series (PMI) since the GFC period. (See graph above or click here for a larger version.)

In a world where most economies were reducing their debt burden, China’s aggressive leveraging has made it a locomotive for growth.

More >>

Source: ANZ bluenotes

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Totara growers set sights high

Totara project sets sights on sustainable timber – In Northland, $1 million dollars, partly funded by the Provincial Growth Fund, is being spent to investigate the feasibility of a totara timber industry.

There’s little cause to dust off the anti-native tree logging placards of the 1970s though. The Totara Industry Steering Group, which is running the pilot project, is quick to point out it is not clear-felling trees or cutting down the few original totara left in New Zealand. The pilot is focused on selective felling of totara trees which have regenerated in abundance on Northland’s farms.

The steering group which includes representatives from Scion, the Ministry for Primary Industries, Northland Totara Working group, Tai Tokerau Maori Forests and Northland Inc. aims to investigate whether barriers to establishing a sustainable industry are surmountable and if they are, it hopes to facilitate the development of the industry.

If successful the pilot could pave the way for sustainable native forestry in New Zealand. With last week's announcement two thirds of the One Billion Trees programme would be native trees and a focus on better ways to manage land prone to erosion, the steering group feel like the "stars are aligning" for their project.

It’s estimated the totara industry has the potential to produce $7.5 million per year in three years. Eventually if the wood is processed into higher value products, the industry could be worth up to $60 million per year.

Steering group member, Paul Quinlan, hopes the pilot will change the way timber is produced.

“The Totara Industry Pilot project is quite focused on making sure this is not business as usual, but a new and different model. Something better than we have ever seen before.

“That’s the lofty ideals. Whether it can achieve that will be very interesting.”

More >>

Source: www.newsroom.co.nz

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OIO approves Nelson Forests sale

OneFortyOne purchase of Nelson Forests confirmed by Overseas Investment Office - OneFortyOne (OFO) has received confirmation that the Overseas Investment Office has approved its purchase of Nelson Forests. The completion date for the purchase will be Tuesday the 4th of September 2018.

Nelson Forests, currently owned by investment funds advised by Global Forest Partners LP, is a vertically-integrated plantation and sawmill business in the Nelson Tasman and Marlborough regions of New Zealand.

“We are very pleased that approval has been granted by OIO. The decision is important, providing certainty for the Nelson Forests’ team, customers, the region and the broader NZ forest industry. We look forward to being a strong contributor to the region,” said OFO’s Chief Executive Officer, Linda Sewell.

Nelson Forests is a recognised leader in forest management and has been broadly used as the benchmark for performance in the New Zealand industry. “The acquisition fits nicely with the balance of OFO’s assets in the Green Triangle”, said Ms Sewell.

Linda will be in Nelson to mark completion date on the 4th September 2018 and to welcome the Nelson Forests’ team to the OFO family.

Campbell Global, Gresham Partners and MinterEllisonRuddWatts were advisory partners to OFO on the transaction.

About OneFortyOne - OFO was formed in 2012 following the acquisition of a 105-year lease of 93,000 hectares of plantation assets from the South Australian Government. OFO’s name comes from the 141st meridian line at the border of South Australia and Victoria and passing through OFO’s plantation estate.

Since commencing its operations OFO has expanded its estate, increased the number of trees planted and grown its domestic processing and sales market by more than 45 percent. In January 2018, OFO purchased Carter Holt Harvey’s Jubilee Highway sawmill in Mt Gambier, South Australia and Woodchip operations at Portland, Victoria. In just five years, OFO has become an established industry player within Australia with a strong track record of industry and community partnerships.

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Industry: ETS scheme changes timely

Emissions Trading Scheme revisions timely and necessary for climate change goals - Forest owners are calling the proposed revisions to the Emissions Trading Scheme (ETS) both timely and necessary if New Zealand is to hope to meet its greenhouse gas reduction targets.

Forest Owners Association President Peter Weir says the Te Uru Rakau discussion paper is appropriately the first significant document to be produced by the new forestry unit established within the Ministry for Primary Industry.

“The Ministry for the Environment quite correctly states ‘The ETS is New Zealand’s main tool for reducing greenhouse gas emissions so it’s important it is a credible and well-functioning scheme that helps us meet our climate change targets.’”

“To date though, the ETS has been applied inconsistently and is relatively ineffective in bringing emissions down and promoting afforestation to sequest atmospheric carbon. Meanwhile higher land prices have stifled most afforestation efforts.”

Farm Forestry Association President Neil Cullen believes it is important the ETS is capable of delivering real results with encouragement for more trees to be planted, especially on farmland.

“Farmers looking at planting trees are nervous about the prospects of the government distorting the carbon market, as they have in the past.”

“Farmers would like to know what the likely range of the carbon price will be over five year periods.”

“They’d like smaller woodlots to be included in the ETS. They need a system which is inclusive of all forestry, and is straightforward and easy to understand, before they will significantly commit to more trees on their farms.”

“The ‘soft’ floor and ceiling mechanisms suggested in the discussion documents need to be considered, but I suspect many potential woodlot owners would want more security than a government carbon auction,” Neil Cullen says.

Peter Weir says a significant inclusion in the discussion is that of the retention of carbon in what are termed harvested wood products.

“The current scheme makes no allowance for the fact that carbon remains locked up in timber for potentially longer than the life of the tree it was produced from. This is recognised internationally, but here in New Zealand it doesn’t flow through for the benefit of forest growers or wood processors.”

“Likewise, we are uncertain so far of how a proposed ‘cost containment reserve’ price ceiling mechanism might work to replace the current ceiling of $25 per tonne. Mindful of the Productivity Commission’s recommendation of a meaningful carbon price a rigid cap at $25 per tonne, it’s not going to change behaviour.”

Peter Weir says one attractive element of the ETS revision is an option to include averaging. This is where a carbon price is set for forests which allow for the fact that they are in continuous production.

“Tailored adjustments to smooth the credits and liabilities and to lower risk are changes FOA has pursued for some time and would make the ETS a more attractive option, particularly for owners of small forests, than is currently the case.”

Peter Weir is encouraging forest owners to read the consultation documents. “It’s important to better understand the proposal for carbon averaging.”

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Windblown timber bill vital for coast

The Government needs to support a proposed Local Bill which would enable the harvesting of windblown trees on conservation land in the West Coast following adverse events, National’s Maureen Pugh says.

“I have been working with the West Coast Regional Council since the Government blocked my motion to have my Members Bill on this topic introduced to Parliament in April.

“This a practical Bill which embraces environmental responsibility and supports regional economic development, creating jobs and boosting incomes for families on the West Coast.

“It will allow the Director-General of the Department of Conservation to authorise the removal of specified windblown trees on Conservation Land following a significant event for harvesting.

“This Bill follows on from the legislation implemented by National following tropical Cyclone Ita which saw a number of native forests in the West Coast and Tasman severely impacted – legislation that was opposed then by Labour and the Greens.

“However, this 2014 legislation was supported by local Labour MPs Damien O’Connor and Rino Tirikatene. I challenge these MPs to respect the wish of the West Coast Regional Council and the people of the West Coast and support this Local Bill through Parliament.

“Removing and processing these trees which would otherwise lie decomposing on the West Coast forest floor would provide jobs for our region along with clearing space for native regeneration – two areas which NZ First claims to be passionate about.

“Recent Cyclones Gita and Fehi have made this Local Bill necessary as large quantities of trees were felled. We need to be prepared by implementing legislation to deal with significant events like this in the future.

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1BT progress report

Shane Jones and his growing teams continue to get out there doing it ... planting trees as well as putting on his infrastructure hat (literally) this week. Here is an update of how its going, as of this week.

The Ministry for Primary Industries (MPI) has welcomed the Nelson City and Marlborough District councils into the Hill Country Erosion Fund (HCEF) following a special funding boost round held in June.
"The extra $1.7 million and broader criteria has succeeded in getting more councils doing this work, treating affected land, and preventing erosion in prone areas. Every tree they plant makes a difference in reducing the many costs of erosion, as well as the wider benefits of trees in our landscapes," said Julie Collins, head of Te Uru Rakau (Forestry New Zealand).
Greater Wellington, Horizons and Northland regional councils also benefited from the fund.

The extra funding was announced earlier in the year as part of Budget 2018 announcements. This saw MPI announcing several changes including: inviting all regions to apply to the boost round in June 2018, for 2018-19 planting adding alpine and coastal erosion areas to eligibility removing the 5 hectare limit on areas that can be treated.

The broadened criteria will also apply in the regular (4-yearly) funding round due to open in October, which also has an increase in funding of $34 million available.

"This year's enhancements bring a virtually 4-fold increase over previous rounds. The more we can invest now, the better the long-term outcomes are going to be for those communities and landowners," Julie Collins said.

"By backing regional investment in sustainable land management practices, this fund enables local councils and landowners to design and implement solutions locally, in keeping with their economic, social, and environmental goals," Julie Collins said.

Projects funded in the HCEF boost round:

Nelson City Council (new participant)
Tree planting on erosion-prone land.
Strengthening expertise for both landowners and within the council.
Sustainable land management planning pilot programme.

Marlborough District Council (new participant)
Land assessment and management planning.
Strengthening expertise for both landowners and within the council.
Greater Wellington Regional Council
Tree planting on erosion-prone land.
Expand existing erosion control work.
Strengthen land advisory services to achieve the right trees in the right places.

Northland Regional Council
Tree planting and soil conservation to protect erosion-prone land. Undertake analysis and assessment work relating to ongoing soil conservation activities.

Horizons Regional Council
Pole planting of poplars and willows on storm-damaged land in Ruapehu District.
Planting in riparian zones on approximately 500 hectares of hill country.
Assessments of eligibility of plantings of willow and poplar poles planted for erosion control for entry into the Emissions Trading Scheme.

The applications were assessed by subject matter experts at MPI and also by a cross-agency advisory panel with a range of skills and experience including from MPI, the Ministry for the Environment, Te Puni Kokiri, AgResearch and Landcare Research.

Trees planted through the HCEF contribute to the Government's one billion trees target.

More >>

Source: Te Uru Rakau

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Scion Log Price Outlook

In May, 58 people from across the New Zealand forestry products supply chain participated in this outlook. They represent a substantial component of the NZ forestry industry. Log price outlooks remain stable. For the third quarter in a row, participants expected little immediate movement in log prices and anticipated a slightly higher future pricing.

Volumes were also expected to be relatively consistent with perhaps a 5% increase over the next 6 months. However, various participants expressed concern that harvesting crews, transporters and port infrastructure were starting to reach maximum capacity.

With the exception of domestic processors, business expectations over the coming 12 months are still relatively positive. In many cases more business optimism was voiced in May 2018 compared to February 2018, however, caution should be exercised since these indices have only been calculated twice and certain calculation adjustments have been made.



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Victoria: Consortium plans forestry hub

A consortium of forestry companies has begun the development of a high-tech optimisation facility aimed at maximising the value of resource handled on the Eden and East Gippsland regions. The new development at Edrom Road will be designed with the sustainable recurring 100-year resource profile in mind.

Consortium partners, including Boral who will provide technical and operational support, see a transition to many new technology applications in the region.

Forestry Corporation of NSW recently announced that the hub was the preferred proponent for a 15-year long-term contract for 25,000 m3 per year of quota hardwood log.

The new hub will include a separate log optimising facility that can extract short logs from existing pulpwood streams to augment the volume of the quota sawlog component.

Additionally, processes that will use the sawdust and residues from the sawmill and existing wood chipping operations are being investigated. It is expected that the combined roll out of the new investment will be in the order of AU$20 million dollars. This investment will result in increased job opportunities in a range of professions and trades.

The consortium in their media release this week said that they would like to thank Forestry Corporation of NSW, the local member Andrew Constance, their workforce, contractors and the Eden region as a whole for providing the conditions and support needed for such a long-term venture. The productive forests of Eden will have a long- term future thanks to the range of renewable products they produce coupled with the benefit of strong road and port access to domestic and export markets.

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Electrifying the trucking industry

Low Emission Vehicles Contestable Fund grant goes to Eastland Group for New Zealand-first heavy electric vehicle trial - A future where logging trucks and other heavy vehicles are quiet, cheap to run and environmentally friendly? That’s the possibility that Gisborne-based infrastructure company Eastland Group is about to explore, with co-funding from the government.

Energy and Resources Minister Megan Woods announced this week that Eastland Group has been awarded $177,000 from the Low Emission Vehicles Contestable Fund, administered by EECA.

The grant will go towards the purchase of New Zealand’s first all-electric water truck, which will be used to suppress dust at Eastland Port and log yards around Gisborne. But the project has larger ambitions: it will gather data on the vehicle’s economic and environmental benefits, and showcase electric innovation to logistics businesses and the public across the central North Island.

Eastland Group chief executive Matt Todd says the project is part of the organisation’s wider strategy around emerging technologies and the electrification of the transport fleet.

“Along with the port, our businesses include geothermal power plants in Kawerau and lines company Eastland Network. We also have a significant shareholding in retailer Flick Electric Co. Through Electric Village, New Zealand’s first community-focused energy hub, we’re promoting the testing and uptake of EVs in all forms.”

Last year, with support from the fund and Eastland Group’s shareholder Eastland Community Trust, Eastland Group established a region-wide network of high speed electric vehicle chargers.

They previously committed to ensuring at least 75 percent of their non-commercial vehicle fleet would be electric by 2019 – a goal they’ve reached a year ahead of schedule.

The next step is to rigorously investigate the potential of electric heavy vehicles within the infrastructure sector. At the moment this is largely unproven, due to the lack of data and technology available.

“We’ve identified an immediate opportunity at the port,” says Mr Todd. “The EECA CO2 emissions calculator showed that our current diesel water truck produces a sobering 0.77 tonnes of CO2 in just 35 days, so this new truck will have an immediate impact in reducing our emissions.

“We’ll also be trialling it on a number of other transport tasks. Logging trucks, for example, are a major contributor to the region’s noise and environmental pollution. We envisage a future where these, and other heavy vehicles in the logistics and marine sectors, move from internal combustion engines to electric models.

“A range of economic and environmental advantages will follow. And from there, the whole community benefits. If a water truck can be electric, what else might be possible within diesel-dominated industries? We’re intending to find out.”

The project cost has been scoped at $379,000, and includes the purchase of an electric terminal tractor and an on-site charging point. The vehicle is expected to be delivered and operational by the end of the year.

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PGF funds Whakaki assessments

$100,000 for cultural and economic assessments of Whakaki catchment land – The Provincial Growth Fund (PGF) will provide $100,000 for cultural, land use and economic impact assessments to be done of the Whakaki catchment area in the Hawke's Bay.

"The assessment will look at the best ways to improve the productivity and environmental sustainability of the land while protecting historically significant sites," said Luke Southorn, Ministry for Primary Industries' (MPI's) director of regional economic development.

"The Whakaki catchment, east of Wairoa, has severe erosion and water quality issues that are impacting on the long-term social, environmental, and economic sustainability of the area.

"MPI has been working with the local community, in conjunction with the Wairoa District Council and the Hawke’s Bay Regional Council, to help them think about a transition for their land to more productive and sustainable methods of use. The community told us they want to further pinpoint where their resources and effort should be focused to deliver the greatest impact.

"The land use and economic assessment will inform local landowners of high-risk land that needs to be treated, which land has the potential for improved productivity, and options for best sustainable land use. "The cultural impact assessment will identify cultural and historically important sites around the Whakaki catchment that need to be considered prior to making significant changes and improvements.

"If we get this right we could stabilise erosion-prone farmland to minimise soil loss into waterways, improve water quality, trial viable alternative land use options, and enhance the overall living standard of the local community by generating job and income opportunities," Mr Southorn said.

The assessments will contribute to other cross-agency initiatives underway in the Whakaki catchment which include an ongoing Hill Country Erosion (HCE) project and a Freshwater Improvement Fund (FIF) proposal to restore the lake and wetland. The Provincial Growth Fund also recently provided a further $100,000 funding to help establish manuka trees on land adjacent to the lake to support a reticulating wetland as part of the FIF work.

Through the PGF, the Government has committed to invest $1 billion a year, over 3 years, in economic development in the regions.

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Jobs



Buy and Sell



... and finally ... speeding tickets

1. SPEEDING AND FISHING

A man was speeding down the highway, feeling secure in a gaggle of cars all traveling at the same speed. However, as they passed a speed trap, he got nailed with an infrared speed detector and was promptly greeted by the wail of a siren and flashing lights.

Cursing his luck, the man immediately knew what was coming, so he slowed down and pulled over. The officer got out of his petrol car, as calm as can be, and walked over to the man's car.

He handed him the speeding ticket, was about to walk away when the man asked, "Officer, I know I was speeding, but I don't think it's fair - there were plenty of other cars around me who were going just as fast, so why did *only I* get the ticket?"

"Ever go fishing?" the policeman suddenly asked the man.

"Ummm, yeah..." the startled man replied.

The officer grinned and added, "Ever catch *all* the fish?"

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2. THE HELPFUL WIFE

A male driver is pulled over by a cop and the following conversation takes place:

Man: What's the problem officer?
Cop: You were going at least 75 in a 55 zone.
Man: No sir, I was going 65.
Wife: Oh Harry. You were going 80.
(Man gives his wife a dirty look.)
Cop: I'm also going to give you a ticket for your broken tail light.
Man: Broken tail light? I didn't know about a broken tail light!
Wife: Oh Harry, you've known about that tail light for weeks.
(Man gives his wife a dirty look.)
Cop: I'm also going to give you a citation for not wearing your seat belt.
Man: Oh, I just took it off when you were walking up to the car.
Wife: Oh Harry, you never wear your seat belt.
Man: Shut your mouth, woman!
Cop: Ma'am, does your husband always talk to you this way?
Wife: No, only when he's drunk.

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3. A BLONDE POLICE STOP

A blonde was speeding in a 35 mile per hour zone when a local police officer pulled her over and walked up to the car. The officer also happened to be a blonde and she asked for the blonde driver's license.

The driver searched frantically in her purse for a while and finally said to the blonde policewoman, "What does a driver's license look like?"

Irritated, the blonde cop said, "You dummy, it’s got your picture on it!"

The blonde driver frantically searched her purse again and found a small, rectangular mirror down at the bottom. She held it up to her face and said, "Aha! This must be my driver's license" and handed it to the blonde policewoman.

The blonde cop looked in the mirror, handed it back to the driver and said, "You're free to go. And, if I had known you were a police officer too, we could have avoided all of this."



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

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John Stulen
Editor
Innovatek Limited
PO Box 1230
Rotorua, New Zealand
Mob: +64 27 275 8011
Web: www.woodweek.com

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