WoodWeek 5 August 2020
Looking to the PF Olsen Log Price Index, with recent decreases in export log prices, their index decreased $3 in July to $114. The index is currently $9 below the two-year average, $11 below the three-year average, and $8 below the five-year average.
For our faithful ForestTECH delegates keen on finally getting some networking and face-to-face learning in this calendar year ... the great news is our ForestTECH 2020 Conference program is complete and registrations are OPEN. It's all happening in Rotorua on 18-19 November.
Meanwhile, down on the farm … an MPI-commissioned report endorses Forest Owners Association statements that forestry leads sheep and beef farming for export returns and providing jobs. In May, business analyst PwC submitted a report to the Ministry for Primary Industries (MPI) which compared the economic and employment output of forestry with sheep and beef farming.
Picking up on the keywords from Westpac’s latest forestry outlook, here's what their economists are saying: ”China is key. Recall that China accounts for nearly 60% of New Zealand’s overall wood exports and more than 80% for log exports. After falling 10% in the March quarter, the Chinese economy is recovering both sooner and stronger than any other major global economy.”
The Westpac Economic Bulletin goes on to say that Chinese GDP has already rebounded back above its pre-COVID level, following the 11.3% jump over the June quarter. We expect further growth over the September and December quarters of 3.5% and 1.7%, respectively, and then nearly 10% over the 2021 year. See the article and today's SnapSTAT where we have ALL of the details for you.
Finally in this week’s SnapSTAT story in a graph, brought to you by the team at Chainsaw & Outdoor Power Limited & Oregon, we’ve charted the long term “rise and rise” of log harvests for the past 25 years. Enjoy!
This week we have for you:
Log export market updateThanks to the team at Champion Freight we have the latest log export update for you.
Thanks to the Champion Freight team here is a graphic summary of the latest monthly update for export log markets.
Champion Freight's latest report shows shipments to China shipments month-on-month to end of June were up by 15 percent, thus bumping overall log export values 7 percent.
Log export values to South Korea were down 5 percent month-on-month in June. Logs to India were down a massive 71 percent compared to June 2019, affirming South Korea as our second most important export log market.
Log export values into China year-on-year (y-o-y) to the end of June were down 22 percent. Overall log exports mirrored that being down 25 percent across all markets. Logs to South Korea, now our second largest log market, decreased by 22 percent y-o-y to end of June.
ForestTECH Conference OPEN for registrationsFor our faithful ForestTECH delegates keen on finally getting some networking and face-to-face learning in this calendar year ... the great news is our ForestTECH 2020 Conference program is complete and registrations are OPEN.
Despite closed borders, social distancing requirements and uncertainties around Australia for travel and meetings right now, ForestTECH is running as planned on 18-19 November. Some changes though to the usual format to cope with COVID-19 conditions are in place for this year's event.
ForestTECH 2020 will be running in Rotorua, New Zealand on 18-19 November.
Key features: Our main technical subject themes are split for the first time between remote sensing, data capture and forest inventory and forest establishment, mechanised planting and silviculture, two half-day workshops. Also in-field demonstrations are planned both before and after the planned conference and exhibition.
For the first time, ForestTECH 2020 will be both a live event and streamed on-line as a virtual event!
We're bringing you an array of extras that we think will really going to appeal to local, Australian and international delegates. Further details will to come each week. You can now check out the programme for both days on the event website: www.foresttech.events.
Westpac outlook sees second half log liftToday we bring you a fresh outlook from the economists at Westpac - This concise economic update sees a general lift in Chinese economic activity boding well for export log prices:
China - The big boss
We expect the second half of 2020 will be better than the first. In fact, we expect export log prices to lift as Chinese economic momentum builds and its construction sector sparks into life.
As always for export log prices, and for forestry more broadly, China is key. Recall that China accounts for nearly 60% of New Zealand’s overall wood exports and more than 80% for log exports. After falling 10% in the March quarter, the Chinese economy is recovering both sooner and stronger than any other major global economy.
Already, Chinese GDP has rebounded back above its pre-COVID level, following the 11.3% jump over the June quarter. We expect further growth over the September and December quarters of 3.5% and 1.7%, respectively, and then nearly 10% over the 2021 year. The economic recovery follows the successful containment of the outbreak. While there have been second waves, notably in Beijing, these outbreaks have been quickly contained.
That general lift in Chinese economic activity is also beginning to translate into activity in the sectors that matter for forestry. The Chinese housing market is sparking to life and the construction pipeline is growing, and when we look at a range of indicators, like building permits, land sales, and house prices, they are lining up for a material pick up in (housing) construction, and thus demand for wood.
On this basis, our central view is that we expect a lift in export log prices over the second half of 2020. If anything, we anticipate much of the lift will occur over the September quarter, noting that New Zealand harvest is at cyclical lows and it will take time for logging to respond to any price lift.
More: Westpac Economic Bulletin - Forestry: COVID impact and outlook - Re-enter the dragon
MPI report endorses FOA positionMPI commissioned report endorses FOA statements that forestry leads sheep and beef farming for export returns and providing jobs - In May, business analyst PwC submitted a report to the Ministry for Primary Industries (MPI) which compared the economic and employment output of forestry with sheep and beef farming. Other options looked at were carbon forestry and a mix of land use.
The report had been commissioned in 2019. FOA has requested and just received a final copy of this report from MPI.
Entitled The Economic Impact of Forestry in New Zealand it is a clear and objective refutation of the statements which have been widespread in the news media recently which are that forestry destroys local communities and jobs. PwC has found forestry makes more than double a value chain impact than sheep and beef farming, in both value-add by land use and also in providing employment.
In particular, two tables in the report speak for themselves.
Germany's forests decimated by insects, droughtIn Germany, rising temperatures and droughts have made trees more vulnerable to attacks by bark beetles and other insects - That's led to a nearly sixfold jump in forests destroyed by pests over the past two years. Around 32 million cubic meters (1,130 million cubic feet) of wood damaged by insects had to be removed from Germany's forests in 2019, the Federal Statistical Office reported this week.
That total is three times higher than the 11 million cubic meters that was destroyed in 2018, and an almost sixfold increase on the 6 million cubic meters felled due to pests in 2017.
"In recent years, the native forests have suffered from drought and hot spells," the Wiesbaden-based statisticians said.
"Pests like bark beetle can multiply increasingly quickly in already weakened trees."
Central Europe: Spruce bark beetle and its impact on wood markets - Between 2017 and 2019, over 270 million m3 of standing timber in Central Europe was damaged by a combination of factors: primarily, changing climate conditions that featured hotter, drier summers and warmer winters. In combination with frequent windstorms, this created ideal conditions for the spread of spruce bark beetles, especially at lower elevations.
The damage is across many countries, including Poland, Switzerland, Slovakia, Italy and Sweden, but the most severe losses have been in Germany, the Czech Republic and Austria. The outbreak in these three countries is so severe that FEA analysis predicts that the killed timber volume from the European spruce bark beetle will eventually exceed that of the British Columbia Interior’s mountain pine beetle outbreak.
Log exports - In 2019, log export markets proved to be an important release valve for excess salvage spruce logs that were surplus to domestic mills’ needs in Germany and the Czech Republic. This trend will continue throughout the salvage harvest, especially since beetle-killed logs are being harvested at close to cost levels in Central Europe, allowing for exported logs to be competitively priced for volume sales to China.
In the current year, the rise in log exports is expected to pause due to curtailments related to the COVID-19 pandemic; however, this assumption could quickly change if China’s log demand picks up. Note that Germany and the Czech Republic accounted for 80% of log exports from Europe to China in 2019, a proportion we expect to grow in 2020 and beyond.
Assuming that markets return to more normal conditions later this year, log exports from Central Europe should continue to rise — perhaps even sharply, depending on market demand, container rates and container availability. Based on the potential harvest of damaged timber and the capacity limits of the central European sawmill industry to process the damaged logs, rising log export volumes could result in major disruptions to global trade flows.
The new FEA report, Central European Beetle & Windstorm Timber Disaster: Outlook to 2030, is now available. For more information, a brochure is available via this link.
Source: Russ Taylor, Managing Director, FEA-Canada & Rocky Goodnow, VP, North America Timber Service, FEA LLC
Log export rules: Canada upsets JapanCanada risks trade spat with Japan over restrictions on log exports - For as long as Canada has been harvesting trees, the issue of log exports has dogged politicians in that country. Now, a federal rule that forces private forest operators to offer a right of first refusal to domestic sawmills before obtaining export permits could lead to Canada’s first trade dispute under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The prospect of a trade spat with Japan puts additional pressure on Ottawa to relax export restrictions on raw logs. Vancouver-based Mosaic Forest Management has go on record to say its ability to operate remains threatened by Ottawa’s export rules. So far, the politicians in Canada's capital, Ottawa, appear unmoved by Mosaic’s pleadings.
Federal Canadian and BC restrictions on log exports have long been decried by the US lumber industry as an indirect subsidy to BC sawmills, leading to US duties on Canadian lumber. Some commentators suggest Ottawa should address Japan’s concerns before it’s forced to. It might not like the outcome otherwise.
Source: Globe and Mail via tree frog news
Graph source: Westpac
Carbon market updateAn update the Carbon Match team: Supply remains tight - especially from foresters who, naturally enough, have recalibrated their expectations upwards.
Volumes changing hands were light early in the week but momentum built again yesterday and we saw a collection of sellers around the $34 mark paid for the first time. About 100,000 went through around that level.
If you’ve been thinking about selling but have been hoping for something near $35 this might be your moment to throw up an asking price and see what happens.
We have had the odd seller express remorse over selling earlier in the $30s. And we get it - in theory there is nothing stopping spot NZUs travelling at over $35. Carbon prices currently are nowhere near the levels they need to be to see us hit Paris targets, let alone our big audacious 2050 goals.
But, equally, there is no point ignoring the economic headwinds. Overnight we've seen two of the world's largest economies report stark contractions. There has been a 9.5% decline in US GDP over the last quarter, compared with the same quarter last year (the deepest decline since records began in the 1940s). Germany's GDP likewise fell 10% compared with the same period last year.
What does this mean on the ground for New Zealand? - Confidence is lower in New Zealand and while the lingering wage subsidy seems set to remain in place until after the election, pressures on business everywhere are mounting. There's something of a cruel irony that, after almost a decade of underwhelming ETS policy, carbon prices are climbing so significantly now and only just beginning to bite.
The beef and lamb sector is one that is concerned. They are feeling the impacts of prices coming off for premium cuts of meat as restaurants globally suffer the effects of rolling lockdowns and distancing requirements. Log prices are also reported to have softened in June.
Looking at the scenarios discussed in the Productivity Commission's Low Emissions Inquiry (see pg 67) of 2018, you can't help but notice the contraction across the next 30 years that is contemplated for land used for Beef and Lamb. Likewise the strongly growing role of exotic forestry in its place. It's worth a look. It's also notable that only in the "policy driven" scenario does it look like new native forestry plays anything more than a cameo role.
What's my point? That while NZU holders might well be sitting here feeling pleased about the results of recent reforms you also have to acknowledge that not everybody is happy, and that this will continue to affect longer term stability of policy. Holding NZUs is not risk free.
There are also many NZUs sitting there on the "invisible" offer. Because a fixed price option is still in place, there will be up to 40 million (approx) NZUs effectively made available from the Government at $35 for May 2021 compliance. A further 4.75 million are also expected to be sold at the first auction next March.
In addition, there are currently 121 million units sitting in private accounts in the registry. That's as of 30 June 2020. Certainly the "stockpile" has diminished - the number has fallen by 11 million since the same data was reported last year and much of it remains in forest owners hands. But it is still roughly equivalent to three years' compliance demand. Further statistics on 2019 compliance activity are expected to be out soon.
On the other hand, there's no indication from the Labour party that they would revisit the direction of travel. And last night's latest Colmar Brunton poll has Labour looking like they could govern alone. We are now just 7 weeks out from the election.
Carbon Match - every weekday from 1-5pm. missed last week’s newsletter or want to refer a friend? Sign up on our home page.
ISO: Massive new log crane technologyFour new Liebherr Group LHM 550 mobile harbour cranes are presently on their way to ISO in New Zealand. - The new cranes feature the most up to date technology and will deliver enhanced safety outcomes, increased cycles, and lift capacity to the ISO operations. Each crane weighs an impressive 465 tonnes with a boom length of 55 metres and dual outrigger pads which provide improved point loading distribution on the quayside.
The cranes can be remotely-controlled and will feature an electric-hydraulic grapple which will remove wharf personnel from the operational environment resulting in a safer operation. The grapples will have a 35 tonne and 9.0m2 lift capacity which makes them a world-first in terms of size and capacity.
Andrew Davies, Chief Operating Officer, ISO Limited said, "The new cranes will significantly change the way logs are loaded in New Zealand and most importantly are a significant step-change to our current practices, improving both safety and productivity."
The cranes were manufactured in Germany, and are currently on their way to New Zealand aboard the Heavy Load Carrier vessel the ‘Rolldock Sun’ and will be commissioned during the second half of 2020.
Right tree, right placeForestry sector stresses 'right tree, right place' approach as debate over carbon farming continues - As the debate over carbon farming continues, forestry groups say the solution to the country's afforestation question is planting the "right trees in the right places for the right reasons".
The New Zealand Forest and Wood Sector Forum - a collective of the country's forestry sector representatives - says that means taking a "measured approach to the question of land use".
"Rather than buying a title and saying it will be solely for one use or another, we need to examine the land under the title, and decide what the best use is for each piece of land," the group said in a statement on Tuesday.
"In other words, some hill country farmers would benefit from having some of their land under forest, while some forest land could be better used for food production."
The group said it was important to look at each piece of land in terms of both its primary and multi-use potential, taking into account water resources, environmental considerations, access and proximity to processing or export centres, such as mills and ports.
"For the forestry sector, this means planting a range of forests for a range of reasons, from permanent forests stabilising land and capturing carbon, to forests for manufacture of high-value products, through to short-rotation energy forests. It may also require conversion of some existing production forestry, either into farmland where the land is better used for food production, or into permanent forest / native forest where the terrain or instability of land makes it unsuitable for productive forestry," the group said.
"For the farming sector, this could mean incorporating more forestry into existing properties, to improve income from poor land as well as reap the additional benefits forests can provide such as biodiversity and water protection."
The issue of afforestation has been a cause of debate in the rural sector for a while now, but has made even more headlines after the Emissions Trade Scheme (ETS) was passed last month.
Scion: Business case for trees in QueenslandThey beautify our streets, provide shade in hot weather and are a key part of the world’s ecosystems – but there is growing awareness that trees can help grow a healthy economy, as well.
Dr Elspeth MacRae, chief innovation and science officer for Scion, believes trees are one of the best ways to move New Zealand towards an economic strategy based on a circular bio-economy.
Tree products could increasingly replace fossil fuel-based plastics, she says.
Unlike a linear economy, which is based on a model of take, make and waste, a bio-economy is based on an ongoing cycle of bio-based resources, production, use and recycling. The goal is to minimise waste and benefit the environment, as well as the back pocket.
Across the globe, the bio-economy could be worth billions of dollars to countries who tune into it. In a 2019 presentation paper, MacRae outlined the financial potential bio-economic policies could have in 10 years time. By 2030, it was expected to bring a AUD$1b injection to Queensland’s coffers alone.
It is a field MacRae has been studying for more than 20 years. Her employer, Scion, specialises in research, science and technology development in forestry, wood products and other biomaterials. Trees are a renewable resource which can be replanted and regrown. Materials made from them can be used as replacements for plastics, concrete, glass, metal and other non-renewables, she says.
Through Scion’s research, and other research globally, materials sourced from trees – including bark – are being turned into resources which are used as substitutes for products previously made using fossil-based fuels, such as petroleum. MacRae says researchers across the world have probably tapped into about 40 per cent of the ways trees, and other plants like hemp, can be used to make household and personal items, including clothing.
“It’s a great business opportunity.”
Almost finally … You know him: The Tree Man!Well-known American rock and roll musician Chuck Leavell has a documentary coming out soon entitled Chuck Leavell: The Tree Man.
It took his whole life to live and three full years to film. Filmed in four countries with more than 80 interviews from artists with a combined 58 Grammy Awards by the artist included, “Chuck Leavell: The Tree Man,” an Allen Farst film, is the cinematic documentary that shines a light on one of the greatest rock’n roll pianists and keyboardists over the last 40 years.
Not just known for his musical influence, Leavell is also one of the biggest names in environmental forestry and was selected the National Tree Farmer of the Year in the United States. His commitment to the planet and his strong family ties are refreshing reminders to be kind and treat your neighbour with respect. As Leavell puts it, “if you cut a tree down, plant two for the next guy.”
More: ‘The Tree Man‘.
Buy and Sell
... and finally ... midweek jokes
One weekend morning, a wife says to her husband, "We've got such a clever dog. He brings
the daily newspapers every morning."
"Yes, teacher," he said, "my dad taught me."
"Good, Johnny. Tell me what comes after two," the teacher said.
"Three," replied little Johnny.
"Very good. What comes after five, Johnny?" asked the teacher.
"Six," answered little Johnny.
"Excellent. Your dad did a very good job.
Now, what comes after ten?" the teacher asked.
"A Jack!" replied little Johnny.
"I ain't had no fun in months"
"Now, how should I correct this sentence."
"Get a new boyfriend," said Little Johnny.
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