WoodWeek – 2 November 2011

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Greetings from the WoodWeek team. This week we bring you the export market report. Not surpisingly China is the focus with dark clouds on the horizon - but no complete shipwrecks yet. Other markets are less gloomy.

In other news there are plenty of innovations to look forward to in the logging business with Brightwater Engineering set to start manufacturing Madill machines in Christchurch and the Steep Slope Harvester set to be on show at the FICA Big Day later this month in Nelson.

Meanwhile the effects of forestry's latest prosperity has continued to help the rest of the country - especially port company results. Last week the Port of Tauranga - which handles an eye-watering 40% of NZ's forest products exports. This week Port Nelson points to forestry's bouyancy in a good result for shareholders there.

Also this week across the Tasman there is good news for all businesses with their Reserve Bank cranking back interest rates a fraction. And in Tasmania the prospects for some mills are now looking brighter.

For FICA members we have events coming up all around the South Island - the Big Day Out on the 17th & 18th November in Nelson; FICA regional meeting/field trip/networking dinner in Balclutha at the Rosebank Lodge on the 24th; Practical Leadership Workshop the next day at Rosebank Lodge on the 25th; and a Logging Costing Workshop in Rangiora on the 26th (yes, Saturday) - phew!

Also for FICA members, the information on the upcoming annual general meeting which follows the Big Day Out in Nelson. See you there - and yes we do have some room left over if you still want to register your team.

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TPT Export Market Report

TPT Forests

Conditions in the China market since late September have deteriorated. A combination of climbing softwood log & lumber stock levels, seasonal softening in demand for end product, reduced credit availability and increasing supply pressure from softwood exporters from all sources have culminated in pricing coming under severe pressure during October, with more downward price pressure expected as 2011 closes.

The ‘on-season’ which the Chinese industry was relying on to boost lumber demand has not eventuated and with the low usage northern winter and Chinese New Year periods now in sight, it is clear that the market needs to shed a lot of inventory over coming months before getting back into equilibrium. During 2011 this market has been oversupplied by up to 30% month on month – largely driven by demand from speculative domestic traders, looking for an upturn in demand which hasn’t eventuated. Even with steadily rising inventories, pricing has remained strong allowing Pacific Rim softwood supply into China to operate at record levels. Combined softwood inventory levels are now in excess of 4 million m3, which is equivalent to 3-4 months usage.

Expectations are for a continuation of current tough trading conditions for some months ahead, and in all likelihood it will be after the Chinese New Year in January 2012, before there’s any significant improvement.

Behind the scenes the Chinese property market looks to be under some serious stress after 3 years of rising prices and seemingly insatiable demand. Rising prices over 2009/2010 has made housing increasingly unaffordable for the average income earners, and has started to cause public unrest. This year Government measures to take the heat out of the over-cooked property market have started to reverse this trend, with the level of construction activity and property prices both reduced markedly. If this trend is to continue construction activity for 2012 may be somewhat subdued and therefore reflected in log and lumber demand.

The Indian log market is faring much better at this stage, but is currently being targeted with shipments that would have otherwise been China bound volume. Any additional cargoes for India will quickly put this market into an oversupply situation, with obvious consequences.

The Korean and Japanese log markets are still reasonably balanced with regards to inventory, so are in a good position to maintain a level of stability, but are to an extent influenced by the other log markets also. As with India, uncontrolled supply putting pressure on inventories and/or supply/demand balance will have obvious consequences.

With shipments now being delayed and production reduced across all softwood suppliers, the demand for Handysize log vessels is tailing off. Freight rates have started to reduce to reflect reduced demand, but to date rates have not reduced enough to off-set falling log prices, and therefore there will be continued pressure for rates to continue to fall. Ship owners are preparing for a challenging period as demand for loggers falls and therefore earnings will follow suit.

Foreign exchange remains anyone’s guess with as many views on the future as there are experts. Recent USD plays by the Japanese Government and the European recovery plan announcements have affected the NZD and therefore shows the volatility NZ exporters are challenged to deal with.

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Kiwi Contractors Key Indicators

Check out the latest changes in diesel prices, interest rates and exchange rates for New Zealand in this week's Key Indicators. We will post Australian data in a fortnight.

2 November 2011
Interest RatesDiesel Price Watch
90-day bill rate = 2.68%Average (excl GST / all regions) = $1.31
Exchange RatesNC Change (month) = 0%
NZD/USD = 0.8072NCChange(quarter) = 0%
NZD/Yen = 63.15Change (year) = 17%
Labour Cost Index - Ag/Forestry/FishingConsumer Price Index
June 11 quarter = 1026Sep 11 quarter = 1162
Change (quarter) =+0.4%Change (quarter) = +0.4%
Change (year) = +1.5%Change (year) = +4.6%

*Note:The LCI has been re-expressed on a June 2009 quarter base (=1000).

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Harvesting innovations bring new potential

Innovations in harvesting trees on steep slopes have potential to double the size of commercial forestry in New Zealand, according to the industry’s leading forestry research organisation. Future Forests Research’s 2011 Annual Science Report outlines improvements in harvesting techniques and equipment to increase productivity, improve safety and cut costs.

“Cheaper and more effective methods of harvesting trees on New Zealand forestry’s steep slopes are vital if the forest industry is to remain internationally competitive and to grow,” the report says.

“Once cost-effective solutions to steep country harvesting are achieved, it will enable greater expansion of forestry on to marginal land, most of which is on slopes over 20 degrees. This could double the size of commercial forestry in New Zealand.” Over the past year FFR has worked with Kelly Logging Ltd and Trinder Engineers Ltd in Nelson to test and refine the new Steep Slope Harvester developed by these companies that can safely fell, bunch and extract trees on slopes up to 50 degrees where ground conditions allow. An economic analysis by Scion showed the advantages of bunching with this machine included a 60% increase in the number of trees hauled, compared with manual felling.

With FFR’s support the companies are now developing a second prototype capable of operating at different angles more effectively on steep slopes. While Trinder Engineers work on refining the machine, FFR researchers are developing tools to assist the operator.

During the past year researchers have demonstrated how digital terrain models derived from aerial LiDAR (Light Detection and Ranging) can be displayed through an on-board monitor to assist the machine operator to navigate in complex terrain.

The natural progression of this research programme is to eliminate the need for an operator sitting in the machine through the development of remote control (tele-operation). Over the past year the groundwork has been laid for a remote control system capable of operating the harvester on steep terrain. Once achieved, this technology will help to enable FFR’s vision of future logging operations with “no worker on the slope, no hand on the chainsaw”, removing workers from hazardous situations.

The Kelly Logging and Trinder Engineering Steep Slope Harvester will be on show at the FICA Big Day Out on the 17th and 18th November in Nelson. To register call or text Lisa Forrest on 07 921 1382 or 021 275 8011, or email lisa.forrest@fica.org.nz.

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Komatsu 398 - New Head: Heavy Assignment

Komatsu is pleased to announce the introduction of the 398 in the Australian forestry market. The new Komatsu 398 is designed to handle a large range of forests, from first thinnings to clear fall, working as both a harvesting head or a processor for pre-felled timber.

With its well-considered design, based on tried-and-tested components and a structrally strong chassis, the Komatsu 398 can cope with the tough assignments. Suitable carriers for the Komatsu 398 include excavators in the 27 ton class and upward, or a purpose built forest machine such as the Komatsu XT450L.

Low maintenance costs and minimal downtime have been the key objectives in the development of this new harvesting head. The well thought out chassis construction and the fully protected hose routing through the rotator are prime examples of incorporating these objectives in the design.

Another example is that the head is fitted with soft-sealed hydraulic couplings (ORFS), in which o-rings comprise the seals rather than metal-to-metal interfaces. This is good for the environment, as leaks are minimized. It´s also good for the production, as the head's reliability is increased.

The trunk feed through the head uses three feed rollers, which are powered by four hydraulic motors, with a geometric placement and movement pattern that enables them to not only feed the trunk through the head but also to lift it. The result is a secure trunk grip and superb measurement performance. The feed rollers are controlled by two cylinders with an equaliser bar.

The standard Komatsu 398 has three delimbing knives. Optionally, two additional delimbing knives can be mounted in the rear section of the head. An optional top saw is also available.

The standard head is equipped with EcoOiler, an innovative system that provides effective control over the amount of lubricant fed to the chain and bar. The Komatsu 398 is designed for use with the MaxiXplorer Head control system.

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Coroner comments on logging fatality in court

Marlborough logging company Pelorus Contracting refused to allow the Department of Labour to formally question management and staff after forestry worker Sean Elliot Mortensen was killed on the job last year, department health and safety inspector Thane Young told an inquest on Friday.

Coroner Carla na Nagara also heard from Merrill & Ring health and safety auditor Aaron Robinson, who said Pelorus Contracting was "below average" in its management of health and safety when Mr Mortensen died. American-owned Merrill & Ring contracted Pelorus Contracting to log the site where Mr Mortensen was killed.

The 34-year-old Blenheim man died when he was struck by a tree while working in Robin Hood Bay, north of Rarangi, on January 20 last year.

The tree struck Mr Mortensen after he and a co-worker, Bradley Mackel, attempted to fell it while the mainline – used to pull felled trees up to forestry skid sites – was attached.

There was not enough slack in the mainline, causing the tree to snap at its base, swing uphill and land on Mr Mortensen.

Pelorus Contracting director Andy Stewart and several of Mr Mortensen's former co-workers told Ms na Nagara that the technique used by Mr Mortensen and Mr Mackel was not an industry standard, but was sometimes used on jobs.

"It was never classed as a real dangerous act ... it would be good if it was brought into the training," Mr Stewart said. It had been added to the company's health and safety manual since Mr Mortensen's death, he said.

Mr Robinson said he did not see the technique being used during his twice-yearly audits and was not aware of it.

To read the full story click here.

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FICA Notice of Annual General Meeting

FICA members are reminded that the Annual General Meeting will be held at the Rutherford Hotel in Nelson at 8:30am on Friday, 18th November. From this Friday the 4th November, the meeting papers will be emailed to members and will also be able to be accessed at any time from then on the members-only section of the FICA website - including the minutes of the 2010 AGM, FICA Annual Report for 2010/11 and FICA audited Annual Accounts for 2010/11. To attend the AGM members must have their current membership subscription fully paid up.

A copy of the FICA Annual General Meeting Agenda is attached here.

To log in to the FICA members-only section of the website click here.

You will see the login/register box in the top left hand corner of the page. Contact Lisa Forrest if you have any queries.
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Logging Costing Workshop in RANGIORA

The next FICA Logging Costing Workshop will be held in Rangiora on the morning of Saturday the 26th November.

The content of this popular workshop follows a mix of Mark Blackburne’s list of ‘must know’ key costing issues for logging contractors.

Click here to download a flyer for this event. Numbers are limited so register now!

To register for any FICA event call or text Lisa Forrest on 07 921 1382 or 021 275 8011, or email lisa.forrest@fica.org.nz.
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Logs float Port Nelson over budget

In New Zealand's second most important forestry region, the Port of Nelson has reported another steady year, with logs again contributing to a good result.

Chairman Nick Patterson was reported as saying that given the global economic downturn several factors contributed to revenue being higher than expected. “Logs were again a steady performer for us, with the demand from China contributing to cargo volumes being 51,000 tonnes up on budget,” he said. “This meant stevedoring activity was also stronger than expected, both in Nelson and for log operations out of Picton. Container volumes, while down on last year, were also higher than anticipated.”

However Mr Patterson said expenses had also been over budget, with the high cost of maintaining the port’s two existing cranes driving the decision to bring forward the purchase of the new LHM 550 mobile harbour crane. Electricity and fuel prices had gone up, and plant hire costs were also up because of the greater stevedoring activity. The final cargo tonnage figure for the year was 2.711 million, down on the record of 2010 but still ahead of budget.

“As well as the strong figures for logs, apple volumes were ahead of expectations for the year, as were bulk wine shipments in flexi-tanks, thanks to another large grape harvest in Marlborough,” Mr Patterson said. “However, processed forestry volumes were down on budget, due to higher log prices, log availability issues and tough market conditions.”

Mr Patterson said while it had been a postive year to the end of June, there were indications the demand for logs from China was now softening. He said there were other major challenges facing key port users. A total dividend of $4.2million (total) will be paid to the Nelson City and Tasman District Councils.

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Del Vista has plans for Huon mill

The new owners of the Southwood sawmill in the Huon Valley expect it could re-open within weeks. The recently-formed Victorian company Del Vista Forest Products bought the mill from Gunns earlier this month.

Tasmanian forest industry businessman Ken Last has been appointed the mill's general manager and says all that remains is to finalise a wood supply agreement with Forestry Tasmania.

Mr Last says the 40,000 cubic metres of native sawlogs required by the mill has been set aside in the forest peace deal. "The contract will probably be signed early this week and then after that's completed we can then look at starting the sawmill up probably within the next couple of weeks after that," he said.

Mr Last says the green sawn timber from Southwood can not be sold unless it is dried and moulded at the finishing plant he is establishing at Remount Road in Launceston.

"Whilst they're different shareholdings and they're not joined at the hip as such, I mean, they're a natural fit for one another, now of course, Remount Road would not only buy from companies like Southwood, but they could buy from smaller family companies that have green sawmills spread around the state." It is understood Mr Last is investing in the Remount Road plant with a consortium involving the former Gunns head John Gay and the Neville Smith Family Group.
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Former Gunns boss back into timber

John Gay - the former chairman of forest company Gunns – was reported this week by the Australian to be back in the timber trade. Industry sources confirmed that Mr Gay as part of a consortium was buying Gunns sawmill at Deloraine and veneer mill at Somerset, both in Tasmania's northwest as well as a timber drying and finishing plant at Remount Road in Launceston also once run by Gunns. The three purchases will move Mr Gay, an outspoken defender of native-forest logging in Tasmania, back into the industry from which he was ejected in May last year.

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FIEA adds Scholarship to major Sawshop upgrade

A new FIEA scholarship for forestry students has been added to a major upgrade of saw-doctoring equipment at the Waiarki Institute of Technology this year. In addition to a wide array of innovative events being run with Australasian forest products companies to encourage adoption of new forestry, wood processing and manufacturing technologies, FIEA is also contributing directly to several new initiatives this year.

For sawmilling companies, FIEA worked closely with the Waiariki Institute of Technology to support the upgrade of National Training Centre’s saw-doctoring facility at their Waipa Campus, Rotorua. Brent Apthorp, FIEA Director says “FIEA was delighted to be able to directly assist the industry by contributing $50,000 through our FIEA Educational Fund to upgrade equipment in line with a new qualification in Saw Doctoring that has just been developed”. This was in conjunction with generous support from CHH in offering surplus saw sharpening and levelling equipment for sale. The installation was completed in March.

The Forest Industry Engineering Association has also just set up a new annual $2,500 FIEA Scholarship with the School of Forestry at the University of Canterbury. It’s being offered for five years and will commence early in 2012. The new Scholarship has been designed to encourage and support an outstanding student in their third year of study undertaking either a Bachelor of Engineering (Honours) Forest Engineering, or Bachelor of Forestry Science and who has a strong interest in Wood Science or Engineering. Details on the scholarship can be found on the NZ School of Forestry website.

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Russians need quota to join WTO

Russia will introduce an export quota on unprocessed timber after it is accepted into the World Trade Organization, Interfax reported, citing Maxim Medvedkov, the Economy Ministry official responsible for trade talks.

Timber exported under the quota will be taxed at a rate lower than the current duty, while sales abroad exceeding the quota will be levied at a higher rate, Medvedkov was cited as saying. The agreement was reached as part of the European Union’s decision on Oct. 21 to back Russia’s entry into the global trade arbiter, the Moscow-based Interfax news service said.

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Buy and Sell

... and finally ... Say what???


Definition: "Figure of speech where the latter part of a sentence is unexpected; frequently used to create humour." ie - "Where there's a will, I want to be in it."

1. Whenever I fill out an application, in the part that says, 'In case of emergency, notify:' I write ' A DOCTOR.'

2. I didn't say it was your fault, I said I was blaming you.

3. Women will never be equal to men until they can walk down the street with a bald head and a beer gut, and still think they are sexy.

4. Behind every successful man is his woman. Behind the fall of a successful man is usually another woman.

5. A clear conscience is the sign of a fuzzy memory.

6. I’d ask God for a bike, but I know God doesn't work that way. So I stole a bike and asked for forgiveness.

7. You do not need a parachute to sky dive. You only need a parachute to sky dive twice.

8. Money can't buy happiness, but it sure makes misery easier to live with.

That's all for another Wednesday in wood - we hope you enjoyed today's content AND the joke. Catch you again next week.

John Stulen
WoodWeek Editor
PO Box 6160
Building X91, Scion Campus, 99 Sala Street
Rotorua, New Zealand
Tel +64 27 275 8011
Web www.woodweek.com

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