WoodWeek 7 August 2019
Meanwhile on the training front, industry people surveyed by forestry’s ITO, Competenz, were disappointed with the Government’s plan for changes to the system. CEO Fiona Kingsford says, “We surveyed more than 1,000 of our employers this year who told us that ITOs perform a critical function and need more funding, not disestablishing.”
Kingsford says both her organisation and its employers and industry leaders are disappointed that last week’s announcement means that the industry-centric ITO sector will be phased out of workplace-based training.
In our latest graphical news updates – SnapSTATS – we have another snapshot of log market statistics for you – this week it is the recent market history graphed in percent quarterly change in prices for logs sold on the domestic market in New Zealand.
Early next month we have a strong program of case studies on the emerging growth market of mass timber in commercial buildings. Our WoodWorks – Changing Perceptions Conference is running in Auckland this year to make it more accessible to people from the major centres. It is being held at the Novotel Auckland Airport Hotel, right at the airport. With key leaders from the engineered timber industry seeing growth in the number of commercial building starts using mass timber there is a willingness to share expertise. We encourage people who have not attended before to join us this year.
Finally, with a diversity of opinions abounding regarding the many issues facing both our industry and our society from climate change to who gets credit for what in countering it we have a counterpoint to Peter Williams’ opinion piece from last week – we hope you find the debate informative and enlightening.
This week we have for you:
Nelson Forests exploring optionsNelson Forests Ltd is exploring new ways to meet wood export market demand that will create jobs, increase domestic processing of logs in the Marlborough region, and add value to the Top of the South economy.
Nelson Forests and Kaituna Sawmill are owned by Australian company OneFortyOne. OneFortyOne Executive General Manager - New Zealand, Lees Seymour, says the company is exploring opportunities to process more logs on shore and to develop alternative wood chip markets.
Seymour says that Nelson Forests has hired a project manager to do a feasibility study on a number of projects, with one being investigating the building of a facility that would enable the export of wood chips from Port Marlborough.
The process involves chipping logs and forest residues, resulting in higher-value woodchip being exported, greater returns to Marlborough forest owners and improved environmental outcomes for the region. To increase volumes available, woodchip from sawmills could be added to the mix, including woodchip produced by the Kaituna Sawmill.
Another project is investigating debarking export saw logs that are not suitable for processing in domestic mills. The de-barking process removes the need for fumigation of whole logs for the export market.
Nelson Forests Ltd and Port Marlborough have signed a Memorandum of Understanding that outlines how the two companies will work together through the feasibility phase and if successful through to implementation. “The relationship we have with Port Marlborough is outstanding and we are very happy to be able to work with such a professional team,” says Seymour.
Rhys Welbourn the CEO of Port Marlborough says he is “delighted to be able to work with Nelson Forests to develop the feasibility and business case – this is good news for the port and good news for Marlborough”.
The Kaituna Sawmill currently processes about 115,000 tonnes of log per annum and is investigating options to increase the scale of the operation; again this will create jobs, increase domestic processing of logs and add value to the Top of the South economy. Seymour says that “in order to increase sawmill capacity there is the need to develop new woodchip markets, you can’t do one without the other.”
Port Marlborough exports approximately 700,000 tonnes of logs a year at Picton, with the capacity to export a million tonnes.
There is an opportunity for other forest owners to supply logs for chip export and woodchip producers to supply woodchip, and it is not limited to the wood from the company’s own estates or Kaituna Sawmill. “If we could do it, it would be helping other forest owners as well, adding more value to the regional export pipeline.”
If the feasibility study is positive, Seymour says the company believes it could start exporting chip by the end of the 2020.
Pictured above: Lees Seymour, Managing Director of Nelson Management Ltd, Linda Sewell, CEO of OneFortyOne, and Chair of the Board for OneFortyOne, John Gilleland.
Kingsford: Reform dashes industry hopesGovernment reform dashes hope for industry – Industry training organisation (ITO) Competenz has three years to hand over its 20,000 apprentices and trainees and the 3,500 New Zealand employers it currently works alongside to the NZ Institute of Skills and Technology (NZIST), the centralised polytechnic being formed by the Ministry of Education, according to the Government’s cabinet paper released last week.
Fiona Kingsford, Competenz CEO says both her organisation and its employers and industry leaders are disappointed that today’s announcement means that the industry-centric ITO sector will be phased out of workplace-based training.
“We surveyed more than 1,000 of our employers this year who told us that ITOs perform a critical function and need more funding, not disestablishing.”
The fundamental risk our industries face is the time involved and significant disruption of establishing a new NZIST and transitioning the workplace based training to the new system. It could mean being even less responsive to the fast-changing nature of work, which weakens the country’s ability to recruit, innovate and compete,” says Fiona.
She concedes that phasing out ITOs over three years to 2022 is a positive change from the Government’s original proposal.
“Extending the length of time that we can support our new and existing apprentices and trainees through the transition will ensure stability of their needs.
“But we also know that any changes and uncertainty in this sector could mean a downturn in the number of people engaged in the entire vocational education system, so we will be working hard to ensure we continue to support our employers and learners throughout this period to make sure this doesn’t happen,” she said.
Competenz has supported an increase of apprenticeships year on year, particularly in the engineering industry, which has seen 16 per cent growth in apprentices over the past few years, and a 20 per cent hike in employers engaged in training.
“It is bittersweet that our success is now compromised. We cannot afford to lose this momentum at a time of critical skills shortages and industry growth,” Fiona admits there is much about the current system that needs to change to meet the needs of a rapidly changing world of work and was pleased the ITO’s recommendation to align the new framework across six vocational pathways had been reflected in last week’s paper.
“We support the development of the four to seven new industry-governed Workforce Development Councils (WDCs), as it’s critical that on-the-job training meets the needs of industry and is fit for purpose.
“Having greater opportunities on investment decisions, strengthened standard setting, skills leadership and employer brokerage is also welcomed. We are not yet clear on how this will be executed however, we believe that the relationship with employers is a critical role of the WDCs, so this is also positive,” said Fiona.
The paper confirmed a new funding model but did not give details.
Log export update: JuneLog export markets - This week we've got our monthly update from the Champion Freight team. In June wood exports to China and India were up again, but all other key Asian log markets were down.
The chart shows total log export values to China year-on-year to the end of June were up 20 percent year-on-year contributing to overall log exports growing 16 percent across all markets. Logs to India, our second largest log market, grew 27 percent in June y-o-y but are valued at less than 10 percent of shipments to China
To the end of June, China shipments month-on-month were up 23 percent and overall log exports up 18 percent. Logs to India grew 142 percent month-on-month in June.
ANZ Commodity Price IndexUnder pressure: The ANZ World Commodity Price Index fell 1.4% m/m in July. The recent fall in forestry prices weighed on the index, with dairy price movements also negative. The index has weakened by 0.5% in the past year.
The fall in the index was exacerbated by the strength of the New Zealand dollar during the month of July, resulting in the NZD Index falling 2.8% m/m.
SnapSTATS - Price paid for domestic logsChange in price received by New Zealand businesses for logs for domestic market
2010 Q4–2018 Q4, % change from same quarter previous year.
More >> https://figure.nz/chart/F0jZBij8PpbRbvHu-1v7U9nKTitolZJFZ
Tall Timber Building Case StudiesEarly next month we have a strong program of case studies on the emerging growth market of mass timber in commercial buildings. Our WoodWorks – Changing Perceptions Conference is running in Auckland this year to make it more accessible to people from the major centres.
Speaker Profile: Ralph Austin, President of Seagate Mass Timber, Vancouver, Canada
"When my dad had me work alongside him so he could teach me about carpentry, I was like most kids. I wanted to do something different. But after a few years of university in London, Ontario, I headed west to Alberta in the late 70s to work in the construction industry.
"When prefabrication framing was just being experimented with, I started my own Company – Seagate Consulting and quickly adopted it on every project I oversaw.
"Wood Prefab is Growing in Popularity & Building Height. Today, by operating a portable / mobile prefab station onsite (or nearby), I can better control costs, decrease build-time, keep a tidier and safer site, reduce waste and improve the quality of construction for clients.
"Fascinated with new technology involving prefabrication, CNC machinery, 3D modelling and timber framing, I’m excited to gain insights into timber construction from Europe and apply them here in Canada. Europe’s wood design, structural connections, tools, techniques and equipment are slowly being adopted in North America as architects and engineers become aware of the innovations in timber construction."
Hear more from Ralph at Changing Perceptions 2019 | 4 September in Auckland, NZ
Beehive: ETS fixes drive action says JonesA final set of changes to how forestry is treated in the NZ ETS has also been announced.
Earlier this year the Government announced averaging accounting will be an option available to forests registered from the beginning of 2019, and mandatory for forests registered from 2021 onwards.
Averaging accounting means a forest owner does not need to surrender emissions units upon harvesting. Instead they receive units as their forest grows, up to a determined average level of long term carbon storage, and they will not face any liabilities on harvest provided they replant. “Cabinet has now decided that forests registered in the ETS before 2019 will not be able to transition to averaging accounting,” Shane Jones said.
Shane Jones said there were a range of reasons for this decision, “Averaging is primarily intended to encourage new forests because they make the biggest contribution to reducing our carbon footprint.”
“It’s also about managing the volume of carbon units entering the market to maintain a stable price to drive emissions reductions. This decision will be reviewed in 2021, once we have a better understanding of how the carbon market will be affected and the resulting costs,” Shane Jones said, adding “The design details we’re announcing now add to landowners’ flexibility and help ensure the ETS is the best scheme it can be, giving prospective participants more confidence.
Forestry participants will be able to ‘relocate’ a forest under averaging accounting – perhaps to a less productive land area – without having to surrender units for the deforested area and they won’t have to pay back units in the event of natural disasters, such as a forest fire or major storm, provided they replant in four years.
“These are sensible changes, which make sure it’s easy for people to use their land how they want,” Mr Jones said.
See the full news release from New Zealand Government here.
Nokian tyres adds R&D and moreSince announcing expansion plans in 2018, Nokian Heavy Tyres are progressing a plan to increase the production of commercial tyres up to 50 percent and more than double the number of new products by investing heavily on production and product development. What started as a vision is quickly becoming a reality. At their R&D site they’re installing hollow-core slabs and test machinery. The Euro 70 million investment, the largest in Nokian’s history, will reach full production capacity in 2021.
Matti Kaunisto, Development Manager at Nokian Tyres, is satisfied. After months of planning all the details and getting intimate with the Building Information Model BIM) on his computer, he can actually see the vast new 3,500-square-meter R&D building taking shape. “Seeing it on a screen is one thing”, Kaunisto says, “but being able to walk there is another. The size gets lost in the computer screen, but once you stand there you really sense the space.” Nokian says expanding a working factory is a bit like fixing a bicycle while riding it. Using agile change management for planning has proven successful. By implementing ‘Lean’ model principles, they have been able to increase their delivery ability by 15% already this year – during ongoing renovations.
Besides enabling more capacity and future growth, the new facilities serve an important role by supporting smoother flow and safer work. The planning, construction and setup are important steps, but the real innovation lies within the people involved in the process. The goal for the investment is to produce 50% more and more than double the number of new products.
Wairarapa: One farmer happy, others are notWairarapa farm sold to Austrian countess - Hadleigh Station in Wairarapa is a sheep and beef farm which will be converted to forestry.
There were four farmers bidding, two of them from neighbouring farms, but they couldn't get close to forester Roger Dicky (sic).
Now any farm is fair game, one farmer says. If you speak to anyone to do with sheep and beef lately, talk turns to trees. Their communities are under threat and they feel powerless.
Carbon Match market updateNZUs have firmed again and finished up for July with a last trade of $23.85. As of writing, NZUs are best bid $23.50, best offered $24 - a wide spread which most probably reflects the fact that the market is still digesting last night's announcements. Third Tranche of ETS Fixes Announced – Yesterday the Government announced a third set of fixes to the ETS.
One aspect which will serve to tighten supply over time is that free allocations to entities that are both Emissions Intensive and Trade Exposed (EITE) will begin to be phased down by 1 per cent per year from 2021-2030, then at 2 per cent from 2030-2041, and at 3 per cent per year from 2041- 2050.
Changes to how forestry is treated in the ETS have also been announced in relation to the application of "averaging".
If eligible for averaging, post-89 forest owners will not need to surrender emissions units upon harvesting as they do under the current saw-tooth approach. Instead as a forest grows, NZUs will be received up to a forest's average level of long-term carbon storage, and there will be no harvest liabilities provided replanting takes place.
The Government had already announced that averaging will be an option available to forests registered into the ETS from the beginning of 2019, and mandatory for forests registered from 2021 onwards. But of course those new forests take time to grow, delivering a very small contribution to supply in the short to mid-term. The bigger question for the market had been how owners of existing "post-89" forests older than that would be treated.
Last night the Government announced that forests registered in the ETS before 2019 will not be able to transition to averaging accounting.
Keeping Control of Supply – One of the key reasons cited for this was "to maintain a stable price to drive emissions reductions". There was concern that "moving more than 2200 existing forests onto averaging could contribute to an oversupply of units (which, under stock carbon accounting, will be surrendered to the Crown upon harvest) into the carbon market."
There was also concern that offering averaging as an option to older existing forests would have created significant extra financial costs to Government due to units already credited no longer being required to be surrendered on harvest.
While the press release states that that decision may be revisited in 2021 (once more relevant data has been collected), we think the Government's concern over the risk of creating extra supply should be noted by emitters.
All About Trees One of the tricky things with the New Zealand ETS is that its supply is so heavily concentrated in the hands of forest owners, and hence strongly linked over time to what is happening in that sector.
History has made for a lack of diversity on the supply side. Indeed emitters wanting to meet their obligations are pretty much restricted to buying a forestry derived NZU or, if available, surplus NZUs allocated to EITE entities.
While the plan to auction into the private sector the unallocated portion of the Paris budget will somewhat alleviate this, it will by no means be enough without international purchases and further sequestration in new forests.
But Not Everyone is Happy - Unfortunately public opinion is increasingly mixed about the use of forests to meet our Paris targets and other future commitments. Recent opposition has surfaced from the likes of the 50 Shades of Green group - see our previous newsletter - farmers, conservationists and others.
See for example the recent criticism by Dame Anne Salmond of the Government's Billion Trees program, and the response thereto from Te Uru R?kau / Forestry New Zealand. Those wanting a podcast for the way home might be interested in ‘The Detail’ on Newsroom.
Our point? Our (approximate) overshoot of our Paris budget could be as much as 200 million tonnes and we have no credible plan to get there yet.
There are three ways in which New Zealand can try to address that: 1) afforest 2) buy international reductions (if possible) and 3) fundamentally tighten our belts to create genuine emissions reductions in the economy. As land-use gets ever more contentious, expect more focus on the latter, and the prices required to drive that.
Carbon Match - every weekday from 1-5pm.
Opinion: Counterpoint to Peter WilliamsWhy sources matter in a climate of ignorance – In an article recently published by Newshub (and which appeared in WoodWeek last week), Magic Talk host Peter Williams challenged readers to tell him that so-called climate expert Dr Willie Soon doesn't know what he's talking about. In reply, Newsroom’s Joel Rindelaub explains why it's so important for those weighing on climate science to be transparent about their funding sources and conflicts of interest.
With all due respect, Mr Williams: Willie Soon does not know what he is talking about. Not only does Soon propagate material that misrepresents our current understanding of science, he has also displayed ethically dubious behaviour while doing so.
Let’s start with Soon’s credentials. As opposed to what Williams’ column would imply, Soon is not an astrophysicist. In fact, he is not even an employee of Harvard. Soon is a part-time scientist at the Smithsonian Institute, where even his employers have distanced themselves from his radical views, releasing a statement that supports human-induced climate change.
The Smithsonian Institute is not the only establishment to support the scientific consensus on climate change. Nearly 200 scientific organisations worldwide hold the position that climate change has been caused by human action.
In his research, Soon has published articles that have been criticised by scientists for their methodology and misuse of data. Additionally, he has accepted more than $1.2 million USD from the fossil fuel industry for his research while simultaneously withholding this funding information in many of his research publications. The failure to disclose funding sources and potential conflicts of interest is an egregious breach of scientific integrity and ethical guidelines, and it calls into question the validity of the motives for his work.
But we shouldn’t waste all of our time on Soon. The opinion of a single scientist does not constitute a consensus much like the results from a single scientific paper does not represent an absolute certainty.
... almost finally ... tallest tree in the worldHow tall is the tallest tree? - The tallest known living tree is a coast redwood called Hyperion, which was 380 feet and 1 inch (115.85 meters) when it was last measured in 2017. Discovered in California's Redwood National Park in 2006, Hyperion is around 1,200 years old and is currently growing 1.5 inches per year. At this rate, Hyperion should remain the tallest tree until 2031. At that point, Paradox, an up and comer in Humboldt Redwoods State Park who is growing at the rate of 7.5 inches a year, will likely take the crown.
Even when standing beneath these towering green gods and goddesses, it would be hard to appreciate just how tall they are. One wouldn't even be able to see their treetops. So to give you an idea, I like this illustration that shows not just Hyperion's staggering stature, but some of the planet's other noteworthy trees as well.
Source: Tree Hugger (obviously!)
Buy and Sell
... and finally ... when good banks go bad ...
A young college girl came running in tears to her father. "Dad, you gave me some terrible
financial advice!" she cried.
The Japanese Banking Crisis (didn't know there was one ... but here goes anyway)
According to inside contacts, the Japanese banking crisis shows no signs of ameliorating. If anything, it's getting worse.
Following last week's news that Origami Bank had folded, we are hearing that Sumo Bank has gone belly up and Bonsai Bank plans to cut back some of its branches.
Karaoke Bank is up for sale and is (you guessed it!) going for a song.
Meanwhile, shares in Kamikaze Bank have nose-dived and 500 back-office staff at Karate Bank got the chop.
Analysts report that there is something fishy going on at Sushi Bank and staff there fear they may get a raw deal.
A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it starts raining.
and finally (I think this is an oldie, but you've got to laugh at getting one over the bank):
A man walks into a New York City bank and says he wants to borrow $2,000 for three weeks. The loan officer asks him what kind of collateral he has. The man says "I've got a Rolls Royce -- keep it until the loan is paid off -- here are the keys." The loan officer promptly has the car driven into the bank's underground parking for safe keeping, and gives the man $2,000.
Three weeks later the man comes into the bank, pays back the $2,000 loan, plus $10 interest, and regains possession of the Rolls Royce. The loan officer asks him, "Sir, if I may ask, why would a man who drives a Rolls Royce need to borrow two thousand dollars?"
The man answers, "I had to go to Europe for three weeks, and where else could I store a Rolls Royce for that long for ten dollars?"
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