WoodWeek 10 February 2021
Looking to key market drivers, the SOPI report suggests growth in the Chinese construction industry and the US housing market is expected to support demand for our key forestry products over the medium term. In addition, domestic timber demand is expected to remain strong due to increased residential construction.
Continuing with market forecast intelligence, we have an international source saying China’s gross domestic product (GDP) expanded 6.5% year-on-year in Q4 2020, following 4.9% growth in the third quarter. Despite a complicated year with all the implications of COVID-19, China’s economy ended in remarkably good shape and remains poised to expand further this year.
Looking to carbon forestry and how it can help us balance our emissions, its time to cut to the chase after last week’s initial responses to the Climate Change draft report. So, we've got some light reading for you directly from the report itself. We are also pleased to announce Dr Rod Carr, Chair of the Climate Change Commission as our Carbon Forestry Conference keynote speaker. For those actively involved in climate change mitigation and carbon sequestration through carbon forestry, our conference running in mid-June (click here for details or to register) is drawing considerable interest and momentum is building quicker as people are register every day right now.
Last week saw the first monthly issues of www.harvesttech.news, www.foresttech.news and www.woodtech.news go out to industry for 2021. We already have some 15,000 subscribers - and growing weekly - so if you’re not already receiving them, click on any of the three links here to sign up. They’re free!
This week we have for you:
MPI forestry forecasts in SOPIIn the latest analysis from Ministry for Primary Industries quarterly report, "Situation and Outlook for Primary Industries" (SOPI) their information suggests forestry exports are expected to increase 8.1 percent to $6.0 billion for the year ending June 2021 due to strong demand for logs from China and robust demand for sawn timber from the US.
Growth in the Chinese construction industry and the US housing market is expected to support demand for our key forestry products over the medium term. In addition, domestic timber demand is expected to remain strong due to increased residential construction.
Looking into log export sector - Log export revenue fell 24 percent during the year ended June 2020, largely due to COVID-19 related disruptions to harvesting, logistics, and demand. China remains the key market for New Zealand log exports, making up 82 percent of overall log export values.
Log exports are forecast to reach $3.2 billion in the year ending June 2021, up 12 percent from 2020 but well below 2018/19 values when prices and volumes reached all-time highs. Chinese demand for logs remains strong, driven by increased construction activity. We expect demand for logs to continue over the medium- term if China's construction industry remains strong.
The outlook for log prices is less clear despite strong demand signals from key markets. European foresters have been sending increased volumes of spruce logs into China in response to a spruce beetle infestation (Figure 17), which is likely to put downward pressure on New Zealand log prices. On the other hand, a planned ban on Russian log exports in early 2022 is expected to support demand (and prices) for New Zealand logs in the medium term.
Demand from South Korea, our second largest market for logs, is forecast to be relatively stable over the forecast period. Demand from India is expected to remain subdued for the remaining part of the year as COVID-19 cases decline, but it is expected to increase as its GDP growth rebounds.
2021 China economic updateChina’s gross domestic product (GDP) expanded 6.5% year-on-year in Q4 2020, following 4.9% growth in the third quarter. Despite a complicated year with all the implications of COVID-19, China’s economy ended in remarkably good shape and remains poised to expand further this year. Although some analysts expected the economic growth to rebound to 8.4% in 2021, others cautioned that a recent outbreak of COVID-19 cases in China could impact activity and consumption in the run-up to the Lunar New Year holiday.
Holiday migration - While the Lunar New Year break officially runs from February 11th to the 17th, lockdown policies are expected to intensify around the holidays as people travel to and from their hometowns. Often cited as the largest human migration on earth, this holiday sees hundreds of millions of people returning to hometowns across China to celebrate with their families. While travel and family events are currently permitted, many people are being asked to submit COVID-19 tests before and after travel. Any region with recent cases will also have further restrictions on travel, with the possibility of immediate policy changes if new cases are found. The COVID repercussions of this holiday are expected to last up into early March, given concerns about the incubation timeline for those returning to major cities.
China’s manufacturing sector continued to improve in December. The Caixin China General Manufacturing Purchasing Managers’ Index (PMI index), an important indicator of the strength of the Chinese economy, reached 53 in December[i]. (With a reading above 50 indicating an expansion in activity.) Both demand and supply in the manufacturing industry remained strong, while overseas demand improved.
2021 Economic Outlook - The Economist Intelligence Unit (EIU) expects China’s real GDP to recover to 8.7% in 2021 – following its slump to 1.8% in 2020 – underpinned by fiscal support for infrastructure, healthcare and consumption. After loosening in 2020, monetary policy will shift to a neutral stance in 2021, amid concerns of deepening structural imbalances. Restoring domestic demand will be a key theme under the “dual circulation” model, but policymakers will enjoy limited success in this area.
The International Monetary Fund (IMF) forecasts an expansion of 8.2% for China’s GDP in 2021, down a full percentage point from the IMF’s April 2020 estimate. Looking at different aspects of the economy, in 2020 fixed-asset investment rose by 2.9%, and value-added output at industrial firms increased 2.8%, while retail sales fell 3.9% and household consumption expenditure fell 4.0% year on year. Industry and investment activity have been major drivers, while consumption still shows some weakness tied to lockdowns and ongoing limits on tourism travel.
The Construction Sector - According to the National Bureau of Statistics of China (NBS), the average new home price in China’s 70 major cities rose by 3.8 percent year-on-year in December 2020, after a 4 percent rise in the previous month. This was the slowest pace of growth in housing prices since February 2016, as the government stepped up its efforts to deleverage the highly indebted sector to reduce financial risk.
Total investment in real estate in China had a year-on-year increase of 7 percent from January to December, 0.2 percent higher than that from January to November. The total floor area completed in China in Q4 2020 was at 3.848 billion m2, up 85.9 percent compared to Q3 (2.069 billion m2).
Source: Canada Wood Group
Climate Change Report - Cut to the chaseFollowing the initial responses from sector groups, including forestry, journalists, analysts commentators and worried backyard barbecuers, its time to cut to the chase and make direct reference to the document itself.
Here is a brief extract from the draft report online:
What are we recommending?
To learn how you can be involved and respond click here
For a direct link to the draft report pdf, click here
For those actively involved in climate change mitigation and carbon sequestration through carbon forestry our Carbon Forestry Conference running in mid-June (click here for details or to register) is drawing considerable interest and momentum is building quicker as people are register every day right now.
Rayonier results offer insight to wider industry moodFirst Look at RYN's Q4: Solid Quarter, Upside Guide - 4Q EPS of $0.08, above BMO at $0.04, consensus at $0.05. Adj. EBITDA of $74.5mm beat BMO's $67.5mm and consensus at $65.5mm. Real Estate drove the beat. FY21 EBITDA guidance of $285-315mm. BMO at $277mm and consensus at $274mm. Guidance upside in New Zealand, PNW, and Real Estate segments.
New Zealand (NZ) - Slight miss. Adj. EBITDA $16.8mm; BMO at $17.7mm. 4Q harvest vols +2% y/y (export +2.3%, domestic +2.1%). Export sawlog prices +2% y/y and +11% q/q due to higher demand from China, partially driven by restrictions on Australian logs. Domestic sawlog prices +6.4% y/y and +4.7% q/q driven by FX (ex. FX, prices = ~flat).
Forestry worker dies near MastertonA forestry worker was killed in a workplace accident in Masterton on Tuesday evening. Police were called to an incident at Tinui involving an injured male forestry worker around 5pm.
Westpac Life Flight Helicopter and local ambulance were called and first aid was administered at the scene.
“Despite medical attention the male, who is from the Wairarapa area, sadly passed away at the scene,” a police spokesperson said.
Police have referred the incident to the Coroner and WorkSafe New Zealand has been advised.
Source: Stuff News
Royal Wolf case study for log rail solutionA leading shipping container supplier Royal Wolf and New Zealand’s KiwiRail have jointly developed a bespoke logging container that significantly improves efficiencies and capacity when transporting logs to the Port of Tauranga for export.
The 484 logging cradle cassette containers, built by Royal Wolf’s Intermodal Business Unit, were specially designed as a replacement for KiwiRail’s old log wagons which were designed to only carry logs. The new 20-foot cassette containers can be loaded and secured onto different types of railway wagons to increase compatibility and capacity across KiwiRail’s network.
“We’re problem solvers,” says Michael Horne, Royal Wolf General Manager Intermodal. “We modify containers to meet a company’s specific logistics and transport needs. KiwiRail’s logging cassettes are a perfect example of us tailoring a container solution to help increase efficiencies and capability for a client.”
Royal Wolf worked closely with KiwiRail to develop a prototype container followed by the manufacture of a batch of containers and then the final product. Mr Horne says having the right container is essential to enable logistics companies to maximise loading and capacity for products as they transport freight around the country.
“There are a wide range of commodities and products transported in our containers but coming up with a solution for the safe transportation of logs required a very specific design. The cassette containers are functional but also highly innovative because they are able to be secured to a range of different wagons in the KiwiRail fleet.”
New innovations around log measurement and scaling and wood transport are key themes being explored as part of this years eagerly awaited HarvestTECH 2021 event running in Rotorua, New Zealand on 13-14 April. Full details on programme content can be found on the event website, HarvestTECH 2021
WHO KNEW? Tomatoes and wood good togetherPromising new technology using leftover forestry wood to extract clean carbon dioxide is expected to benefit commercial greenhouses growers and the environment. A Kiwi CO2 invention would help increase crop yield and reduce emissions at the same time.
New Zealand Gourmet's Roelf Schreuder said the produce wholesaler is currently getting CO2 for their Taupo crops from Taranaki as a waste product, which is brought in through trucks every week and "can be a hassle".
Now, Hot Lime Labs has developed a way of producing clean CO2 on site. The technology uses wood chips to warm the plants at night while producing carbon dioxide, which is soaked up by limestone pellets, which acts as a "CO2 sponge," founder and CEO Vlatko Materic said. “It grabs CO2 and lets all the other components out and then releases CO2 on demand on contact with air."
Trials have shown the higher-quality gas creates better produce. “It gives a bigger yield and better fruit at the same time so they probably would have increased the output by 10 per cent,” Materic said.
The company now wants to work with the forestry industry to use its problematic waste wood, or slash. “All the things that would be otherwise just rotting on the ground, emitting their CO2 anyway, and are much lower cost and also readily available everywhere.”
The technology is seen as a game changer for growers in the South Island who rely on coal, which is subject to the emissions trading scheme. Switching to biomass fuel like slash would avoid the cost of levies placed on higher emission energy sources. "By using the opportunity to take the CO2 production from that biomass and add it to the greenhouse, that makes it a much more attractive option for growers," Tomatoes NZ’s Helen Barnes said.
A commercial model is expected in the middle of next year, and there is already interest from growers around the country.
SnapSTAT - Sponsored by COP
Source: Westpac - Forestry: Covid impact and outlook report
Russ Taylor Global: Market InsightsRUSS TAYLOR GLOBAL is pleased to announce a second complimentary report that summarizes Japan’s wood industry and consumption trends. The Japan Part 1 report (released in December) covered log and wood products imports and domestic production and supply trends, including some historical perspectives back to the 1960s and 1970s. The new Japan Part 2 report discusses trends in business, demographics, housing, other end uses, and lumber prices.
Japan remains a most important market for global exporters of higher quality and value-added/engineered products. Understanding and reviewing some of the major demand and demographic trends and issues in Japan (in combination with import and domestic production trends) should be useful to most industry players.
The full Part 1 & 2 Report is available by request: simply send an email to: firstname.lastname@example.org (or visit www.russtaylorglobal.com to join our email distribution list).
The full New Release with highlights of the Part 2 Report can be viewed here.
Lachie McCaw recognised with Australian Fire Service MedalThe Institute of Foresters of Australia and Australian Forest Growers (IFA/AFG) has congratulated Director Dr Lachlan (Lachie) McCaw for being awarded the prestigious Australian Fire Service Medal (AFSM) as part of the Australia Day Honours.
Dr McCaw received the medal, which recognises distinguished service by members of Australian fire services, for his ability to bring strategy, fire science and incident management together to inform best practice fire- management principles.
Fellow AFSM recipient and Chair of the IFA/AFG’s Forest Fire Management Committee Mr Gary Morgan AM AFSM said Dr McCaw’s significant contribution to forest fire management and fire research made him a thoroughly deserving recipient of the award.
“Lachie’s dedication to forest fire management through his research and operational management is second to none,” Mr Morgan said.
“He exemplifies the best form of research – not only conducting significant research but also applying this knowledge actively through the practice of forest fire management.
“Lachie is also very generous in imparting this knowledge and experience to colleagues and peers, which makes him such a valuable contributor to fire management throughout Australia.”
Dr McCaw has worked in forestry since 1980 and is a Registered Professional Forester (RPF) with skills in native forest management. He has extensive experience in bushfire research and management with a focus on forests, woodlands and shrublands of Western Australia.
His research interests include fire behaviour, fire climate and weather, and the role of planned fire in sustainable land management. He has been involved in a many aspects of native forest management including regeneration processes, thinning of regrowth stands and forest health.
He works as a Senior Principal Research Scientist with the Department of Biodiversity, Conservation and Attractions Western Australia, manages a 15ha family forest at Manjimup and has been an active member of Australian Forest Growers.
As well as being a Director of the IFA/AFG, Dr McCaw adds to the wealth of knowledge and experience on the IFA/AFG’s Forest Fire Management Committee. Other committee members who have been acknowledged for their contribution to forest fire management in Australia include Gary Morgan AM AFSM, Ruth Ryan AFSM, Euan Ferguson AFSM, Kevin Tolhurst AM, Phil Cheney PSM and Neil Cooper PSM.
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