WoodWeek 24 February 2021
In our first story you’ll see how the market has changed since 2020. Chinese in-market softwood inventories are at their lowest level since late 2016 (1.2Mm3 less than this time last year). Thanks to Marcus Musson from Forest 360 for today’s commentary.
STOP PRESS! - ACC’s Impact Investment Fund has taken a share in Robotics Plus, one of the world’s top 50 innovative robotics companies in a partnership to improve the safety in the workplace internationally. Even better than that, Robotics Plus founder, Steve Saunders will be a speaker at our April conference, presenting on their revolutionary new scanning systems at our HarvestTECH Conference in Rotorua in April
Before you get into the rest of today’s excellent news, we need to let you know that our combined HarvestTECH and Forest Safety Conferences in April and our mid-June Carbon Forestry Conference are proving popular as we make reminder calls to all of you register.
For the heavy lifting loggers out there, John Deere introduces the new six-wheel 768L-II Bogie Skidder: a true woodland warrior designed to conquer wet conditions and steep slope terrain.
Looking to the carbon markets, we are pleased to see that Margules Groome has constructed a model forest on the East Coast of New Zealand’s North Island, using yield and costs benchmarks from Margules Groome’s extensive database the AgriHq December 2020 Prices for log pricing.
What more can I say ... because just for you, we’ve got a fact-packed Woodweek issue! On the other hand, I could ask everyone in our faithful subscriber audience (yes, you!) to send more good jokes. We’re always in need of them ... for me for a laugh of course! I might even share them with the rest of you later!
This week we have for you:
Log export update: At the risk of tempting fate …Opinion: Marcus Musson of Forest 360 - In a period when price corrections are expected, export and domestic log markets appear tickety-boo – In last month's column, I commented on the strength of the export log market with a degree of trepidation.
This was around the longevity of the current pricing levels in China (our primary market), as history has dictated, time and time again, that once A grade exceeds $145/Jas it's time to brace yourself for a good old-fashioned walloping.
Whenever export prices get to these levels there is plenty of talk about the drivers of price being "different this time" and "this is the new medium-term level". Within a month we're generally crying into our soup and dialling back production as prices plummet faster than John Banks' radio career.
So, here we are with A grade in the mid $140's, Chinese in-market softwood inventories at the lowest level since late 2016 (1.2Mm3 less than this time last year), zero supply from Australia and a relatively high exchange rate.
As Chinese Lunar Celebrations commence, we have seen daily sales drop to around 60Km3 from 85Km3 in early January. It is expected that this usage will drop to miniscule volumes for February before returning with some gusto in March following the almost month-long holiday. Inventory will build through this period as we keep the foot on production throttle in New Zealand. However, as we are heading into the Chinese holiday period at a very low inventory position, we don't expect to see any negative price pressure in the short term.
Even at the current price levels, it is hard to see any significant increase in NZ production or supply volumes. Harvesting crews are all generally in work, trucks are working to capacity and it is highly unlikely the rail network will increase its efficiency. Many of the ports are struggling to move the current production levels through the system let alone any increases.
The Chinese market remains very strong with continued government stimulus pushing China's GDP forecast to 8.2% for 2021 from 2.3% in 2020. The Chinese real estate market has rebounded post Covid and is showing positive signs for 2021 although the government has hinted at a crackdown on speculation.
Other supply points have not had any impact on inventory levels with Australia being shown the door (9% of total supply) and supply from USA and Canada approximately half of their peak in 2018.
Europe is the one outlier with a significant volume of wood available due to widespread bark beetle infestation. This volume has been more subdued than expected as container freight cost has increased markedly and supply reduced thanks to Covid. Russia has proposed a ban on log exports from the beginning of next year and buyers are already looking to secure supply from other sources.
The three main components that make up the export price that forest owners receive are delivered sales price in US$ in the export market – known as the CFR price (Cost and Freight), shipping cost and foreign exchange rates between NZ and USA. The CFR price is forecast to rise post February although sentiment varies between many of the export companies as to the degree of this.
Whatever gains are made will likely be wiped out with rising shipping costs. Strong commodity demand and higher oil prices are pushing shipping costs north and shipping companies currently hold a hand of aces during a period in which the freight market is traditionally soft.
Foreign exchange has not been playing ball with an increase of 4 cents in the past 3 months. Rule of thumb is a reduction in real returns of $2/log tonne for every cent increase in the $NZ:US. We are hopeful that the new regime in the US will provide a shot in the arm for the US economy and take some heat out of the exchange rate. This is yet to manifest but one would expect Biden's $1.9 trillion stimulus package would get their economy fizzing.
All in all, it's looking rather positive around the traps and forest owners are making tidy returns on their forest investments. Domestic markets continue to be strong with many sawmills short on log inventory and long on timber orders.
In a period where we are generally bracing ourselves for a rapid price correction and a bit of soup crying, things seem to be tickety-boo. Maybe this time the drivers are different …
NZIF - Log market update in WellingtonLog Export Market Update from Chris Rayes, Marketing Director, AVA Timber - Wednesday 24 February 2021, CBRE, Level 12 Harbour Tower (Old ASB Tower), 2 Hunter Street, Wellington 5.15-7.30pm
2020 was an interesting year for log exports with the industry shut down for a month in the Covid lockdown. 2021 has started with firm log markets in China so what is driving falling inventories and strong demand in China, and will this continue for 2021?
What is likely to develop in Korea and India? What are the impacts on these two markets of the China / Australia trade war?
What is going on in the freight markets. Have the changes in fuel regulations had any serious effect on freight rates. Why are rates increasing so rapidly now?
Chris Rayes, Marketing Director for AVA Timber Ltd, ( a Joint Venture between Hancock and Rayonier Matariki Forests) has once again kindly agreed to present his views on the log export markets of China, Korea and India, and to take us through current and future developments. He has also agreed to take us through the rationale, structure and function of the newly formed AVA Timber, Australasia’s largest log exporter.
The lifts close off at 5.30 so try to get there on time. We will have a notice in the lobby with a mobile number to ring for latecomers up to 5.45pm. Please RSVP to Peter Hill at firstname.lastname@example.org.
ACC invests in Robotics PlusSTOP PRESS! Steve Saunders, Founder of Robotics Plus will be speaker at our April conference, presenting on their revolutionary new scanning systems at our HarvestTECH Conference in Rotorua in April
ACC Impact Fund invests in world-beating Robotics Plus technology that keeps workers safe - ACC’s Impact Investment Fund has taken a share in one of the world’s top 50 innovative robotics companies in a partnership to improve the wellbeing of those working in some of New Zealand’s most dangerous industries.
Tauranga-based Robotics Plus is the first successful opportunity for ACC’s new Impact Funds which has twin objectives – to improve the health, safety, and wellbeing of New Zealanders and provide a strong investment return that helps Kiwis pay less in levies for accident cover.
The technology being developed by Robotics Plus is designed to keep forestry, agriculture and transport workers safe and is attracting global interest. Its innovations include a Robotic Scaling Machine (RSM) that can more quickly and accurately measure the volume of timber on logging trucks, eliminating what is a dangerous manual task at ports, forestry sites and sawmills.
ACC’s investment sits within the target range of $2 million to $15 million that is consistent with the initial announcement for the Impact Fund.
“We are excited to partner with Robotics Plus to take this innovative Kiwi technology to the rest of the world” says ACC’s Head of Private Markets, Martin Goldfinch. “This investment was a perfect fit with our goal to ensure Kiwis stay healthy and safe while contributing to a financially sustainable scheme for the benefit of all New Zealanders. That’s the impact we want to make - combining ACC’s established expertise in injury prevention with its proven skill in investment management.”
Robotics Plus co-founder and CEO Steve Saunders welcomed ACC on board as an investor. “It’s great to have ACC investing in Robotics Plus alongside the continued support of Japan’s Yamaha Motor Co.,” he said. “ACC is an excellent strategic fit as they align with our values and our vision of being an impact company - enabling people, land and trade to fulfil their potential. ACC have strong ethics and a proven record in successfully growing long-term investments.
“The investment will help us accelerate the development of our advanced technologies that help solve complex global problems, including robotic log scaling technology, as we scale up rapidly and enter new markets internationally whilst providing solutions domestically,” Saunders says.
Logs are New Zealand’s third-biggest export, worth $4.5 billion in 2020. But log handling is also a major cause of workplace injuries, with some 17,000 active claims costing $75 million last year, ACC data shows. Mt Maunganui-based port logistics company ISO Limited, which handles more than half of New Zealand’s log exports, has recorded no injuries or fatalities in log scaling since installing 11 RSMs at sites across the North and South Islands. The move has also allowed workers that were doing this task manually to be moved to higher- skilled positions.
“It’s safer and more productive than the previous manual system used throughout the world which requires people to manually scan and measure the logs by climbing on to trucks and trailers to perform the task,” says Paul Cameron, CEO of ISO.
The RSM, developed in collaboration with ISO, led to Robotics Plus being listed on Robotics Business Review’s top 50 most transformative companies in the global robotics sector in 2020. The technology is among a suite of innovative projects Robotics Plus has developed, including robotic fruit packers that reduce the musculoskeletal strains and injuries associated with repetitive manual tasks, and robots capable of a variety of tasks in horticulture.
The Private Markets team welcomes interest from companies, organisations and funds seeking investment in proposals that improve health, safety and wellbeing.
“We want to hear from anyone who believes they can make a positive difference to health, safety and wellness in New Zealand while generating suitable returns,” Goldfinch says.
ACC’s investments - ACC’s Investment Team oversees some $50 billion of assets, achieving a benchmark-beating 7.59% return last year, ensuring New Zealanders continue to pay less in levies for accident cover.
The Impact Fund was launched in September last year and aligns to ACC’s environmental, social and governance approach that recognises the public good role at the heart of the corporation and its legislation. It will complement the broader work ACC already does in injury prevention.
New John Deere bogie skidder packs performanceJohn Deere introduces the new six-wheel 768L-II Bogie Skidder, a true woodland warrior designed to conquer wet conditions and steep slope terrain. Incorporating the proven, durable features found on the John Deere L-II skidder lineup, the new 768L-II maximizes productivity, performance, and comfort when carrying hefty loads over long distances in challenging conditions.
“Profitability and productivity are critical in the woods, and as loggers take to new areas for jobs, they need dependable machines that are built with these niche applications in mind,” said Matthew Flood, product marketing manager, John Deere Forestry. “With our new 768L-II Bogie Skidder, we’re delivering a purpose- built machine that navigates tough terrain, such as swamps or steep slopes. Providing distinct features, the John Deere bogie skidder helps logging contractors maximize their potential, regardless of the conditions.”
The 209 kW machines features heavy-duty bogie axles, which incorporate large components to maximize durability and stability for long axle and tire life. The heavy-duty axles are purpose-built for tough applications, effortlessly pulling heavy loads and maneuvering tough terrain. The smooth, stable operation results in reduced machine vibration, ultimately minimizing operator fatigue. Another key feature is the excellent tractive ability and floatation. When combined with the bogie axles, ground pressure is reduced, allowing the 768L-II to work in wet terrain not accessible with a four-wheel skidder. As a result, the harvesting window is extended, adding more working days to the calendar.
The new arch design provides the operator with an expansive rearward view of the grapple and work area, providing excellent visibility. Improving maneuverability, the long wheelbase and boom-arch envelope boost reach and lift capability for the boom and grapple, increasing performance in the woods. The tight turning radius enhances agility at the landing.
“The John Deere bogie skidder is hands down twice as good as a regular four-tire skidder. It’s just all- around better in my book for productivity and ground disturbance,” said Jason Dawson of Triple J Logging. “With the 768L-II, you can carry twice as much of a load, especially in wet conditions and on the steep terrain, without tearing the ground up.”
The 768L-II retains the other customer-favorite features introduced on the L-II product lineup. Streamlined and redesigned electrical and hydraulic systems result in improved uptime and increased guarding and protection of key components. An improved grapple squeeze force and two-speed winch further increase productivity, while articulation steering sensors improve the operator experience.
To learn more about the updated 768L-II Bogie Skidder, as well as the full line of John Deere Forestry equipment, visit http://www.johndeere.co.nz or your local John Deere dealer.
Carbon forestry - To harvest or to leave?The Viability of Harvesting Blocks based on Carbon Price in New Zealand - Since 2019 we have seen a dramatic rise in the price of NZUs in response to various government policies and regulations. Along with the Billion trees incentives, this have driven an expansion in the New Zealand forest estate not seen since the early 1990s.
Much of this new establishment will be entered into the ETS under the averaging accounting method. However, the government has delayed compulsory entering under averaging until 2023, so forest owners with new establishment from 2019 through to 2023 have the option of entering under the ‘old’ stock change system, or the new averaging accounting method. The averaging scheme results in a much higher rate of return than the stock change ‘safe carbon method’ for standard rotational forestry. Given this fact, and with the increase in NZUs prices, predictions for continued long term strong NZU prices, and increasing uncertainty regarding long term log export prices, is there the possibility that a ‘plant and leave’ regime may be more economic?
Margules Groome has constructed a model forest on the East Coast of New Zealand’s North Island, using yield and costs benchmarks from Margules Groome’s extensive database the AgriHq December 2020 Prices for log pricing. The MPI lookup tables were adjusted by 10% upwards to compensate for some of the conservativeness inherent in the generic tables. Land price was assumed at NZD6 500/ha, to reflect the high prices being paid for unforested Post 89 land currently.
The results of this specific modelling exercise were surprising, click here for more >>
Government set to close carbon market loopholeGovernment rushes to patch $90m hole in carbon market - The Government is rushing to fix a gaping loophole that exposes New Zealand's carbon market, the Emissions Trading Scheme, to major market manipulation.
The Government is exposed to $360 million in financial risk over the next year due to a loophole in the rules governing New Zealand's carbon market, the Emissions Trading Scheme.
The existence of that hole is a result of an error in the drafting instructions sent to the Parliamentary Counsel Office when the Scheme (ETS) was amended last year, Climate Change Minister James Shaw told Newsroom.
Although Shaw was initially advised that the risk to Crown accounts was low, he said media attention around the loophole meant that advice had changed. Now, the Government has introduced an amendment to Parliament under urgency, set to pass ahead of the first ETS auction on March 17 – at which the Government could lose out on up to $90 million.
PF Olsen Australia releases safety code draftThe health and safety team at PF Olsen Australia were contracted in February 2020 to conduct a review and prepare an Exposure Draft of amended Forest Safety Code for Tasmania. It was released this week. They were ably assisted by Bryan Bottomley. The Code uses material from Safe Work Australia, NZ Forest Industry Safety Council and information supplied by machinery sellers and other industry participants. It addresses emerging issues like winch- assisted harvesting, drone and atv use. The unique regulatory environment for forestry in Tasmania is also reflected.
Over the past 12 months the industry has participated in a very detailed review and the final version of the Exposure Draft was prepared following three facilitated workshops in November located in Burnie, Launceston, and Hobart for which 90 people registered and 77 attended. The recommended amendments in the Exposure Draft are necessary to remove obsolete provisions, reflect modern practices, and to be accurate and useful.
It is the view of the Tasmanian forest industry that the document should maintain its status as a Code of Practice so that the safety of Tasmanian forest workers is given the same level of protection under the WHS Act as the forests in which they work through the Forest Practices Code.
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Source: FISC Safetree Dashboard
Tasmania industry encouraging womenWomen are still scarce in forestry industry but change is coming, says Tasmanian Forests and Forests Products Network - Tasmania's forestry industry has been dominated by men for years, and still is, says its peak representative body.
But Tasmanian Forests and Forest Products Network convener Therese Taylor is hopeful that change is coming.
"In Tasmania only about 18 per cent of the workforce are women," she said. "Although that is spread out across all occupation areas ... it's low. And we think a workforce that's got a better representation of males and females is a stronger, more successful workforce."
She said one of the reasons for low female participation was a lack of awareness about how scientific some of the roles could be.
"There's opportunities in climate change, sustainability, agronomy," she said. “Without high-level science, this industry won't survive. And we need to tell the stories of the women who are doing that in the modern forestry industry."
One of those women is Naomi Cleaves (pictured), who is employed as a lab technician at Forico's fibre lab at Ridgley. Ms Cleaves was working as a casual at Forico's Somerset seedling nursery when she was scouted by laboratory manager Lorraine Ennis.
"We first saw Naomi working in the Nursery and thought she had great potential to work in the lab," Ms Ennis said. "Fast-forward to now, Naomi is a thriving entry level laboratory technician and is currently studying at TAFE to further her qualifications."
Ms Cleaves said she enjoyed the variety of work at the lab.
Source: The Advocate
The Conversation: How did this Kauri survive?The mysterious existence of a leafless kauri stump, kept alive by its forest neighbours - tect Plants use their leaves to make food from the sun’s energy and carbon dioxide. With very few exceptions of parasitic plants, no tree is known to grow without green foliage — or to be more precise, no tree can start life without leaves or some sort of green tissue containing chlorophyll.
But some may end up as “zombie trees” long after they lose all leaves and large parts of their trunk, either to disease or the chainsaw.
Such undead tree stumps have been observed for almost 200 years, but the evolutionary and physiological processes leading to their existence remain a mystery. One reason is because they are rare. Another is because whatever happens on their journey from feeding themselves to being fed happens out of sight — likely below ground.
American forest ecologist Suzanne Simard has shown that trees send each other signals through a network of fungi buried among their roots. This underground communication includes warning signals about environmental change and the transfer of nutrients to neighbouring trees before they die.
We suggest this supply can continue beyond the apparent death of an individual tree. By measuring water flow in the stem of a living kauri (Agathis australis) stump and its neighbouring trees, we show underground connections are indeed likely responsible for the survival of the stump.
A living tree stump is clearly a biological oddity, and our key question is why such root grafts form.
Wood is good ... even better for wind turbinesSwedes and Danes combine for more LVL wind turbine towers - This week, Vestas* (a Danish wind turbine leader) it had invested in a Swedish wooden wind turbine tower manufacturer. The Danish turbine maker said it had become a minority investor in Modvion, which uses laminated veneer lumber, or LVL, to make turbine towers that are modular and put together on-site.
“When compared directly with the value chain of a conventional steel tower, Modvion towers are expected to reduce carbon emissions by 80 percent for the wind turbine tower,” Vestas said in a statement.
In a separate announcement, Modvion explained the idea behind the deal was to “accelerate market adoption and scale-up the production of wooden wind turbine towers.”
In April, Modvion installed a 30-meter tower on an island near the Swedish city of Gothenburg, and the company plans to build its first commercial tower in 2022.
“The reduced weight of Modvion’s towers, in combination with their ability to align with Vestas’ modular product architecture, could allow for increased ease of transportation in logistically challenged markets,” said Bo Svoldgaard, Vestas’ Innovation leader.
“Furthermore, the tower design could allow for Vestas to increase turbine hub heights, contributing to a reduction in cost of energy,” Svoldgaard added. “Overall, there is potential to become less reliant on steel prices, which would support Vestas’ ongoing growth journey.”
As technology develops, the size of wind turbines is increasing. Siemens Gamesa Renewable Energy is working on a 14-megawatt turbine which can also be boosted to 15 MW if required, while GE Renewable Energy’s Haliade-X can be configured to 12, 13 or 14 MW.
* Vestas is a Danish company with 29,000 employees that designs, manufactures, install, and services wind turbines across the globe. They have installed more than 132 GW of wind turbines in 83 countries.
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