WoodWeek 1 September 2021
2:40pm - See our updated story on today's carbon auction.
This week our team has decided to reschedule our 6th Annual WoodWorks Conference to 3 November. The event has grown strongly this year with registrations up 50 percent and the date change is to allow as many people to have an in- person experience. This year the event includes a BRANZ pre-conference workshop and a CLT plant tour at Red Stag’s Waipa site at Whakarewarewa Forest on Tuesday, 2 November). To register or see more details click Here>>
Staying with log export news, the EPA has decided to gradually phase out use of methyl bromide gas by 2033. The ozone-depleting gas is used in New Zealand to kill pests from trade cargo, almost exclusively to sterilise logs and export timber. The EPA says New Zealand’s use of the toxic gas increased by 66 percent between 2010 and 2019, and that we’re out of step with other countries who are lowering use. Today we have some expert commentary on the plans.
Last week in Australia, a decision was reached to cancel the big outdoor AUSTimber 2021 show. Over the past 18 months, Austimber organisers faced numerous challenges, including two reschedules in 2020 resulting from the Black Summer Bushfires and of course, ongoing COVID-19 challenges.
The final word for the week goes to our busiest log export port. Log export volumes loaded from Tauranga bounced back from the 2020 lockdown, increasing 14.3% to 6.3 million tonnes. Sawn timber and wood panel exports decreased 12.4% in volume.
This week we have for you:
Carbon Match: Carbon Market Update(OPINION: Lizzie Chambers, Managing Director, Carbon Match) Brave Today or Take Your Chances Next Week? – Last week on Monday saw a frenzy of activity as NZUs surpassed the $50 mark for the first time.
That was in the wake of a Government announcement confirming updates to ETS settings that take effect for the 2022 calendar year. In particular, the trigger price for the Cost Containment Reserve at auctions will go from $50 to $70 for calendar year 2022 and rebase upwards by 10% p.a. plus inflation thereafter.
We continue to see some strong buyer interest on the board, although sellers appear hesitant just at the moment, and today's offers on Carbon Match have made for slim pickings, natural enough just a few days out.
All eyes are on the upcoming auction today, even more so following MfE's Monday announcement, which most in the market seem to have expected to come after the next auction was settled.
What will happen? We won't make predictions but all we can say is the obvious - with spot NZUs now bid $51 and strong buying interest, the likelihood that the interim clearing price at next week's auction will hit or surpass the $50 CCR trigger price certainly went up since this time last week.
The March and June auctions were fully subscribed, and spot NZUs have continued to strengthen month on month. The cost containment reserve of 7 million tonnes cannot roll forward past the December auction. If it lasts that long.
While the June auction monitor report, only recently released, showed an 87.5% increase in the average volume won per bidder, it also showed a 53% decrease in the number of successful participants in comparison to the first auction.
Indeed, the inaugural March auction saw 30 out of 40 participants successful in attaining at least some volume. By contrast, the June auction saw 21 out of 37 buyers left out in the cold. In auction no 1 (March), successful bids appeared to be distributed equally between compliance and non- compliance buyers, whereas for the June auction, those with a compliance obligation accounted for just 37.5% of successful interest.
2:40pm News Update: Carbon prices crash above ceiling. - Click here to see today's carbon auction news from BusinessDesk
2033 for Fumigant Phase-outThe EPA has decided to gradually phase out use of methyl bromide gas by 2033. The ozone- depleting gas is used in New Zealand to kill pests from trade cargo, almost exclusively to sterilise logs and export timber. The EPA says New Zealand’s use of the toxic gas increased by 66 percent between 2010 and 2019, and that we’re out of step with other countries who are lowering use. The Science Media Centre (SMC) asked experts to comment.
Dr Laura Revell, Senior Lecturer in Environmental Physics, University of Canterbury, comments:
“Methyl bromide is toxic to humans and damaging to the stratospheric ozone layer, which protects us from harmful UV-B radiation. The use of methyl bromide is controlled by the Montreal Protocol on Substances that Deplete the Ozone Layer, however it is exempt from the Protocol when used as a fumigant for quarantine and pre-shipment purposes. Nonetheless, Parties to the Protocol are encouraged to minimise the use of methyl bromide wherever possible.
“Various alternatives have been approved for use in other countries, including irradiation, cold and heat treatments, phosphine, sulfuryl fluoride, ethanedinitrile, and ethyl formate. When it comes to international trade, replacing methyl bromide is not straightforward since the alternative needs to be approved as a fumigant by both countries involved.
“New Zealand plans to prevent methyl bromide emissions from escaping into the atmosphere by implementing technology to recapture emissions. Previously a 10-year deadline was set to do so; until 2020. Given that the 2020 deadline was not met, and has now been extended out to 2033, it is difficult to get a sense of how seriously the new deadline will be heeded or enforced.
“As New Zealand is the fifth-largest user of quarantine and pre-shipment methyl bromide, reducing our emissions will make a difference globally. Atmospheric modelling shows that reducing methyl bromide emissions would accelerate healing of the ozone layer. Therefore, the decision to extend the phase-out of methyl bromide weakens the contribution that New Zealand makes to solving a global environmental issue, along with prolonging local issues relating to air quality and health.”
No conflict of interest.
For more expert commentary click the link below:
> Dr Olaf Morgenstern, Principal Scientist – Atmosphere and Climate, NIWA,
> Dr Belinda Cridge, Toxicologist, Institute of Environmental Science and Research (ESR)
> Professor Ian Shaw, Professor of Toxicology, University of Canterbury
Source: Science Media Centre
MPI: Sector Update #5 - Covid(A message from Deputy Director-General, Te Uru Rākau - New Zealand Forest Service) - Tēnā koutou. Thank you to everyone across the sector for your efforts over the last week and a half, and for your contribution to New Zealand’s response to the current COVID-19 outbreak.
The Government has announced that from Wednesday 1 September, the plan is for all areas south of Auckland to move to Alert Level 3, while Auckland and Northland will remain at Alert Level 4. When Alert Level 3 comes into force in your area the Forestry and Wood Processing Sector will be able to operate in compliance with Alert Level 3 requirements.
For businesses within the Auckland border and Northland region, the current Alert Level 4 requirements will remain until further notice. For clarity of the difference between Alert Level 3 and Alert level 4 please see the link here.
What everyone can do now: establish updated Covid-19 protocols - In preparation to reopen operations, you must first ensure you have strong protocols in place for your business to operate safely and protect against spread of the COVID-19 delta variant. We recommend you read the updated Alert Level 3 COVID-19 Industry Protocols on the SafeTree website (accessed here) to assist you with developing your own business specific protocols. Wherever possible we urge you to adopt the highest level of safety possible to protect your workforce and community.
Preparing for moving to Alert Level 3: for businesses outside of Auckland and Northland - Forestry and wood processing businesses in Alert Level 3 areas will be required to operate in compliance with the Alert Level 3 requirements which can be found here. However, currently we remain at Alert Level 4, so until the change to Alert Level 3 this means preparing equipment for operation should only be done after the change to Alert Level 3.
If you believe there is a critical risk to essential supply chains which requires urgent action we ask that you seek guidance from your Lead Liaison (see below) at Te Uru Rākau – New Zealand Forest Service before undertaking any activity prior to the move to Alert Level 3.
Freight of Goods to, from and within Alert Level 4 areas - In Alert Level 4 all freight can be distributed and received, with essential freight prioritised. This includes unloading, delivery to, and receipt by, businesses (including those businesses not currently permitted to trade for receipt only) and customers.
Registering to Travel - If you are a business that requires your employees to travel across the alert level boundary for work, visit MBIE’s website here. This includes information about permitted travel, the business travel register, the boundary, and exemptions.
The business travel register opened from midday, Sunday 29 August.
It’s important to note, you won’t be able to re-use the travel documents that you applied for during previous Alert Level changes and will need to reapply for new documents.
Public Health remains the priority - The public health threat posed by the Delta variant of COVID-19 remains high. We strongly recommend your organisations continue to exercise restraint and minimise operations and worker movement where possible and comply with your legal obligations under the Order. This includes businesses operating under Alert Level 3. If possible, people should continue to work from home.
We also recommend providing any people needing to be onsite with a personally addressed letter by the company’s Chief Executive outlining the clause they are operating under, in case they are approached by authorities.
If you are unsure on what the above means for your operations or have any issues you would like clarity on, I recommend that you reach out to your Lead Liaison (see below).
Getting in touch with us - If you require clarification about your ability to operate, please contact:
Thank you once again for your commitment to helping protect New Zealand against this COVID-19 outbreak.
Five Years On: Steady GrowthThe forestry sector has continued to benefit from rising global demand for our key forestry products, as well as strong domestic demand. Internationally, rising demand for New Zealand’s logs and sawn timber, especially from China and the US, is putting upward pressure on export prices. Domestically, there has been strong demand for construction materials due to a robust housing market.
Today’s graphic shows steady growth in both log export volumes and prices over the past 5 years:
MPI Situation and Outlook for Primary Industries: Forestry – Log export revenue is forecast to reach $3.8 billion in the year ending June 2022, on the back of continued strong demand as China ramps up infrastructure projects. The outlook for log prices is expected to decline slightly due to increased supply from other countries. European and South American foresters anticipate increased log shipments to China, which is likely to put downward pressure on New Zealand log prices. It’s not clear whether Russia's proposed log export ban in early 2022 will be a complete or phased-in ban, but nevertheless, the ban is expected to partly offset the impact of increased supply into China and support New Zealand log demand and prices in the medium-term.
South Korea is New Zealand's second largest log export market and accounts for 8.0 percent of total log exports. Demand for logs slowed over the past few years as economic growth has weakened. In addition, importers are forced to compete on price with Chinese importers, so while volumes have decreased, the value of exports has remained relatively steady, as rising Chinese demand has lifted prices. Export volumes to South Korea are expected to remain low as Australian logs are being rerouted following China’s ban on them, placing further downward pressure on demand for New Zealand logs.
India’s demand for New Zealand logs dived due to the COVID-19 pandemic and is yet to rebound. Export volumes are down 69.5 percent in the year ended March 2021 compared to last year. India now accounts for only 2.0 percent of total log exports. Demand from India is expected to remain subdued for the rest of the calendar year, as COVID-19 cases remain high. In addition, Australian logs have been redirected to India after China banned them, putting pressure on this market. Over the medium-term, demand from India is expected to increase as the pandemic wanes and conditions improve.
Sawn timber outlook is positive – Sawn timber export revenue is forecast to reach $910 million in the year ending June 2021, up 12.5 percent compared to last year. Timber export prices are strong due to a combination of strong international and domestic demand as well as a greater proportion of higher value appearance grade products driving up average prices to an all-time high of $550 per cubic metre in March 2021.
Timber production decreased slightly despite increased harvest volumes and is most likely due to bottlenecks caused by capacity expansion projects in some mills. In addition, domestic timber consumption has risen at the expense of export volumes due to high levels of domestic residential construction.
Timber export revenue is forecast to increase further to $920 million in the year ending June 2022, due to continued strong demand. However, prices are expected to decline slightly, as supplies increase.
Winning An Uphill BattleWinning An Uphill Battle – Stability & Capability:The John Deere 959ML is a direct result of the continued growth of the steep slope logging market and is available in one of two configurations from the factory - a shovel logger or a directional feller.
Recently introduced by Deere, this new machine leverages the top features from John Deere’s M and MH- Series models, including the levelling control system, to produce a new machine specifically designed for steep slope shovelling and felling applications. In addition, the machine can be ordered ex-factory with Deere’s new directional felling attachment the FL100.
The robust durable design of the FL100 offers the ideal solutions for felling and manoeuvring timber on steep slopes. The FL100 delivers outstanding grapple strength, arm durability, and rotate/tilt power. Unique long-arm geometry and a large-capacity bar saw allow the FL100 to cut and handle everything from small to extra-large timber, ranging from 100mm to 1m.
Exceptional durability combined with simplified routine and periodic maintenance helps increase uptime on both the 959ML and FL100. For more about John Deere forestry equipment, contact your local John Deere Forestry dealer.
AUSTimber Show CancelledLate last week the Australian Forest Contractors Association advised that, with great sadness and disappointment that a decision has been reached to cancel AUSTimber2020/21.
Like many events over the past 18 months, Austimber has faced numerous challenges, including two reschedules in 2020 resulting from the Black Summer Bushfires and then at the beginning of the COVID-19 pandemic.
Over the past few months, Austimber recommenced planning, and significant preparation work has taken place for the November show. However, over the past weeks, we have seen the continual worsening COVID- 19 situation from the Delta strain and government lockdown measures across Australia which demonstrates the unpredictability of delivering an event in this environment.
Recently some exhibitors communicated their concerns and provided notification of their intent to change their exhibiting arrangements at the AUSTimber 2020/21 show in November, including no live demonstrations occurring during the show and significantly limiting their overall participation. The reasons cited included additional costs, planning and logistics required amid growing concerns of the pandemic and the associated restrictions across Australia.
The health, safety, and wellbeing of everyone delivering and attending the AUSTimber show have always been paramount. Many options have been assessed on how the event could still be delivered and have been exhausted; particularly recognising the important contribution AUSTimber makes to the industry and the Gippsland region, impacted first by bushfires and now by the pandemic.
Unfortunately, the compounding costs of deferring the show on two prior occasions combined with the continued uncertain outlook resulting from the COVID-19 pandemic have meant it is not financially feasible or possible to reschedule the show again, and therefore the show must be cancelled.
Profit Grows for Port of TaurangaPort of Tauranga, New Zealand’s largest port, reported Group Net Profit After Tax of $102.4 million, a 15.4% increase, on 25.7 million tonnes of trade late last week. A 14.3% increase in log exports and a 46.0% increase in Subsidiary and Associate Company earnings were balanced by increased costs and reduced container volumes due to supply chain congestion.
Cargo trends – Total trade increased 3.8% compared with the previous year, growing to 25.7 million tonnes, although container numbers were 4.1% fewer at 1.2 million TEUs. Imports increased 4.0% to 9.4 million tonnes, and exports increased 3.6% to 16.3 million tonnes.
Log export volumes bounced back from the 2020 lockdown, increasing 14.3% to 6.3 million tonnes. Sawn timber and wood panel exports decreased 12.4% in volume.
Dairy product exports decreased 1.9% to just over 2.3 million tonnes, reflecting a later-than-usual season and a reduction in tranship volumes. Kiwifruit exports increased 10.1% in volume. Oil product imports increased 11.6% in volume, and cement imports increased 42.4% in volume, reflecting the strength in the local economy. Fertiliser imports decreased 16.9% in volume, grain volumes decreased 8.9% and protein and stock feed imports decreased 10.4%. Coal imports increased significantly as a result of lower hydro energy production and declining gas production.
MPI Export NotificationsForest Products Export Standards - Phytosanitary Requirements of Brazil. Read requirements here>>
... and finally ... best lockdown song ever
That's all for this week's wood news.
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