WoodWeek – 8 December 2021

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Welcome to you, our faithful subscribers! As the summer of a logger’s discontent sets in, our market updates today bring a reminder that the most significant factor in the export price reductions between July and November has been the massive increase in shipping costs globally. Thanks once again to Forest 360 and PF Olsen for their market update contributions to get you started this morning.

In this week's ANZ Commodity Index update report the forestry index fell 5.7% as high freight costs reduced the value of logs at the wharf-gate. The volume of logs being used in China has also fallen away as their property and construction industry goes through some financial challenges. The drop in returns means the number of logs offered for sale has fallen, which is helping to rebalance the market. Shipping rates are starting to ease and the lower quantity of logs being shipped to China should help prices start to recover.

Moving to more positive news spotted on Reuters yesterday, China’s central bank eased monetary policy again to offset the shock from the impending Evergrande collapse, and a slowing of economic growth in China from covid stoppages and electricity shortages.

Shining some more light towards the end of the proverbial log export tunnel, PF Olsen reports show softwood inventory levels are flat at 4.8 million m3 and daily offtake is steady at 75k per day. While this is the time of year we usually see daily offtake hit 100k per day, remember there will be about 2m m3 fewer logs supplied from New Zealand in November and December than usual, due to suspended harvesting operations.

Looking to the chance for a brighter New Year, we have some dates for your diary. Here are some of our upcoming technology events coming for your networking and upskilling early next year, Residues to Revenues 2022, DigitalAg 2022 and WoodTECH 2022. We are pleased to announce our first Environmental Forestry Conference coming in May, Environmental Forestry 2022. It’s planned for Rotorua, New Zealand on 10-11 May. At your next team meeting, sort out who will attend and mark the dates in your diary. The programme is now online. Further information is included in this week’s issue.

As we move to end another trying year for everyone, for our advertisers please note the upcoming issues of WoodWeek, our last issue for 2021 is Wednesday, 15 December. For 2022, our first issue is scheduled for 19 January 2022. If you have any questions relating to advertising in the lead up to the end of this year and bookings for the start of next, please make contact directly with kerry.apthorp@innovatek.co.nz. There you have it for another week.

Finally, we hope you enjoy our festive season humour to end today's good wood news stories. Pour yourself a coffee and watch our jolly video clip ... otherwise you'll never know what a 'puggy bank' is!!!

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Forest 360 Log export market update

(OPINION Forest360) - As the country moves into the covid traffic light system, the forest industry remains firmly parked at the lights on red with the hand brake on. Most of us were hoping for an early Christmas present in the form of a reasonable increase in export prices but it appears we got socks instead. While Decembers’ prices are up on November (it wouldn’t be hard) they are still around $20/m3 below the magic number of $125/m3 for A grade (close to the 3-year average) which is point at which most forest owners are prepared to let the light turn green.

Expecting a significant increase in trading conditions towards the end of the year is akin to the chances of seeing Judith Collins in the Bridges family Christmas photo as the market fundamentals haven’t changed all that much, yet. The record drop in export returns between July and November has resulted in a production decrease of around 30% nationwide with many harvest crews placed on production quotas and some of the smaller woodlot-based crews struggling to find their next job. Unfortunately, as the softwood inventory in China is north of 5 million m3, it will take a while to get the inventory back to levels that support significant increases. Many New Zealand forestry companies are taking longer than usual shutdowns over the Christmas period which will help bring supply and demand back into some form of balance.

The most significant factor in the price reductions between July and November was the massive increase in shipping costs globally. Much of this increase was based around demurrage from vessels sitting at anchor waiting for a berth. This largely rectified itself with shipping rates down from the high $US70’s/m3 in October to a more palatable $US40/m3 in late November. Many companies still have a few vessel contracts in the higher end of this bracket and the full effect of the lower rates will likely not be felt until January.

It’s unlikely these rates will reduce any further as there are still plenty of other options for cargo with commodities out of Australia at higher rates than can be obtained with logs. Unfortunately, as shipping rates have eased, the actual sales price in China has slipped below $US140/m3 and is likely to hit $US130/m3 during December, effectively offsetting the shipping savings. Thankfully the exchange rate is playing ball with a reduction of $0.02 to see it sitting in the low $US0.68 bracket which has given us an additional $6/m3 on the bottom line.

There is some light on the horizon, albeit a very short person holding an almost flat torch in a leaky dingy. The Russian log ban is supposed to come into effect at the beginning of next year which has been predicated by the closing of the Russia/China rail due to covid issues. We can throw some new batteries in the torch with news of a significant increase in domestic lumber demand in the USA and Canada which will further reduce incoming log supply. Uplift from Chinese ports seems to be in the order of 75,000m3 per day with supply at around 50,000m3, so a deficit of around 750,000m3 per month, which, although not enough to drastically change sentiment with buyers, may be enough to plug the hole in the dingy.

The wider issues with indebted Chinese construction companies haven’t gone away and the expectation is that construction activity may be down 20% from 2021 levels. You’d tie yourselves up in knots if you tried to figure out what the Chinese Government’s position was on assisting the construction sector as every commentator seems to have a different opinion. There have recently been some positive signals from steel makers which has led to an increase in iron ore spot and futures pricing which will hopefully create some positive sentiment in the market.

The latest carbon auction has seen another record with current spot carbon prices climbing to $68.70 per tonne from $64.80 pre-auction. Using the MPI lookup tables that’s a shade under $55k/ha or around $2k/ha/yr for a 28-year radiata rotation in the southern north island.

All in all, 2021 is going to be known as the biggest rollercoaster in memory. Many forest owners are sitting nervously waiting to see how Q1 2022 will play out. If history was anything to go by, things will turn relatively quickly in Q1 2022. Chinese New Year is in early February 2022 which effectively results in nil usage for a month. All going well the slowdown in Q4 2021 and the longer than usual Christmas shutdown will see the inventory position in relatively good fettle and prevent a dead cat bounce like 2015 and 2019. So, let's take a few more cement pills, wash away 2021 with a good whisky and enjoy our new socks – Merry Christmas everyone!

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PF Olsen Market views

(PF Olsen Wood Matters) At Wharf Gate (AWG) prices for export logs dropped on average $18 per JASm3 in the higher quality grades and $23 per JASm3 in the lower quality grades - This was a combination of reduced CFR log prices in China and the NZD strengthening against the USD. The PF Olsen Log Price Index dropped $9 in November to $110. The index is currently $12 below the two-year average, $13 below the three year-average and $15 below the five-year average. Although the China log market remains subdued, AWG prices should increase in December due to ocean freight costs dropping 35% in the last month. Significantly reduced log supply from New Zealand should see CFR prices increase in China in January.

China – The price for logs in China has dropped about 30 USD per JASm3 (17%) in the last month. The price is still highly variable with some exporters achieving sales for A grade logs at 150 USD while others are 140 USD per JASm3. As mentioned in previous Wood Matters articles there is a structural shift in the Chinese economy with the government looking to slow the property market and reduce debt levels, but as is often the case the market has overcorrected.

Softwood inventory levels are flat at 4.8m m3 and daily offtake is steady at 75k per day. While this is the time of year we usually see daily offtake hit 100k per day, there will be over 2m m3 fewer logs supplied from New Zealand in November and December than usual. This is because many forest owners have slowed or suspended harvest operations, and most continuing harvest operations will be taking an extended Christmas break this year.

The Caixin China General Manufacturing PMI unexpectedly rose from 49.2 to 50.6 in October. This was on the back of a further recovery in domestic demand. Economists note the government needs to further address how to balance controlling Covid19 outbreaks with maintaining economic activity.

If low harvest levels continue in New Zealand, there is likely to be a significant reduction in China log stocks and a shortfall of logs by the Chinese New Year in February. Much will depend on how the China property development sector recovers from its current situation.


Source: PF Olsen Wood Matters

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A NEW FIEA Conference ~ Environmental Forestry 2022

FIEA launches new environmental conference - The Forest Industry Engineering Association (FIEA) is proud to announce it's latest new forestry conference: Environmental Forestry 2022, running in mid-May in Rotorua and available to international delegates as a virtual event.

Improving our environmental performance across the forest industry brings both challenges and rewards. For the first time, the Environmental Forestry 2022 Conference will bring together a wide range of foresters working on improving industry outcomes.

Speakers and delegates will be sharing successes and learning's among peers across a range of forest management companies for large and small forest estates. As a result, delegates will be able to make positive change and learn from each other to establish and improve best practices. Participation and contributions from national and regional regulatory agencies have also been invited.

What's Planned? - A range of case studies across the forest production cycle from harvest planning to post-harvest audits and impact assessments are planned. Best practices and recent developments will be discussed through shared learning's among industry professionals. A cross- section of forest operations will be included in a range of professional presentations.

The conference agenda will appeal to regional council staff and management from forest company professionals, from small to large forest companies as well as regulatory and policy staff from local councils, Ministry for Primary Industries, Te Uru rakau – New Zealand Forest Service and the Ministry for the Environment.

For more details click here.

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Europe now second biggest China log supplier

China imported 30% of its total volume of softwood logs from Europe in 2020 and 2021, thus surpassing supply from Russia and North America - European softwood logs were practically non- existent at Chinese ports five years ago. However, a combination of a never-ending hunger for more wood in the country, reductions in shipments from previously significant trading partners, and an oversupply of timber in Europe have altered the log flow into China over the past four years.

New Zealand, Russia, and the US accounted for almost 75% of the total import volume to China in 2017. However, throughout 2020 and 2021, there were sharp declines in supply from Russia and the US, while shipments from Europe and Latin America rose. During the first nine months of 2021, almost 80% of all imported logs came from New Zealand, Europe, and Latin America.

The European entrance into the Chinese market has been dramatic, increasing from less than 500,000 m3 of softwood logs in 2017 to an estimated 14 million m3 for the entire year in 2021, according to the Wood Resource Quarterly. Europe’s share of the total import volume is currently 30%, with Germany being the second-largest supplier to China, following New Zealand.

German shipments have surged from about 200,000 m3 of logs in 2018 to 3.8 million m3 in 2019, and estimates indicate import volumes may reach over 10 million m3 in 2021. Log imports from the Czech Republic grew rapidly in 2019 but have since levelled off, with the estimated volumes in 2021 likely to be substantially lower than in the two previous years (see chart).

Shipments from Germany and the Czech Republic have accounted for the vast majority of the European logs entering China. Several other countries have increased their presence in the past three years, including Poland, France, and Slovakia.

Europe's oversupply of logs is beginning to diminish, and domestic demand is increasing. Thus, while the rise of European exports to China has been dramatic, the trend is unlikely to continue, making the high of almost five million m3 exported in the 4Q/20 a likely peak.

Source: Wood Markets

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Wood industry scholarship applications open

Applications for scholarship in wood industry now open – Donelley Sawmillers, Central North Island Wood Council (CNI) and Rotorua Economic Development are taking applications for a newly created scholarship for those who are interested in a future in the wood industry.

This scholarship aims to support a local person through higher education (university) who is focused on developing a career in Rotorua within wood processing and manufacturing and / or wood technology and / or timber design.

The scholarship covers up to $18,000 in study fees over three years and also includes a 4 to 10 week paid summer internship and mentor support.

• $6000 a year for 3 years of their degree to help with tuition fees and living costs.
• 4 to 10 week paid internships each summer with a Rotorua-based company within the wood processing, wood technology or timber design industry.
• Mentor support from CNI Wood Council throughout the course.

To find out more about the programme and to apply for the scholarship, visit the link HERE.

Applications for this scholarship close on Wednesday 15 December 2021.

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ANZ: Overseas trade update

(ANZ) Overseas Trade Indexes – 2021Q3 - New Zealand’s goods terms of trade lifted just 0.7% in Q3. Export prices lifted 4.6% and import prices lifted 3.8%, but these price increases were less than anticipated. Export volumes fell 3.0%.

Forestry product prices lifted just 0.9%, but export volumes fell by 9.5% as China’s demand for logs has waned due to financial problems in its property development sector. Prices and volumes are expected to fall further in Q4.

Source: ANZ Research

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New development for wood to replace plastic

More than 380 million tons of plastic are produced each year, far surpassing most other man-made materials. It can take thousands of years for plastics to degrade due to the stable long polymer chains. Roughly 12 million metric tons of plastic waste will be in landfills, or in natural environment by 2050,causing severe environmental pollution (i.e., 'white pollution'). More seriously, large numbers of plastic are slowly degraded and then converted into millions of microplastic pieces (millimeters or smaller in size) in the oceans and soil, posing a significant threat to numerous organisms.

In the interest of decreasing this threat, a University of Maryland (UMD) research team led by Liangbing Hu -- a Herbert Rabin Distinguished Professor in the UMD Department of Materials Science and Engineering (MSE) and the founding director of Center for Materials Innovation (CMI) -- recently developed a simple yet cost-effective in-situ lignin regeneration approach to synthesize a strong, large-scale, hydrostable, biodegradable and recyclable lignocellulosic bioplastic, produced 100% from an abundant and inexpensive wood powder, which is generally discarded as waste. The study, entitled, "A strong, biodegradable and recyclable lignocellulosic bioplastic," was published in Nature Sustainability on March 25.

In the fabrication process, the porous structure of natural wood is deconstructed to form a homogeneous cellulose-lignin 'soup' that features nanoscale entanglement and hydrogen bonding between the regenerated lignin and cellulose micro/nanofibrils. Large-scale lignocellulosic bioplastic films can then be fabricated by simply casting the cellulose-lignin soup into a mold. Unlike most petrochemical plastics, this bioplastic can be broken down by microorganisms in soil, which offers an attractive closed loop cycle feature (see Figure). Additionally, the material is strong and robust, demonstrating a unique balance between degradability and durability, which neither conventional plastics nor hydrophilic cellulose consumer products can provide.

"We also noted the lignocellulosic bioplastic can be made from various biomass feedstocks, such as grass, wheat straw and bagasse, suggesting the broad applicability of the treatment process," said Hu. "This strong, water-stable, biodegradable and recyclable lignocellulosic bioplastic with a substantially reduced environmental waste footprint is a strong candidate for replacing widely used petrochemical plastics toward sustainable applications."

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PlantTech wins bids to optimise forestry yield

Scientists from Tauranga’s PlantTech Research Institute are celebrating their involvement in two successful funding bids to the Ministry for Business, Innovation & Employment’s (MBIE) Endeavour Fund, Aotearoa New Zealand’s largest contestable research fund. In this year’s round of funding, 69 new scientific research projects were awarded more than $244 million.

A MBIE-funded project, led by Scion, Seeing the forest for the trees: transforming tree phenotyping for future forests, involves using PlantTech’s capability in hyperspectral imagery analysis to support research that will identify the best genotype to plant in different environments for commercial production and indigenous uses.

A 3D model of radiation transport to enable high yield photosynthetic efficient crops

Research started last month on an airborne remote sensor project, which will determine how a sensor can measure sun-induced fluorescence (SIF) – an indicator of photosynthetic activity and plant stress, such as a lack of water, high temperatures and nutrient deficiency.

Their research team is also leading a two-year international project to use airborne remote sensors to discover what is causing plant stress in kiwifruit orchards, thanks to a successful bid for $1 million.

Principal Research Scientist Dr Alvaro Orsi is leading the project and explains that data from multiple aerial and ground sensors will be used to generate maps showing kiwifruit photosynthetic activity.

“These maps will help kiwifruit growers understand what regions in their orchards are photosynthesising less efficiently and pinpoint the cause of this plant stress. Such capability will allow growers to improve kiwifruit orchard productivity and environmental sustainability,” says Dr Orsi.


Source: PlantTECH

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What is the hydrogen rainbow?

Perhaps you’ve heard of blue hydrogen, green hydrogen, or even pink hydrogen, but what do these multi-hued descriptors actually mean? The colours that make up the hydrogen rainbow tell us a lot about how each specific kind of hydrogen is produced and the effects it can have on our planet. Hydrogen might be the most abundant element in the universe, but it doesn’t exist on its own. Instead, it is produced through a number of processes that each yield different types of energy, which come with their own sets of benefits, by-products and uses. The production method is what gives each kind of hydrogen its colourful moniker — though there is no universal naming convention, so definitions can change over time and vary between countries.

Let’s break down the current hydrogen colour code and take a look at how one hue of hydrogen, in particular, is leading scientists and manufacturers to the pot of gold — a zero-emission future — at the end of the hydrogen rainbow.

Grey hydrogen ~ Grey hydrogen is created from natural gas, most commonly methane, through a process called steam methane reformation. While it is currently the most common form of hydrogen production, the greenhouse gases made in the process aren’t captured.

Blue hydrogen ~ Blue hydrogen relies on the conventional process of steam methane reforming, but the carbon dioxide produced as a byproduct is captured and sequestered underground. It is a source of clean hydrogen with a low carbon content.

Turquoise hydrogen ~ One of the newer colours to join the hydrogen spectrum, turquoise hydrogen is produced via a process called methane pyrolysis. Its primary outputs are hydrogen and solid carbon. While turquoise hydrogen has no proven impact at scale yet, it has potential as a low-emission solution if scientists can find ways to power the thermal process with renewable energy and properly use or store the carbon byproduct.

Pink hydrogen ~ Pink hydrogen taps into nuclear energy to fuel the electrolysis required to produce it. The high temperatures of the nuclear reactors provide an additional benefit — the extreme heat produces steam that can be used for electrolysis or fossil gas-based steam methane reforming in other forms of hydrogen production.

Brown/black hydrogen ~ If green and blue hydrogen hold the key to cleaner hydrogen production, brown or black hydrogen are the exact opposite and the most environmentally damaging. Relying on gasification of coal to produce hydrogen, this process releases harmful carbon emissions that can have a long-lasting impact on our climate.

Green hydrogen ~ Amidst the hydrogen rainbow, green hydrogen is the only variety produced with zero harmful greenhouse gas emissions. It is created using renewable energy sources like solar, wind and hydropower to electrolyze water. The resulting reaction produces only hydrogen and oxygen, meaning zero carbon dioxide is emitted in the process.

While the benefits of green hydrogen are significant, its production is more expensive today. Consequently, green hydrogen makes up just a small percentage of current hydrogen production. But as new advances and innovations in green hydrogen are made, the price will come down, and it will hopefully become common across the globe.

The future of hydrogen is green ~ Hydrogen has been used as fuel for more than two centuries. Today, thousands of vehicles and machines around the world are powered by hydrogen fuel cells. The emphasis on reducing carbon emissions and working towards a greener, sustainable future has shifted the focus of many power leaders, including Cummins, to investment and innovation in green hydrogen production. It could prove to be the gold at the end of the hydrogen rainbow.


Source: Cummins

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Government to commit to coastal shipping network

Transport Minister Michael Wood today welcomed the release of the Coastal Shipping Investment Approach State-of-Play report as an important step towards a more sustainable coastal shipping sector, which will further diversify New Zealand’s supply chain.

“This Government is committed to strengthening our domestic supply chain by making coastal shipping a more viable alternative for moving freight within New Zealand. We are still experiencing the serious consequences of COVID-19 on global supply chains, with unprecedented delays to freight, so it’s essential that we increase our resilience against any future disruptions of this scale,” Michael Wood said.

The insights provided in this initial report by independent consultants from Pacific Marine Management, commissioned by Waka Kotahi NZ Transport Agency, will help decide how best to invest the $30 million funding that has been earmarked for coastal shipping in the 2021-24 National Land Transport Programme (NLTP).

To achieve the Government’s objectives for coastal shipping, Waka Kotahi will look at investing in:

• Enhancing domestic shipping services, with new services, increased frequencies and additional ships for new or existing container and bulk services.

• Reducing shipping emissions through testing emerging technologies. • Improving efficiency with upgrades to rail or road links to and from ports.

• Upgrading maritime infrastructure including shore power connections at ports, small new regional ports, and expanding existing ports.

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almost finally ... Norway's sad donation to Londoners

London’s sad Christmas tree - Oslo has gifted an enormous pine tree, usually a Norwegian spruce, every year since 1947 in gratitude for Britain’s support during the Second World War. But the 24ft-tall tree shipped over to celebrate this festive season has left some social media users asking whether the UK has done something to “upset Norway”.

One side of the 80-year-old spruce looks “thinner and more sparse than normal”, said The Daily Telegraph. The tree’s patchy appearance was also noted by another Twitter user who asked: “Does anyone know what happened to the rest of it?”


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Buy and Sell

... and finally ... ho ho ho

It's almost Christmas - time for some family time.


Okay, it's December (yes, all of a sudden its almost the end of the year). So, its time to remember what is just around the corner ... and a reminder that it is not too early (this is a message for men mainly) to get that Christmas shopping done (or started!).

Not really, just time for a Santa-inspired laugh - watch and enjoy:

That's all for this week's wood news.

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John Stulen
Innovatek Limited
PO Box 1230
Rotorua, New Zealand
Mob: +64 27 275 8011
Web: www.woodweek.com

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