WoodWeek – 13 April 2022

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Welcome to this week’s packed update. Looking to markets we’ve got plenty of pre- Easter treats for you. Forest owners are keen to get to India on the back of the EPA approval of EDN for log export fumigation. They see huge potential in the Indian log market now that fumigant issues have been resolved. They are so happy about the prospects, they want to take government ministers with them on their first big OE in a long time. India is currently the sixth largest economy in the world, but is widely predicted to be global number three, behind only China and the USA, by 2030.

Staying with log markets, we have the PF Olsen market update. Ahead of that, the latest ANZ Commodity report shows our local forestry index lifted 3.3% in March as in-market demand picked up. The global supply of raw logs is relatively tight at present, with supply restricted from most major exporting regions for varying reasons. This means buyers from China are more interested in securing extra supply from NZ, which has supported prices.

Forestry employers will be pleased with yesterday’s joint ministerial announcement that critical skills gaps in the primary sector could be eased with their decision to open the door for 1,580 additional experienced workers to come to New Zealand for jobs in the dairy industry, meat processing, and forestry. Forestry Minister Stuart Nash says the Government has agreed with an industry request for more workers for silviculture forestry, wood processors and manufacturers to enter New Zealand.

Forestry worker border class exception:
  • Border class exceptions approved for up to 300 silviculture forestry workers and up to 280 wood processors and manufacturers to enter New Zealand.

  • These workers must earn at least the median wage (currently $27 per hour).
Exceptions are being made to usual immigration rules to deliver much needed help for our meat, forestry and dairy sectors to keep up the momentum of economic recovery, Agriculture Minister Damien O’Connor and Forestry Minister Stuart Nash announced today. To read more click here.

In more good news, this time on a genetics front, many forest industry leaders will be pleased with news covered by BusinessDesk this week that the government says it's timely to reopen what was a highly-charged debate 20 years ago over the use of genetic modification research, which has been superseded by the technology.

The government accepted a recommendation by the Productivity Commission to review genetic modification regulations without saying how it might start the conversation that's been fraught for more than two decades.

The commission noted that genetic modification, or GM, is a “controversial and emotive issue” and segments of the population in New Zealand and internationally remain resistant. However, it said “genetic modification research is an important pathway to innovation, including in New Zealand’s primary industries”.

We hope you enjoy this week’s statistic in a snapshot: SnapSTAT. Thanks to our feature sponsors - Chainsaw & Outdoor Power and Oregon for their support.

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PF Olsen: Log export market update

China – The price for logs in China has risen steadily through Quarter 1 with the price for A-grade logs now at 177 USD per JAS m3. The inventory of pine logs at the 23 main log ports in China has been stable despite a below-average daily offtake of 65k m3 per day.

Log supply has been constrained with less supply from both New Zealand and Europe. In January 2022, log supply by value to China from New Zealand was down 40% compared with January 2021 supply. This was due to many crews taking extended breaks over the New Zealand holiday period. Even with increasing AWG prices through Q1 in New Zealand, many forest owners are still limiting production levels or not starting new jobs until they see consistency in the AWG pricing. March is traditionally a big month for log production in New Zealand due to good weather, good log prices and a high amount of workdays (23 this year). Due to interruptions in the supply chain caused by Covid absences and weather events, log production will also be lower than expected this March.

Other factors reducing supply will be Uruguayan exporters dealing with increased ocean freight costs, and a reduction in European log supply due to Russia invading Ukraine. While we will likely see an increase in Russian lumber supply (and possibly even logs despite an earlier ban of export logs) this would take time to ramp up, while the reduction from the rest of Europe is more immediate. European supply was already reducing before the war, due to falling salvage harvest levels and increased internal processing and consumption.

While the China log market is ticking along, there is a concern about the lingering effects of the financial crisis in the real estate industry as well as the effect of mass lockdowns as China continues an elimination strategy for Omicron. Currently, the reduced supply is maintaining price pressure in the China log market. However, if any demand reduction exceeds the reduction in supply, then this price pressure will disappear.

The graph below from PFP shows that inventory levels are within the normal range for this time of year.

The At Wharf Gate (AWG) prices for export logs increased an average of $6 in March. Reduced log supply to China has maintained price increases, but increasing shipping costs, a strengthening NZD and other external factors mean an increased downside risk for AWG prices in New Zealand.

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Source: PF Olsen Wood Matters

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Drylandcarbon pushes for a 50-year forestry rotation

(BusinessDesk) Drylandcarbon pushes for a 50-year forestry rotation – A 50-year rotation for exotic forestry can make a material difference to NZ reaching its net-zero target by 2050. (Image: Getty)

Shifting to a 50-year carbon accounting period for exotic forestry rotation rather than 40 would be better for climate change outcomes, rural communities, and land-use choices, Drylandcarbon says.

The government invited submissions on its proposals to change forestry settings in the emissions trading scheme (ETS) and Drylandcarbon – a farm forestry partnership – pushed for three changes.

The submission period closed on April 22 and the government expects to make final decisions in mid-2022.

Drylandcarbon general manager, Colin Jacobs, emphasised that the government consultation “is a really good piece of work”.

However, he said, “we think it could actually go a bit further”.

Colin Jacobs will be one of the speakers at the next Carbon Forestry Conference just announced today for 9-10 August in Rotorua. For full program and registration details see: CarbonForestry22

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Source: BusinessDesk

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ETS registration deadline looms

Te Uru Rākau – New Zealand Forest Service has the following information for forest owners wanting to register post-1989 forest land in the Emissions Trading Scheme. They are experiencing a significant increase in the number of applications to register post-1989 forest land. This is driven by the high price of New Zealand Units (NZUs) and the current mandatory emissions return (MER) period ending on 31 December 2022. Applications to register land in the ETS must be approved by that date if you want to claim New Zealand Units (NZUs) for the 2018- 2022 MER period and have the option of using stock change accounting. The new carbon accounting method – averaging accounting – will apply to land registered from 1 January 2023.

In response to this increased demand to register in the ETS, they have improved their processing rates by increasing their staffing and resources, and refining processes. This has made a significant positive impact; they are more than doubling their processing capacity and further efficiency gains are expected as recruitment continues.

Considering their projected processing rates alongside the rate of incoming applications, they expect to be able to finalise processing of all complete applications received by 30 April 2022 before the end of the current MER period. However, this will depend on the accuracy, volume and complexity of the applications that are yet to be received. They are encouraging you to take care to ensure your applications have all supporting information and meet the requirements of the Geospatial Mapping Information Standard and are lodged with them as soon as possible. Please note they cannot provide the same level of certainty for applications received after this date, but they will do their absolute best to finalise all processing.

In addition to processing applications, they are also taking steps to improve efficiencies in processing other transactions including transfers of interest and emissions returns. These improvements aim to ensure all outstanding transactions are processed by the end of the year.

More information about registering post-1989 forest land is available on the MPI website

Source: Te Uru Rākau – New Zealand Forest Service

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EPA Approved: New export log fumigant

The Environmental Protection Authority (EPA) decision-making committee has approved an application for a new gas to fumigate export logs and timber. EDN is a new tool to kill common pests found in wood. It is a potential alternative to methyl bromide, which is now heavily restricted.

EDN is already approved for use in Australia, South Korea, Malaysia, and Russia. The Czech- based manufacturer, Draslovka, applied to the EPA for approval to import the gas into Aotearoa New Zealand.

"The EPA’s role in regulating hazardous substances involves carefully balancing environmental, health, economic, and cultural factors. The application process for EDN has been lengthy due to the complex technical considerations required for the safe use of the fumigant," says Dr Chris Hill, General Manager of the EPA’s Hazardous Substances group.

"The benefits of EDN are that it rapidly decomposes after use, it is ozone-friendly, and has reduced risks to human health and the environment compared with methyl bromide."

A range of strict rules (known as controls) have been developed for the use of EDN. These include a maximum application rate, and that it is used in specific wind conditions, only under tarpaulins or in shipping containers. EDN is only for use by professionals in commercial settings.

Although the EPA has approved the EDN application, the fumigant cannot be imported or used immediately. Additional WorkSafe rules to protect workers, which are approved in principle, now require ministerial sign-off and gazetting. The EPA decision-making committee will sign the approval to take effect along with the WorkSafe rules. The EPA decision means the Ministry for Primary Industries can progress negotiations with trading partners on acceptance of EDN, as an option to meet their import biosecurity requirements.

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Source: Scoop & EPA

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FOA: Now is time for trade mission to India

Forest Owners call for forest trade mission to India following approval of new fumigant for log exports - The Forest Owners Association wants a delegation of government ministers to urgently go to India to try to re-open the export log market there, following the New Zealand Environmental Protection Authority approval for EDN fumigation of export log stacks.

The EPA has just announced it has approved the use of ethanedinitrile as a replacement for methyl bromide to fumigate logs in New Zealand before they are exported.

EDN is a far more environmentally friendly fumigant. It is effective on insects and pathogens, but breaks down quickly in the environment. It is neither a greenhouse gas nor does it deplete the ozone layer.

India however still stipulates that methyl bromide must be used for log imports from New Zealand. No other fumigants are currently approved by India. China is by far New Zealand’s biggest log export destination, but other log treatments, such as debarking, have enabled log exports there to continue.

The President of the Forest Owners Association, Grant Dodson, says the Indian requirement has meant the collapse of a quarter of a billion dollar a year log export market, as the use of methyl bromide is now highly restricted in New Zealand. New Zealand log exports to India fell to only $28 million last year.

“It’s vital to get back into India. The longer we are out of that market, the harder it will be to get back in,” Grant Dodson says.

India is currently the sixth largest economy in the world, but is widely predicted to be global number three, behind only China and the USA, by 2030.

Grant Dodson says other log exporting countries, such as Canada, have been heavily investing in their Indian export market, adding, “These countries will also work to keep us out for as long as they can. But with EDN approval here, we can now confidently go back to India and begin to compete on equal terms again. We still have to get through regional consent processes at the export fumigation locations here in New Zealand, before EDN can be used for any destination.”

“But the real ‘log jam’ has been the wait for the EPA approval.”

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Remsoft Partners with ForestPHD

Remsoft’s collaboration with ForestPHD opens new opportunities for forestry companies using Remsoft Operations to drive more accurate harvest, delivery and wood flow schedules and budgets. Remsoft recently announced today a new collaboration with Australian-based company ForestPHD, the developer of STICKS, to enable the use of forest machine data in Remsoft Forest IntelligenceTM solutions.

The partnership will improve visibility and data-based intelligence for forestry companies using Remsoft Operations SaaS software to plan and schedule their harvest and wood flow activities.

Widely used throughout Australia, New Zealand and increasingly other parts of the world, ForestPHD’s STICKS cloud solution enables data collected by forest machines to be analysed for better understanding of harvesting operations, wood flow logistics and value recovery. STICKS aggregates data from feller bunchers, harvesters, processors and forwarders that support the internationally recognized StanForD data format that is used by leading forest machine manufacturers.

Linking the machine data from STICKS with Remsoft Operations opens new opportunities to drive more accurate harvest, delivery and wood flow schedules and budgets with improved harvest unit inventory updates and forecasts, harvest productivity rates and harvesting costs.

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Source: Remsoft

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SnapStat - NZ forest harvest volumes since 2008

More from MPI >>

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Carbon Match: Carbon market update

(Carbon Match) NZUs finished up the week around the $76 mark, some ten dollars shy of the record high earlier this year, but still $6 up on the March auction clearing price of a flat $70. The market has been a little quieter since the auction, but news-wise there's plenty to digest, not least of which is the release earlier this week of the latest, extremely concerning instalment of the IPCC's current assessment, known as AR6.

This latest report states that “without a strengthening of policies beyond those that are implemented by the end of 2020, GHG emissions are projected to rise beyond 2025, leading to a median global warming of 3.2” by 2100. A truly frightening prospect.

UN Secretary General Antonio Guterres responded, labelling the report as a record of "a litany of broken climate promises"...a "file of shame" that catalogues "the empty pledges that put us firmly on track towards an unlivable world. Some government and business leaders are saying one thing - but doing another. Simply put, they are lying. And the results will be catastrophic.”

To keep the Paris agreement's 1.5 degree limit within reach, emissions need to peak by 2025, then fall by about 45 per cent from their pre-pandemic levels by 2030. We have the tools to do this, and their costs have declined more rapidly than expected.

But emissions reductions will not suffice to avert disaster anymore - carbon dioxide removals will also be necessary. And we have the tools to do both. Do we have the will?

Time is running out. Minister James Shaw openly laments NZ’s slow progress over the last three decades, saying we "squandered" that time, though he remains positive about work done in the last four years, and optimistic about the forthcoming Emissions Reduction Plan (ERP) for 2022-2025.

That document is due to emerge by the end of May, along with final emissions budgets for the period. The "messenger" for those budgets to the real economy, as the Climate Change Commission said this week, is the ETS.

To that end the CCC is in the midst of engaging to formulate what - going forward - will be annual advice to feed into the yearly updates to regulatory settings of our ETS here in NZ.

While settings can't change for the current year, both the volumes and price triggers could be changed in respect of calendar 2023 and onwards, given that the cost containment reserve for calendar 2022 has already been triggered and indeed, has almost disappeared.

The CCC's recommendations are expected to be submitted mid July following the release of the Emission Reduction Plan. The Ministry for Environment will then follow on with the associated public consultation.

The Future of Farming - The He Waka Eke Noa consultation with the agricultural sector concluded last week. Over 7,000 people expressed their views during the consultation process, and whilst He Waka Eke Noa recognised that some in the sector would prefer either status quo or a minimum cost solution, there was emphasis that they had to recommend a “credible" emissions pricing system.

An email from Tim Mackle (DairyNZ CEO) also accentuated this point, leaving lobby group Groundswell and other farmers claiming that DairyNZ had "dismissed all alternative emissions proposals the day before the group was due to present its emissions plan to the He Waka Eke Noa secretariat”.

It was never going to be straight-forward, with all stakeholders holding strong and differing views of the treatment of emissions. With the looming deadline for the fallback option of agriculture being incorporated into the ETS by 2025, the pressure really is on. He Waka Eke Noa's recommendation to Government is likewise due by 31 May.

Carbon Match from 10am - 5pm every weekday.

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Kiwi startup launches carbon app

Kiwi startup launches web app to encourage smarter forestry decision making; Interactive dashboard lets users explore long-term impact of different policy settings - Climate-focused kiwi startup Carbon Critical has launched an interactive website that allows anyone to experiment with different theoretical tree-planting scenarios, to understand the long-term impacts of future forestry policies on climate objectives, biodiversity and financial returns for farmers and landowners.

The team at Carbon Critical decided to develop the dashboard in response to a recent proposal from the New Zealand government to ban exotic tree species from being registered as permanent forests in the emissions trading scheme (ETS). Carbon Critical founder Jamie Heather is concerned that such a ban could have a serious impact on New Zealand’s deadline to reach Net-Zero emissions by 2050.

“Most people don’t realise that NZ is one of the worst countries in the OECD in terms of progress and commitments to reduce gross emissions. We’ve been slow to get onboard with tackling climate change and now we are going to need every tool we have available to meet our national obligations.”

Jamie says he understands the concerns around monoculture pine forestry and the desire to preserve native ecosystems, but believes a more balanced and evidence-based approach is needed to achieve the best long-term outcomes.

“The Climate Change Commission has advised that NZ needs to urgently cut gross emissions, but will also need to rely heavily on trees, exotic and native, to reach our net-zero targets. But that measured advice is being lost in an increasingly polarized debate that pitches exotics versus natives.”

Sensing a need for evidence-based reasoning in this ongoing debate, Carbon Critical launched its new net-zero web application to encourage more pragmatic discussions and decision making around land-use incentives.

“We wanted to help kiwis understand the tradeoffs involved and let them see for themselves what might happen in the future depending on decisions we make now,” says Jamie. “Exotic trees are good for removing carbon, and indigenous forests are good for biodiversity. We do not have to choose one or the other - we can do both.”

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The web application can be accessed at: Carbon Critial

Source: Carbon Critical

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Public input sought for ETS change

Government seeks public input on excluding exotic forests from Emissions Trading Scheme - The Government is proposing to exclude exotic forests like radiata pine from the New Zealand Emissions Trading Scheme (ETS) to better manage carbon farming and is asking for community feedback.

The new permanent forest category of the ETS, which comes into force on January 1 next year, currently permits exotic species and indigenous forestry to be registered in the scheme, but the Government found there was a risk that the category paired with high NZU (emission unit) prices could increase the establishment of exotic forests.

To manage this risk, it proposed changes to forestry settings in the ETS like whether to adjust how carbon accounting applies to forests on remote and marginal to harvest land, restricting exotic forests from registering in the scheme and including opportunities for improving incentives for indigenous afforestation.

Forestry Minister Stuart Nash said it was about finding a balance. "We want to encourage the right tree, in the right place, for the right reason. We intend to balance the need for afforestation with wider needs of local communities, regional economies, and the environment."

He said that landowners and investors have increasingly planted exotic forests as they seek higher returns as carbon prices continue to rise, but permanent exotic forests like radiata pine have potential environmental and ecological risks.

"These include pests, fire, damaged habitats for native species, biodiversity threats, and a relatively short lifespan compared to well-managed mixed indigenous forests."

Waikato Federated Farmers president Jaqui Hahn said the group was supporting the proposal to exclude exotic trees like pines from the ETS, but they would have liked it to happen sooner.

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Fed farmers push petition to prevent foreign-ownership

(RNZ) Petition to prevent foreign-owned carbon sink replacing East Coast farmland - A petition (see link below) is gathering pace to prevent a swathe of treasured East Coast agricultural farmland being converted to overseas-owned pine forestry. Over 6,600 signatures have been gathered.

The petition was set up by the Federated Farmers Gisborne-Wairoa region president Toby Williams. He is intent on saving some six-thousand hectares at Huiarua and Matanui stations. Toby tells RNZ he's determined this fine agricultural land doesn't become a carbon sink-hole. The purchase of these stations is currently before the Overseas Investment Office.
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Source: RNZ
Petition details >>

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Russian sanctions may alter forest product trade

(WRI Market Insights) Sanctions against Russian exports will permanently alter the global trade of forest products – Lumber trade flows changed almost instantly when Russia invaded Ukraine in late February. Trade sanctions and restrictions in financial transactions by Europe, North America, and major markets in Asia halted shipments from Russia and Belarus. In addition, exports from Ukraine were also disrupted.

Total lumber exports from the three countries in the war zone were 34 million m3 in 2021. Over 25% of that volume was exported to countries with current sanctions against Russia and Belarus. In addition, the two major wood certification organisations, FSC and PEFC, have labelled all timber from the two countries as "conflict timber." The removal of the labelling means that the timber cannot be used in certified products, which will impact any country buying wood from Russia and Belarus and manufacturing certified products, eg – lumber, plywood, pulp, and paper for sales worldwide.

The total volume of softwood lumber that is now unlikely to reach the market in Europe and Asia (outside China) because of sanctions is an estimated 10 million m3, or just over 30% of the total export volume shipped from Belarus, Russia, and Ukraine in 2021, reports the Wood Resource Quarterly. In addition, lumber sold to customers in China that require certified wood for manufacturing forest products targeting Europe and North America will no longer be available from Russia. Europe, which imported 8.5 million m3 of softwood lumber from the three countries in 2021, will be the hardest hit, as the lumber import volume accounted for close to 10 percent of the total consumption on the continent in 2021.

Although the Chinese government has not set up any barriers to trade between them and Russia, it is still conceivable that there will be interruptions in shipments between the two neighbours.

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Source: Wood Resources International

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Buy and Sell

... and finally ... some one-liners to ponder

Thinking back to the depths of the Covid lockdowns, when they said we could have gatherings with up to 8 people without issues - I don't even know 8 people without issues.

Every box of raisins is a tragic tale of grapes that could have been wine.

Dear paranoid people who check behind their shower curtains for murderers.....if you find one , what's your plan?

The more I get to know people, the more I realise why Noah let only animals on the ark.

My train of thought derailed, there were no survivors.

I still have a full deck ... I just shuffle slower

That's all for our mid-week wood news roundup.

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