Forestry and Wood Products Report 2011

An Expert's View about Forestry, Logging and Wood Products in New Zealand

Posted on: 18 Feb 2012

It is not quite the "wall of wood" many predicted but the log harvest is up 30% since 2008 to 26million m3 in 2011.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 2/7/2012 GAIN Report Number: NZ1202 New Zealand Post: Wellington New Zealand Forestry and Wood Products Report 2011 Report Categories: Wood Products Approved By: Joe Carroll Prepared By: David Lee-Jones Report Highlights: It is not quite the "wall of wood" many predicted but the log harvest is up 30% since 2008 to 26million m3 in 2011. Of which nearly 50% is being exported in raw log form predominantly to China. Foresters are making profits but saw millers are having a much harder time struggling with depressed construction sectors domestically and offshore. The appreciating NZ currency is also dampening down export returns. Executive Summary Although New Zealand’s domestic construction sector remains under pressure, the forestry and wood products sectors continued to post gains due to strong international (i.e. Chinese) demand for logs. At 12.8 million cubic meters, log exports accounted for nearly 50% of the total harvest, up from 32% of a 20 million cubic meter harvest in 2008. Log exports were up 28% from the previous year and have doubled in volume over the past four years. China is the major buyer, taking 69% of the total volume in the year to Sep. 30, 2011. South Korea, India, and Japan round out the major destinations for raw logs. With an annual production estimate of 5 million cubic meters ending in Sep. 2011, saw millers and wood processors are still not producing at pre 2008 levels but are making a tough but necessary move to increase the proportion of their throughput which is going to export. For the Sep. 2011 year exports of the major categories of lumber, plywood, particle and fiber board were up 6.5% (at 3.14 million cubic meters), and 7.7% by value in USD. Plantation forestry area in New Zealand seems to Wood product exports are almost back to peak have stemmed its downward trend to stabilize at levels reached in 2006 at 3.18 million cubic meters. 1.72 million hectares as of April 2011, just 1% less than a year earlier. During the planting season (mid The pulp, paper and export chip sectors comprise 2011) it is estimated that 60,000 hectares of trees the other major users but their production tends to were planted, comprised of: 43,300 ha forest land fly under the radar. They use an estimated 4.1 that was harvested the previous year; just under million cubic meters of logs and wood and their 5,000 ha of previously harvested forest land that production levels are reported stable and export had been lying fallow; and 12,000 ha of new earnings robust over the last 4 years. planting on former farmland or land that has come from other uses. It is likely then that the net The overriding factor damaging the financial planted area in 2012 will be slightly above 2011. performance of exporters is the continued The key drivers behind this are: the potential to sell appreciation of the New Zealand currency from carbon credits; and the better financial buying an average of USD 0.72 in 2010 to US0.79 in performance and outlook for forestry. Indigenous 2011. However industry participants expect export forest areas are stable. tonnages in 2012 to be similar to 2011 unless the domestic construction sector takes off and the For the year to September 30, 2011 there was a demand for timber pushes the price saw millers are record log harvest at an estimated 26 million cubic m willing to pay above the export log market prices.eters. Industry participants forecast a similar removal rate in 2012. Even with a dip in log prices in the second half of 2011 forest owners have had a successful year. Forest Area and Harvesting 2011 Source: MAF Net planted area reduced by 1% to 1.72m hectares in April 2011 From MAF tree nursery surveys it is provisionally estimated that the approximately 48,000ha of forest area previously harvested was replanted in mid 2011. As the harvested area for the year to April 2011 was 43,300ha, it is reasonable to assume that just under 5000ha of previously harvested fallow land was replanted which should reduce the forest land waiting for replanting reduce to around 50,000ha In addition it has been estimated 12,000ha of new planting was completed on former farm land or land that has come from other uses. Drivers behind increased planting intentions include: potential to sell carbon credits as the trees grow; and the better net revenue from tree harvesting for forest owners coupled with some confidence the future will bring similar net financial returns. Nursery manager opinions are weighted toward plantings increasing again in 2012. Record volume of logs harvested from the plantation forests in year to September 2011. Industry participants suggest the log harvest will be similar in the next 12 months to September 2012 at 26million cubic meters. If current planting levels are maintained, then over the next decade it is likely log removals will gradually rise to be in the order of 35million cubic meters p.a. Even though log prices have dipped in Q3 and Q4, 2011 Foresters have had another successful year, both in terms of volume and profits. National Exotic Forest Estate Statistics Area and 1- standing volume statistics as at (note Ap 1-Apr-r- 1-Apr-09 1-Apr-10 1) 11 08 Forest area 1 761 1 751 00 1 738 171940 Net stocked area (ha) 000 0 000 0 47 Har note2)vested area awaiting replanting (ha) ( 500 46 400 55 300 54300 1 808 1 797 40 1 793 30 177370 Total forest area 500 0 0 0 Growth characteristics 445 Standing volume (000 3 m ) 933 456 874 467 063 479709 Average standing volume (m3/ha) 253 261 269 279 Area-weighted average age (years) 15.2 15.6 15.9 16.3 Area by species (note3) 1 575 1 568 00 1 556 00 154500 Radiata pine (ha) 000 0 0 0 111 Douglas-fir (ha) 000 109 000 110 000 107000 Cypress species (ha) 9 000 9 000 10 000 10000 26 Other softwoods (ha) 000 26 000 25 000 24000 25 Eucalyptus species (ha) 000 25 000 24 000 22000 15 Other hardwoods (ha) 000 13 000 13 000 13000 Radiata pine area by tending regime 213 Pruned with production thinning (ha) 000 216 000 217 000 210000 706 Pruned without production thinning (ha) 000 728 000 708 000 700000 34 Unpruned with production thinning (ha) 000 31 000 37 000 35000 622 Unpruned without production thinning (ha) 000 593 000 593 000 599000 31- P 31-Dec- 31-Dec- 31-lanting statistics Year ended (note 4) Dec- 08 09 Dec-10 07 Total estimated new planting (ha) (note5) 2 400 1 900 4 300 6000 34 Replanting (ha) (note6) 700 31 300 32 500 35200 31- Har 31-Mar- 31-Mar- 31-Mar-ves ) ting statistics Year ended (note7 Mar- 09 10 11 08 41 Area clearfelled-all species (ha) 400 41 800 43 500 43300 Area clearfelled-radiata pine (ha) 38 37 700 39 200 39800 500 18 Volume clearfelled-all species (000 m3) (note6) 663 19192 20588 21725 Volume production thinned-all species (000 m3) (note6) 195 190 146 201 Total volume removed -all species (000 m3) 18 (note6)(note8) 858 19 382 20 734 21926 Average clearfell yield -all species (m3/ha) (note6) 451 459 473 506 17 Volume clearfelled -radiata pine (000 m3) (note6) 753 18 095 19 192 20493 Average clearfell yield - radiata pine (m3/ha) (note6) 461 480 489 515 Area-weighted average clearfell age for radiata pine (years) 27.9 28.3 28.4 28.6 Notes 1. Source: National Exotic Forest Description as at 1 April 2010 , Ministry o f Agriculture an d Forestry, 2011. 2. I n this report, the area of harvested land that was recorded as awaiting a land use decision has been r eported in the area awaiting replanting. 3. Individual entries may not add to totals due to rounding. 4. The forestry statistics released in this report, and in particu lar, new plan ting estimates, may differ from those produced in the Agricultural Production Survey by Statistics New Zealand. These surveys use different survey frames and designs. 5. The method used to estimate new planting is described on page 7 of this report. 6. The 2011 survey only sought data from owners with 1000 hectares of forest or more. These estimates have been rated up based on the 2010 NEFD survey results for owners with less than 1000 hectares of forest. 7. All volumes are reported as recovered volumes inside bark. 8. These estimates are based on data collected in the 2010 and 2011 NEFD surveys and m ay differ from t he roundwood removals estimate as published in the Annual log and roundwood removal statistics, Ministry of Agriculture and Forestry. This is due to the estimate from that source being an indirect estimate that uses conversion factors for each forestry product to estimate the total roundwood input that would be required to produce total forest product outputs Annual Estimated Roundwood Removals from New Zealand Forests (units: 000 cubic meters of roundwood) Natural Forest Removals from planted production forests Total Plantatio Total Peele Expor n Total Year Removal Saw r Small Pulp t Export Removal Removal Ended s Logs Logs Logs Logs Chips Logs s s Sep- 7 1 3 01 52 185 674 530 452 418 6 794 20 053 20 105 Sep- 7 1 3 02 49 841 822 441 501 401 7 613 21 619 21 667 Sep- 8 1 1 2 03 36 139 035 403 993 299 8 239 22 108 22 142 Sep- 7 1 1 3 04 29 955 109 457 266 230 5 859 19 877 19 904 Sep- 23 7 1 1 3 244 5 033 19 019 19 042 05 827 176 432 308 Sep- 7 1 1 3 06 22 529 140 494 228 219 5 323 18 933 18 954 Sep- 7 1 1 3 07 19 877 231 306 410 325 6 286 20 434 20 454 Sep- 7 1 1 3 08 17 298 189 236 299 411 6 290 19 722 19 739 Sep- 6 1 3 09 12 214 785 162 263 204 8 359 19 986 19 998 Sep- 7 1 1 3 10 10 17 312 037 122 599 315 043 23 427 23 444 Sep- 11 14 6828 1184 1142 3722 402 12815 26 092 26 107 Source: MAF Wood Disposal 2011– Where Did All the Logs Go? 12.8 million cubic meters of the harvest was directly exported in log form in the year to Sep 30, 2011, (i.e. 49% of total harvest) A further 5 million cubic meters of wood ended up as sawn timber, plywood, particle board, or fiber board. The pulp, paper and export chip sectors used another 4.12 million cubic meters The balance went to waste streams for co-generation of energy either heat, steam, or electricity or to many other smaller niche end uses. Sources: Statistics New Zealand Sources: Statistics New Zealand Sources: Statistics New Zealand Source: MAF Source: NZX Agrifax Exports Vs Domestic Usage – Exports Winning Exports Log sales to China underpin the export effort; 69% of all logs exported in the year to Sep 30, 2011 went to China. Export returns for the year to Sep 30, 2011 were up by 28% in USD terms but only 14% in NZD terms. Despite total wood processing being below pre 2008 levels export quantities of sawn timber and wood products are back up at pre 2008 levels and receipts in USD are at the highest level in over a decade. The New Zealand currency has appreciated against virtually all major currencies except the Australian dollar. This has taken the gloss off the returns once repatriated into NZ Dollars. Exporters with stable markets into Australia, mainly sawn timber, mouldings, and plywood are doing well. The heat went out of the Chinese log market in Q3, 2011, as the Chinese Government policies to slow the economy took hold and log inventories in China got too high. However this seems to have been a temporary setback with prices improving again and log inventories under control. The industry in NZ is likely to look to export a similar tonnage of logs again in 2012 unless the domestic construction sector takes off and the demand for timber pushes the price saw millers are willing to pay above the export log market prices. The Central North Island and Bay of Plenty regions are encouraging large scale Chinese saw millers/wood processors to relocate their operations to this area on account that they would be close to the source of the logs they are already purchasing; would have close and ready access to geothermal energy (zero carbon footprint); and a port is close at hand. Apparently a Chinese group is already evaluating a sawmill investment in the region. In the medium term even if domestic construction gets back to pre 2008 levels exports are likely to continue trending up. New Zealand Export Statistics for All Wood Products, Logs, Pulp & Paper (HS Codes: 44,47,48) Year Ending Series: September, 2005 - 2011 Partner United States Dollars - FOB Receipts Country 2005 2006 2007 2008 2009 2010 2011 227,021,96 251,203,05 365,222,11 353,227,50 500,822,70 743,975,03 1,181,859, China 8 0 6 3 3 0 275 Australi 574,587,01 436,900,17 526,395,66 614,945,92 426,192,15 564,705,51 652,393,80 a 7 2 8 3 4 3 7 422,759,13 324,030,89 370,967,61 357,735,15 289,934,49 354,637,78 421,410,26 Japan 4 4 5 7 2 9 0 Korea 216,832,55 248,752,68 314,828,67 289,597,40 235,238,29 297,869,39 368,233,45 Sth 5 5 2 1 0 5 5 105,095,18 190,660,15 India 22,378,600 36,422,432 52,456,746 61,184,119 60,971,109 9 6 285,319,32 270,682,63 235,963,87 208,528,62 138,168,77 167,385,44 148,861,07 USA 9 6 3 3 2 5 8 Indonesi 118,490,58 113,478,67 a 52,240,426 80,906,087 72,062,126 94,192,701 86,968,899 3 7 Taiwan 41,639,951 51,241,582 56,960,648 57,012,765 40,464,958 61,648,064 78,328,988 Philippi nes 77,808,114 58,829,434 57,472,479 57,774,740 47,422,880 55,312,550 74,898,064 Malaysi a 24,527,302 26,007,134 35,162,091 35,617,969 29,607,952 51,198,884 63,983,765 203,977,10 220,855,44 295,650,03 337,176,06 265,037,32 309,058,38 321,717,62 Rest 3 1 9 0 7 2 7 2,149,091, 2,005,831, 2,383,142, 2,466,992, 2,120,829, 2,829,376, 3,615,825, World 497 550 072 958 534 828 156 Source: Global Trade Atlas Source: Global Trade Atlas Source: Global Trade Atlas Source: Global Trade Atlas Source: Global Trade Atlas New Zealand Export Destinations Statistics by Value Wood And Articles Of Wood: Logs, Timber, Wood Products, & Wood Charcoal (HS Code 44) Year Ending Series: September ge , 2005 - 2011 Avera Unite Annual d States Dollars De Compoustinati nd on Growth Country 2005 2006 2007 2008 2009 2010 2011 Rate 101,217,1 134,503,73 186,769,32 205,976,16 399,726,99 612,897,06 973,690,09 China 88 1 7 6 0 1 9 45.8% 349,932,9 276,484,43 303,716,90 288,811,07 217,352,18 277,498,81 355,817,16 Japan 20 2 0 0 9 6 0 0.3% 259,645,4 219,662,11 244,814,42 288,854,66 194,859,95 281,494,09 315,274,00 Australia 93 5 2 5 4 3 3 3.3% Korea 172,858,3 196,771,90 251,002,23 227,821,21 191,195,16 226,283,28 283,003,65 South 05 6 1 3 5 7 5 8.6% 18,497,78 161,068,24 India 8 30,810,012 45,400,787 53,436,867 52,793,400 93,632,980 1 43.4% United 272,652,2 258,582,04 224,787,61 194,739,52 124,684,52 156,692,00 135,869,91 States 16 5 9 2 9 6 4 -11.0% 19,631,93 Vietnam 6 29,998,526 39,453,111 40,804,105 48,499,169 65,601,864 57,664,224 19.7% 25,345,34 Taiwan 0 27,105,880 25,938,367 27,884,803 20,612,727 31,072,517 44,893,713 10.0% Philippine 44,993,47 s 8 29,687,952 24,843,256 21,887,524 21,368,963 27,941,781 39,709,007 -2.1% 17,729,81 Indonesia 6 30,274,825 33,257,560 26,223,582 23,825,035 31,175,926 35,362,941 12.2% Rest of 87,068,65 100,181,35 159,277,70 176,505,01 128,169,59 153,990,24 153,909,86 World 3 4 0 9 8 9 7 10.0% All World 1,369,573, 1,334,062, 1,539,261, 1,552,944, 1,423,087, 1,958,280, 2,556,262, Total 131 775 279 535 721 577 821 11.0% Source: Global Trade Atlas The Domestic Scene New dwelling construction in the doldrums (currently 13,000 to 16,000pa). Christchurch post earthquake rebuild: if wood use generally confined to just residential dwellings then anticipated stimulus to wood processing sector may be illusory. While non residential construction is also at low levels, steel and concrete are the main building materials used for the larger buildings; however a pickup in this sector would still help wood processors. Large scale/efficient saw mills and wood processors are exporting an ever increasing proportion of throughput as domestic markets have shrunk. Industry rationalization is slowly taking place: There are around 400 sawmills in NZ, however at current national output only 5-10 large scale, efficient sawmills/wood processing facilities are actually needed. The Wood Processors Assn and other forestry and wood groups are working hard to convince builders, engineers and architects that buildings of up to 10-12 levels high can be constructed totally from wood or wood beams tensioned with steel. These buildings would be very safe in the event of earthquake(s) so are being promoted for Christchurch. It has been estimated that at least 25,000 new dwellings need to be constructed each year to sustain current housing stock and provide for population increase. Sources: Statistics New Zealand Over last 2 months (Dec-Jan 2011) there are some signs of simulation of the construction sector particularly as the pace of rebuilding in response to the the Christchurch post earthquake begins to pick up in 2012. The pulp and paper businesses fly under the radar, especially politically, but they have international scale and efficiency and are maintaining profitability. Over time it is likely the pulp and paper businesses, given the right policy settings and R&D will broaden their horizons to become bio-chemical companies and perhaps net energy producers. Sources: Statistics New Zealand Useful Websites: MAF: http://www.maf.govt.nz/ NZ Forest Owners Assn: http://www.nzfoa.org.nz/ Wood Processors Association of New Zealand http://www.wpa.org.nz/
Posted: 18 February 2012

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