NZ softwood log exports hit new record, raising ire of processors

New Zealand log exports hit a new record last year, underscoring the concerns of local manufacturers that the country is sending too many unprocessed logs overseas, posing a threat for local timber supply in the future and undermining the goal to add more value to exports.

The country exported $2.41 billion of softwood logs in the first 11 months of last year, surpassing all previous records for any full calendar year, according to the latest Statistics New Zealand figures. Data for the full year will be released on Jan. 30.

New Zealand is experiencing strong demand for logs from China, which has clamped down on harvesting its own forests and reduced tariffs on imported logs to meet demand in its local market. In the first 11 months of 2017, New Zealand exported $1.81 billion of logs to China, above the level for any full calendar year and accounting for 75 percent of softwood exports.

Increased shipments of raw logs goes against the aim of successive governments to add more value to commodities and riles the wood processing sector, which says more manufacturing needs to be done at home to sustain the local industry. It says an uptick in demand for wooden housing could see supply having to be met from overseas if the current situation prevails.

Prior to the election, the wood industry, representing New Zealand's third-largest export commodity group, was annoyed at the lack of attention it received from the Ministry for Primary Industries which it felt was more focused on food safety, agriculture, horticulture and biosecurity of the border. Forestry, it was felt, was at the bottom of the MPI pile and fronted by junior ministers and officials.

The industry starts this year in a more upbeat mood with the new coalition government's commitment to re-establish the Forest Service, plant more trees, focus on regional economic development, require greater scrutiny of overseas investment in forestry, and improve the Emissions Trading Scheme for forestry amid industry concerns that foresters couldn't compete with rival land users such as dairy farmers under the current system.

"We are certainly on the radar now with the government very much pushing in the right direction. The whole industry has a much higher profile now," said Jon Tanner, chief executive of the Wood Processors & Manufacturers Association of New Zealand. "Forestry worldwide has to have the hand of government."

While government initiatives gave the industry more optimism about the long-term future, Tanner said uncertainty remained around the shorter term issue for the domestic market of more unprocessed logs heading overseas.

"We are still very concerned about the competition in the market right now and where that is going and how that is going to be regulated and tackled," he said. "We have got a major problem in the set up of the market. We have got a lot of logs being exported, and it's being increased.

"The demand out of China, all the pundits are saying, it's just only going to increase."

Other wood exporting countries such as Canada and Russia support their local industries while Chinese wood manufacturers benefit from subsidies, creating an uneven playing field for New Zealand processors, according to the WPMA which would like to see the government take a complaint to the World Trade Organisation.

Tanner said the WPMA was contacted by its counterparts in Australia late last year who were starting to experience a similar problem of increasing log exports to China.

(BusinessDesk)


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28 Comments & Questions

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So what are timber manufacturers saying here? They want the NZ taxpayer to subsidise them 'cos wood manufacturers are being subsidised elsewhere in the world?
If that is indeed the case surely it would be better if the Government just got off its backside and tidied up their FTA's?

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This is just about the dumbest industry in New Zealand. Chasing the best short term dollar with no investment in developing a log term - less volatile - business.

75% of exports to one market - china. No diversification - China will turn the tap off at some stage and then see what happens.

Of course the people managing a lot of the sector do so on behalf of absentee owners who probably have no idea what goes on.

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Yes it is the dumbest industry and a Government dumber than that of Clark or English. The Greens must already be considering a vote of no confidence. Beyond the raw exports and lack of processing the fundamental problems with the timber log industry, is that it is very dangerous to all involved in the process from the felling to the unloading and the cost of transporting it and providing the required rail and shipping infrastructure makes it inherently profitable. Already the NZ First Nash government is adopting the most regressive policies, I mean the military is being downgraded to training idiots of low ability, too much body mass and inadequate height in life skills and there is talk about reopening the rail workshops which even with the Government NZR is a part of the industry that should have been private. When the most inefficient East town was closed in 1985 the Management vowed AG Price would never get another contract from the Railways. (NZRO no 4, 2017).

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Sheesh, paragraphs allow us breathe when reading you rant.

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'log term' , quite funny.

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Agree it's sad that we don't process all that wood...the mbie and industry need to do a study with a 3 month time limit to investigate the economics of adding value via sawn timber,pulp and various paper grades and report to govt and the public.

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That work has been done time and time again, NZTE and others have also been trying to attract investment into the sector for 20 years - since they got set up.

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Correct. And it’s always reached a dead-end when plans for investment or expansion by existing processors on a scale necessary to compete globally seek guarantees of power supply in NZ to support these operations, and they can never get it!! Not enough supporting investment in energy infrastructure, highlighting further problems in enabling industry development here.....

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Are you saying that forest owners don't know what they are doing and the taxpayer should step in and save the forest owners from themselves?

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Forest owners aren't always the logical owners of sawmills,pulp mills or paper machines.trees that go overseas will be processed overseas.it would be interesting to see the economics of more processing in nz...one of the biggest factors is the exchange rate.

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Distressing to see so much of the exported logs imported in the form of pallets & crates

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Well then. Why don't you end your "distress', buy the timber and process it into something that doesn't distress you? Or would you like the taxpayer to do that?

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Which are the companies benefiting from the increased sales of softwood logs to China, and why aren't they selling to local processors? Is it because the local companies can't afford, or are unwilling to pay, the prices placed on softwood logs by the logging companies? Or are the log sellers filling overseas orders before the local market? Is it a similar situation to locally produced fruit and veg, which is more expensive to buy locally than to purchase overseas? Are the local market prices being driven by the international market, and are Kiwi sellers just chasing the almighty dollar to keep their shareholders happy, because they are actually owned by offshore investment companies?

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My understanding is that local prices are "set" by international prices - adjusted for frieght etc. The problem in the NZ industry is the "recovery rate" from a log. Most of the NZ processors are supplying sturctural timber etc - so maybe get (stand to be corrected) around 60% recovery. That is 40% of the log becomes a by-product / waste stream. This has little resale value if any.

In China they will recovery a higher % of the log becuase of the waste stream being able to be converted into usable products - packaging for construction sector, pulp and paper etc.

In addition the Chinese buyers are more willing to also buy lower grade products, so probably are considered more valuable clients for local middle men.

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"Shane Jones can't see wood for trees, says Sir Bob"

Well, certainly not while he's seeing in-house movies while cloistered away in his motel room.

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The old Minister of porn is never going to live that down.

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As long as he is sitting on NZ made hard wood furniture it's okay.

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The industry is clearly full of blatant crony capitalists who have been living under government protection way, way too long. Look at those crazy statements this guy makes and wonder at which other industries would even think inside such a failed framework.

Record exports is somehow now a "bad thing" in their upside-down world. Competition in the industry is "too good" and "needs to be regulated". If there was a market demand for finished NZ wood products AND NZ businesses could actually supply it, it would already be booming. All these people complaining about nothing happening in the value-added chain are the same ones who never risk a dollar to build a business but are always ready to pounce with their buddies in Wellington and clip the ticket when someone else actually does it. Stop complaining and build all these wonderful businesses to exploit all these marvelous 'opportunities' you can see that obviously no-one else can.

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Nice one. Very well put. Cheers. 10/10

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Turning a 25 cent seedling into $300 worth of logs by nature adding sun , air, rain and time cannot be matched by any industry. Taking the next step and adding value without just adding cost has been tried and tried and tried. Long live the log trade!

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Really, no one planting the trees, no one harvesting the trees, no one shipping the trees, no capital tied up in the land.......very simplistic. I am not sure that the return on capital is justified but you are right value add has been discussed and tired and failed time and time again.

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NZ processors will have plenty of logs if they out bid overseas buyers.

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Agree, then they can put up the cost of timber they sell to the local builders etc, who then can maybe look at alternatives - steel framing etc, which they can import from China, a major win win for China.

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And that should be the end of the argument to all the hypocritical domestic cry-babies out there who would like the state to again plant trees and sell logs to them cheap.

Why should a forest owner sell for less than what he/she can get overseas?

Same can be said about our lamb, beef, cherries and just about all the internationally traded commodities NZ produces.

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I think a comment from a spokesperson for Legasea is needed here. :)

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Perhaps if the government only purchased NZ made paper, wooden furniture and all the other products that can be made from these logs, the businesses producing them would grow, providing more employment. These 'value add' products would then be cheaper to produce (more units, greater efficiency) and we'd then start competing once more with the export market.
I'm surprised no-one has mentioned how much we pay for milk in these comments. Will paper and wooden products be next in our outrage, only to be quickly forgotten like fuel prices?

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And while you're about it, stop importing electronic equipment and only buy local. Why stop there? Stop importing cars & machinery too.

I can see PYE being restarted (they were great stereos, NOT), and NZeta scooters, oh the world will be our oyster,

Sorry, we've closed NZ borders & reintroduced exchange control. You want to leave? Apply to the RBNZ for some currency. Last time we did this (mid 80s?) I think it was around $20/day.

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Has anyone bothered to go down to their local hardware stores to purchase any timber lately? The prices they're asking have gone through the roof. No ones bothering with dressed 4x2, it's too dear. Rough sawn is the order of the day. Must have some gold in it.

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