• Higher IRR returns for forests
• Faster tree growth rates so harvest age can be lowered
• More new markets for wood products
• Additional funding for expanded processing facilities
• Higher margins for solidwood and re-manufactured products
• Better co-operation with Government

View a Sample of the Report.

1. New Forest Ownership

   Over 40 forest owners are profiled. Some of the previously minor forest owners/managers in New Zealand are now getting to be very important. For instance GMO RR has moved into second place with over 200,000 hectares under management. Global Forest Partners has interests in over 120,000 hectares and Ernslaw One now has almost 90,000 hectares. It is well on the way to its goal of 100,000 hectares. Of course we have some notable reductions and (almost) total exits, and we are confident that next year’s list will be measurably different again. One or more of the above owners could well have added another 100,000-150,000 hectares to their portfolios -- or one of perhaps 14 or so new TIMOs waiting in the wings (which are identified in the report) might have landed.

2. Log Export Markets and Prices

   There has been a major swing away from the positive vibes we received in 2003, to a far more subdued note in 2004. Exports to China and Korea especially have taken major volume and price hits. The total export volume for the Y/E to June 2004 is down 20% on the volume exported in Y/E to December 2002 -- and the value is down almost 30%. Japanese log export volume was less in 2003 than it was in 1991. Monthly shipments to China were down 70% in July 2004, compared with July 2003. Ouch! The pattern of falling income is repeated for most forest products. Market demand, low prices, exchange rate, shipping costs and changing harvest patterns have all contributed to this drop. But there is a worrying medium- term now stretching into a long- term price reduction trend for many grades. For instance, Japan A grade log prices appear to have fallen by more than 1.5% pa in real terms over a period of more than 30 years. This leads to another serious issue -

3. Forest Valuations

   How times have changed! In the 1980s many valuers introduced “rolling average prices” to actually take out some of the impact of rising prices on valuations. We remember debates with corporate accountants who were absolutely convinced that the only way forward for log prices was up. But then from the mid-1990s the effect of the 2003 price spike was about to fall off the 12-quarter “rolling average” price. This would have resulted in a sharp reduction in valuations. So then, by magic, the concept of “return to trend” price series became popular. But somehow, after the “trend line” was reached, the forward price assumptions always seemed to be flat, irrespective of the trend direction. A sort of “return to trend line but” approach. Forest valuers have been in an unenviable position. If they assume real price reductions, their clients will not buy anything. But if they assume anything else, they were/are? almost certainly overvaluing forests. The field is littered with unsuccessful attempts to try to actually predict future prices, exchange rates, interest rates etc. But US TIMOs have come to the rescue as they need only to beat US financial index trends. Some of these may actually be less than zero, e.g. the technology sector share price index from 1999-2004 (except for my favourite NAVR which is at an all time high, having increased by 17 times in the last 2.5 years).

4. Change in Focus in Sawmilling

   There have been some major changes to the production optimism and market focus amongst many of the 55 sawmilling companies we spoke to this year. A huge shift in production is evident from USA markets to domestic and Australian markets. Also more than 15 important expansions planned in 2003-04 have been deferred or cancelled. The NZ sawmilling sector has so far escaped the massive consolidation that has occurred in Scandinavia, Western Canada and more recently in Chile. But it cannot defy gravity forever. An early stage in this process may be underway with buyers looking at Tenon assets. A sale of State Forests of New South Wales, and the almost inevitable acceleration in harvest there may speed up the day when Australia is selfsufficient in lumber. Then what? Well we think that when the USA wood market cools, and the Australian market gets more crowded, some major European sawmills will take a serious look at New Zealand as a new lumber market. They could supply really high quality 70-130 year- old pine and perhaps spruce lumber. Then the WQI chaps would have some quality products to benchmark the young NZ radiata lumber against.

5. Wood Quality

   There has been much gnashing of teeth about wood quality in recent years -- at least for solidwood. This has culminated in the formation of WQI. But is its focus on the problems of young wood an excuse to drop the ball on the fundamental problem with radiata pine management in NZ – that it has been cut too young? Last year was the year of the discovery of this top secret fact. When Australians get 60-70% in MGP10 or better from their radiata pine logs and we get 20-30%, it is no wonder there has been a propensity to wind back the dials. We doubt if there will be any more LVL plants built here until this age issue is resolved. Does it need a research effort to determine the obvious?

6. RMA Issues

   A hardy annual -- but there is enough material to write a book about RMA alone. We have not gone that far but do cover several precedents and issues in various chapters. But one can sense (finally?) a change in government perception as more and more wood processing and electricity projects are canned by vexatious objections. Will we see a new dawn in project consents post- 2004? This RMA issue may indeed become a 2005 election issue, with both major parties vying to become the most anxious to free up the consent process. But we remain skeptical as the Greens and the new Maori Party will fight to the death to retain the perceived existing privileges that their constituents enjoy.

7. The Pulp and Paper Sector

   What a sad situation. The Brazil pulp sector has gone ballistic -- we report on this in a case study. Some single pulp mills in Indonesia now make more than 2.5 million tpy of pulp (up to 8-10 times that of an NZ plant). The biggest uses 12 million m3 of wood per year. Chilean pulp production is in the middle of a massive expansion and Uruguay plans to add at least 1.5 million tpy to its pulp capacity. The Australian Federal Government is funding programmes to get 1-2 huge new pulp mill projects off the ground, and China looks like it is building a pulp or a paper mill every month at the moment. Meantime we are shrinking our capacity. And five years or so down the track the future of one of only three continuous digesters in NZ will need to be decided. With RMA water issues the way they are, and spiritual needs becoming important, the future looks ominous.

8. Leadership

   What has happened to the new crop of the Baigents, the Carter twins, Jack Henry (NZFP) and Geoff Schmitt (TPP) -- or even the Fletchers dare I say it? Where are the N.Z. equivalents of the Angelinis and the Mattes (Chile), the Hynes (Australia), Klausner (Austria/Germany), or the Emersons (USA)? Surely the entrepreneurial spirit that built (as opposed to sold) the forest products sector in New Zealand is not so far bogged down with paperwork and policies that it cannot get re-ignited. The jury is out.

9. The Test

   Marsden Point is the world’s most attractive place to build major new wood processing plants. There are numerous unique advantages, which are discussed. These include a major deep water port, oodles of industrial land, major uncommitted wood resources nearby, the strongest wood in New Zealand, a mothballed power station that could be rebooted, industrial labour skills etc. If this site does not fly in the next 3-5 years, then maybe New Zealand is indeed simply too far away from markets. If so, it will definitely be back to the drawing board.

   

   If you wish to be alerted to any changes of this page, enter your e-mail E-mail:

   ---

   The AKTRIN Group of Information Centers is an international consulting firm fully dedicated to the furniture, textile and wood industries. Our research library contains over 1500 reports, covering all aspects of the residential and office furniture markets, textile, fiber fabrics, apparel, garments, as well as wood products, lumber, MDF, particleboard, plywood, millwork, windows, doors, floor coverings and much more.

   Search Terms: AKTRIN, Aktrin, aktrin, Aktrin Industry reports, wood structure, Aktrin Wood Information Center, Wood Resources, wood, Business and Politics, NZ economy, international benchmarking, government policy impacts, Forest Resources, Wood land Owners, Maori interests, Tree Management, Forest Returns, Radiata pine, douglas fir, eucalypt, acacia costs, wood land yields, pruning, prune, Log, Woodchips, Forest Production trends, domestic species, export price trends, Wood products markets, Solid wood, Lumber, plywood production, strategies, cost benchmarking, Engineered Wood Panels, wood cost benchmarking, new wood panel plants, Pulp and Paper Development, pulp and paper statistics, ownership changes, Government Issues, Policy, trade, wood research, forestry training, legislation, taxation, overseas investor regulations, return of forests, Maori, Government assistance, Wood Processing Strategy, Environmental Issues, RMA, FSC certification, climate change, Kyoto Protocol, Investment Opportunities, Overseas investment, forest opportunities, forest resource company, benchmarking, review of emerging forestry regions, infrastructure review, Future Harvest, New Zealand, over-cutting the forest resource, DANA, Dana

   Furniture information Market reports Residential furniture Office furniture Bedding Market statistics Mailing lists Furniture standards Furniture consulting Export Import services Message board Wood information Market reports Market statistics Consulting Message board Associates Textile information Market reports Market statistics Consulting Message board Associates Consulting