Wood prices

November 27th, 2013 at 3:00 pm by David Farrar

The Herald reports:

’s outspoken economic development spokesman has lashed out at “arrogant” foreign owners of New Zealand’s forests, saying their pursuit of the highest possible profits comes at the expense of local workers, communities and the wood processing industry.

Jones’ comments come as he and industry figures ring alarm bells that local processors are being priced out of the log market as skyrocketing Chinese demand drives prices higher.

So the global price of wood is increasing. I’m not sure this is a bad thing for a country that produces wood.

Jones seems to be saying that owners of NZ forests should refuse to take the highest price for their wood, and should sell locally for a cheaper price.

I wonder if this logic extends to all industries? Should all companies be told they are not allowed to accept a high foreign price for their products until they have sold all they can domestically?

“These foreign-owned companies rely on ratepayers to upgrade roads so they can move their logs to the ports, they rely on New Zealand’s social insurance when workers in the forests are killed.

Neither of these statements are true. When logs are moved on roads, they pay for the costs of maintaining and upgrading roads through road user charges. They pay up to $368 per 1000 kms.

Forest companies also pay ACC. Their levy rate is $6.35 per $100 of wages. This is set to cover the costs of accidents and deaths in that industry.

“The foreign owners’ agenda has eclipsed the rights and interests of the New Zealand taxpayer and workforce, this is not a sustainable forest policy.”

Jones is good about complaining, but does he have a solution? Is he saying Labour will pass a law to ban companies from selling goods overseas if they can be sold cheaper in New Zealand?

Hancock did not return the Herald’s calls but Forest Owners Association president Paul Nicholls said owners were looking for the best return on their investment.

“Most forest owners sell somewhere between half and two thirds of their product to domestic mills but there’s always competition for those logs from overseas buyers, so it does come down to a matter of economics, which markets the domestic mills are selling into and what they can afford to pay for logs.”

The global price of wood is high and rising. I don’t see you can do much about that.

 

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25 Responses to “Wood prices”

  1. Colville (2,242 comments) says:

    Yippppeeeeee :-)

    I own 20,000 21/22 year old trees!

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  2. Bill Ted (92 comments) says:

    I’m pretty sure the only benefit of being in Opposition is that you can spout rubbish and journos just take your word for it. The media don’t care, so long as they have a negative angle to run they’re happy. It’s counterproductive for them to fact check and lose that angle, so they don’t. Jones and Cunliffe are just taking advantage of it. Can’t blame them really.

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  3. redqueen (552 comments) says:

    Forgetting a complete lack of business or tax knowledge by a Labour member, two questions seem to be ignored: why aren’t local mills able/willing/capable of paying international prices for wood (or are they, in which case, what is the issue?) and why aren’t we exporting more milled products? (aka, conducting value adding business here). Mainly, at this point, my understanding is that a lot of countries will simply not accept processed timber (but will accept logs). That is a legitimate complaint (that there are artificial import barriers for our processed goods – imagine our milk having to be sent in liquid, rather than powdered, form because this had to be done ‘locally’), but so far the complaint appears to be typical Labour ‘rhetoric’. The question is: what is actually harming NZ mills? (simply competition, inefficiency, external trade barriers, etc?) – before we know that, this is just drivvle.

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  4. BeeJay (71 comments) says:

    Colville – Ditto!!!!
    And all the forest owners I know are kiwis!!! And I know heaps of them! I meet up with them almost every year at Forest Partnership meetings! What on earth is Jones talking about?? He must have had another sudden rush of blood to the head! Oh, maybe it’s because we are not Maori, that makes us “foreign”!

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  5. Nostalgia-NZ (5,085 comments) says:

    Bit of a time warp here with Comrade Shane, I thought NZ was the free market economy, not China.

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  6. virtualmark (1,528 comments) says:

    Maybe the long-term answer to Shane’s problem is for iwi to plant some forests???

    Surely Ngapuhi have the unused land to grow trees on, the money to pay for that, and people who need work. Then they can sell the logs to their own people working in local sawmills.

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  7. peterwn (3,238 comments) says:

    redqueen – luckily for Fonterra, liquid milk is virtually unexportable. Similarly for the meat industry, there are economic and other difficulties with exporting live animals (prior to 1882 there was difficulty with exporting even dead animals).

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  8. Colville (2,242 comments) says:

    BeeJay.
    A forest manager from one of the BIG Boys phoned me a while back for a chat, he was ringing around all the medium sized owners in the Manawatu to talk about processing options. He told me there is 380 odd privately owned forests between 20 and 100 Ha in the Manawatu, now if you add in all the Roger Dickie type stuff that is a sh*t load of NZ owned trees!

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  9. labrator (1,892 comments) says:

    The foreign owners’ agenda has eclipsed the rights … of the New Zealand taxpayer and workforce…”

    Not entirely sure how someone’s agenda can change the laws of New Zealand. If Shane Jones believes that to be the case he should suggest a change in law. Otherwise it’s just more empty “foreigners bad”, “companies are bad” Labour rhetoric.

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  10. berend (1,699 comments) says:

    DPF: The global price of wood is high and rising.

    And won’t that mean people plant more forests? But I doubt the greenies would like that.

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  11. nostrils (53 comments) says:

    As long as the trees are green :)

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  12. JC (942 comments) says:

    What has triggered this off is the receivership of the Tachikawa mill in Rotorua about three weeks ago and Labour and allies have been leveraging off that. This wholly owned Japanese mill said it was struggling with the high exchange rate and cost of logs.

    However the story is a bit more nuanced than that. The mill is relatively old (1980s technology), overmanned.. carrying up to twice as many staff as more efficient mills, dedicated to particular products for Japan. Productivity is low and worst of all the owner has been sidetracked by a disastrous foray into China where a hugely costly new mill has gone down the tubes.

    Issue No two is those big foreign owned forest owners dont produce as much log tonnage as the NZ owned forests and the foreign owners have contracts with local mills. The log tonnages these days are coming from woodlots, small forests and big NZ syndicates like Roger Dickie and co.. these tonnages are, unlike the foreign owners, free to go to the highest payers which *may* be the Chinese.

    Issue three.. the Shane Jones complaint is 50 years old.. it gets trotted out every time overseas demand and prices are high, ie, about every 5 years or so and behind every Shane Jones type complaint are our friends the manufacturers and the Timber Industry
    Federation.

    Issue four.. why not process here? Well, a big competitive modern mill in the US might produce four times the volume of timber with a quarter of the manpower as compared to many NZ mills.. our strengths lie in producing big volumes of raw logs on short rotations.. sawmilling not so much.

    Virtualmark.. Ngapuhi have thousands of hectares coming on stream for logging and marketing.. after a few polite hui in which people will stand up and orate about employing local Maori kids.. the logs will be sold to the highest bidders. Maori trustees will be pleased to sell logs locally, but not at a loss of profits.. the shareholders wont stand for that!

    JC

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  13. Colville (2,242 comments) says:

    New Zealands “wall of wood” gets the chainsaw/waratah in the next 10 years. Its going to be awesome for our balance of payments.

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  14. duggledog (1,491 comments) says:

    “When logs are moved on roads, they pay for the costs of maintaining and upgrading roads through road user charges”

    Ha ha ha ha! Ah ha ha ha!

    In theory only.

    Virtualmark: ‘Surely Ngapuhi have the unused land to grow trees on’

    Sadly, no. You see there’s no room. Big plantations of gorse and tobacco weed and blackberry already in situ, with some cannabis plots

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  15. Ed Snack (1,833 comments) says:

    JC, also though, milling Radiata is a bit different to milling typical old growth timber or other non-plantation grown logs. Radiata has significant issues around just how much timber you can get from an individual log, and produces a much greater spread of grades. I used to be in the industry, both on the milling and later on the forestry side, US mills wouldn’t be as productive as they are if they were processing radiata to the extent that we do.

    However I’m a little out of the loop these days, what do the Chinese do with the logs they’re buying, are they simply able to process them cheaper because of low labour costs ?

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  16. Fentex (916 comments) says:

    The global price of wood is high and rising

    As I recall we knew this – it was obvious some twenty years ago that New Zealand was in a position to benefit from forests we were planting that would mature at this time – and NZ planted forests precisely because it could be predicted there would be a payoff in world markets as other producers had a lull we could fill.

    Do I recall incorrectly? Isn’t it a positive thing many in NZ invested wisely in something worthy we could do?

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  17. wreck1080 (3,863 comments) says:

    Haven’t read Jones full comments — but, is it about the price of wood?

    I construed this as possibly that Jones is saying the employers are not treating their staff well to minimise expenses (and thus maximise profits). Also, we all know the forestry worker death rate is too high. Although, my gut instinct is that forestry workers are more frequent drug users so maybe this is partly their fault.

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  18. JC (942 comments) says:

    Ed,

    Although Chinese building is mainly concrete it has created a massive demand for wood for a wide variety of uses in manufacturing, construction, finishing and scaffolding, ie, definitely more than just a cheap substitute. NZ of course is keen to get Chinese investment in our sawmill industry to produce more finished products.. thats one way for China to reduce its energy budget for processed timber.

    JC

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  19. Colville (2,242 comments) says:

    Fentex.
    There was a price explosion in the late 80’s and early 90’s caused I think by the russians shutting up siberia for a few seasons so NZ put the axe to a LOT of trees that were not quite ready and still got massive money for them. Every cockys shelter belt got the chop, I got a guy to clear a small block of trees alongside a road that had 11,000 volt lines running thru it in the middle of winter (knee deep mud). Couldnt have been a more techy expensive block to chop and I still got over $200 a tree in my hand. $60 grand for a bunch of shit. Grinning.
    After that a lot of farms were going cheap and the like likes of Dickie syndicated a lot he may have 100,000 acres under his wing. Ernslaw one owned by the Tiong family out of Malaysia brought up massive amounts of ex sheep farms on the east coast lower nth island and planted them, plenty of others did too.

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  20. Jack5 (5,005 comments) says:

    Colville posted at 4.07:

    New Zealands “wall of wood” gets the chainsaw/waratah in the next 10 years. Its going to be awesome for our balance of payments.

    Ah, the economic miracle, the “wall of wood”, again. It was going to hit to to 15 years ago, and make the country rich. Bit of a myth, I think, like the Saudi Arabia-scale oil supposedly in the Great South Basin, and which dim-witted Invercargill mayors have been talking about for more than half a century.

    By far the most of our plantation forests are in Pinus radiata, a soft wood suitable mainly for pulping into paper or making cheap products such as boxing for foreigners’ exports. It’s use at home isn’t unrelated to the leaky home syndrome that’s costing NZ billions.

    One reason export-log prices are high at present is the Russians, with their vast Siberian forests, are applying export restrictions trying to force China, Korea, etc to take processed or semi-processed wood, thus keeping jobs in Russia.

    There is a cost to the Asian demand for logs rather than processed timber, and that has been the devastation of the processing towns from Taupo north. With few jobs, many have become “gang land”.

    As for the free-market aspect: the rise of the plantation forests is a legacy of State subsidies: in later years (though not recent years), through tax breaks, and in earlier years through the work and science of the Forest Research Institute, which turned the obscure Monterey pine, now I think protected in its native California, into millions of cloned “radiata”.

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  21. Colville (2,242 comments) says:

    as a side issue.

    I am sitting in my beachhouse at a lower nth island east coast beach. Its pisssssssing down.

    Withing 5 kms of me there is probably 5000 acres of Maori owned land that should be in trees. Its erosion prone, steep and at the mo its leased out for next to fuck all to farmers. Reason that its not planted is that the owners, all few 100’s of them can never agree and some just want the chq from the trust for a few bucks each year. Even when the regional council offered to pay half the planting costs they could not get it across the line. Stupid short sighted bullshit.

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  22. Colville (2,242 comments) says:

    Jack5.
    I was told that the chinese are taking logs down to 14 cm small end at the mo such is the demand.
    We have them and they want them. I dont give a flying fuck what they do with them.
    I just hope it gets back up around 90’s prices by the time I market my lot :-)

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  23. labrator (1,892 comments) says:

    Are we sure that when Jones talks about “wood processing” that he’s talking about wood processing?

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  24. JC (942 comments) says:

    Labrator, good question. In fact what he’s really doing on behalf of wood manufacturers and processors is trying to jawbone down the price of logs.

    Its a bit of a joke that he and others are using the receivership of a 100% foreign owned mill to berate log suppliers which are 100% foreign owned. Said log suppliers employ thousands of NZers compared to the several hundred at the sawmill.

    JC

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  25. smttc (725 comments) says:

    Yet more zeno proof that Jones should be in the NZ First party.

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