The China story is often being told. The pace of economic growth continues to attract investors and traders alike. A GDP growing an average of 9% per year for 25 years has made it now the world's second largest economy. Others are drawn by the huge labour force which has seen the country become the low cost manufacturing base for many of the world's leading companies. Others are interested in China's rapidly expanding consumer market and burgeoning appetite for raw materials.
India is the other emerging market being looked at just now. It shares a number of common characteristics with China but it's not the "next China". A recent article by Aberdeen Asset Management outlines the key differences. Very simply China has seen massive investment, often derived from foreign sources. There has been huge infrastructure expenditure to utilise cheap labour to grow an export-led manufacturing base. In contrast, India is more domestically focussed. The economy is driven by the services sector rather than manufacturing-based growth.
What's this mean to future growth? Growth rates compared to China have been slower (5.7% compared with 9.7% over the last 21 years). Commentators are saying that India has developed a strong foundation for growth that may ultimately prove to be more sustainable and less volatile. In contrast to China, the state has played almost no direct role in India's recent growth.
Another vital aspect of India's growth potential is its large reserves of human capital. India already has 17% of the global working age-population, and it will add a further 83 million workers in just four years. Educational standards are also very high. The country produces about 2.3 million tertiary graduates each year, giving it a ranking of sixth out of 30 nations contrasting sharply with China's ranking of 25th. India has the largest availability of qualified engineers to which it adds 300,000 graduates each year.
For the wood products industry (see story in this week's issue) and as investors, India, although not hogging the headlines of recent times, is certainly worthy of further focus. Subscribe a friend
Australian structural pine grades release deferred
A3P advised this week that a decision has been made to defer the introduction of the new SP grade product until market conditions are more acceptable. Representing Australia's plantation products and paper industry A3P CEO, Mr Neil Fisher said contact with timber merchants, truss and frame fabricators, designers and specifiers over the past few months had indicated the need for some breathing space to ensure a smooth transition.
A3P believes that a more acceptable market climate is necessary for the introduction of SP grades to be achieved without major disruption and the extra burden of the current market downturn. "A3P is committed to the launch of SP graded product and believes the new grading system will benchmark the latest Australian and international structural timber production technology and associated new-generation quality assurance principles", said Mr Fisher.
Mr Fisher added that A3P will use this opportunity to spend additional time to formulate a more effective process for the introduction of SP grades and to finalise the two industry standards providing the documentation framework for SP grades. Work will continue on the inclusion of SP grades information in relevant codes and standards. Further information on SP grades and their implementation is available from www.SPgrades.com.au
Timber treatment technology updates available
In mid September a two-yearly technology update, Timber Preservation 2006, was run for timber treatment companies. Around 190 participated in the FIEA series. The programme provided an update on challenges and opportunities being faced by the industry along with an overview of emerging product and process technologies. Information supplied by US, Australian and New Zealand presenters will be essential for future planning by the Australasian wood preservation industry.
For those unable to make the programme, limited copies of the proceedings are still available by contacting annahr@innovatek.co.nz. For FIEA members, five key presentations; (1) Recent and Planned Changes to Timber Preservation Standards, Mick Hedley, Ensis, (2) The BodyGuard Initiative, Mark Abbot, BodyGuard Wood Products, (3) Product Approvals and Certification-Getting New Products to Market, Jeanette Drsdale, Consultant, (4) The Outlook for Australia's Housing and Rennovation Industries, Simon Tennant, HIA, and (5) Extended Producer Responsibility, Andrew Dunn, NSW Timber Development Association have just been added to the Technology Updates or Members page and can be downloaded from www.fiea.org.nz
Some 74 papers, presentations and reports can be downloaded and used by FIEA members from an array of recent technology events being run for the Australasian forestry and wood products companies. If you have forgotten your password to access the site, please contact annahr@innovatek.co.nz
Plantations win higher prices for woodchips
Australia's emerging plantation based woodchip export industry has negotiated higher prices for its product this year. Woodchip export prices to the major market, Japan, have traditionally been negotiated by Gunns that has around 80 per cent of the export market. The plantation sector has in the past ridden on its coat-tails and used that price as a benchmark.
However, this year for the first time, the hardwood plantation sector did its own negotiating this year. Gunns negotiated benchmark price this year was AU$162 per tonne, the same as the year before. The plantation sector normally gets around 10 per cent more than Gunns for its export chips but this year, the sector got a $2 rise to AU$181 per tonne. In addition, plantation operators also enjoyed a slight upturn in volumes at a time when Gunns contracts have fallen by 20 per cent.
The exchange rate and international competition is currently working against the native wood chip industry. Although demand for woodchips has been growing chips are not in short supply as burgeoning plantations in Chile and South Africa are coming on-stream. The decline of the native forest chip market is due to a mixture of political and economic factors. The campaigns of environmentalists against old growth logging have made both Japanese paper mills and their customers wary about buying products from this source.
CRBF cleared to acquire CHH assets
The NZ Commercew Commission has cleared CRBF Limited to acquire the shares and/or assets of a number of Carter Holt Harvey Limited (CHH)subsidiaries that hold forestry assets. The clearance is subject to a divestment undertaking.
Commission Chair Paula Rebstock said that the Commission was satisfied that the proposed acquisition would not have, or would not be likely to have, the effect of substantially lessening competition in any of the relevant markets.
The forestry assets include freehold property, non-freehold land interests, standing timber on that land, plant and equipment, business contracts, licences and consents. The forests and other assets are located in Northland, Auckland, Central North Island and Nelson.
CRBF Limited is a newly created timber investment fund managed by the US timber investment organisation, Global Forest Partners(GFP). GFP currently advises four investment funds in New Zealand; these investment funds own forestry assets in the central North Island, a 50% share of a joint venture with CHH in respect of the Mangakahia Forest in Northland, and a 49% share of a joint venture with Weyerhaeuser Company in respect of 63,000 hectares of forest in the Nelson region. More >>
FSC attacked from left
On 1 September, an organization claiming to represent the interests of a number of locally based non-governmental organizations called on the Forest Stewardship Council to withdraw the FSC certification awarded to a number of companies in eight different countries, including Brazil, Colombia, Chile, Ecuador, Ireland, South Africa, Spain, and Uruguay. Although FSC has been up front about the criterion by which it provides certification to large-scale exotic plantation-based forestry - citing research purporting to demonstrate that such projects relieve pressure on "natural forests" - the statement from the World Rainforest Movement argues that "plantations are not forests" and produce "serious negative social and environmental impacts."
The broadside attributes "a long history of social and environmental crimes" to one certificatee and states that another's "operations are probably economically viable, but no way can they be described as being environmentally appropriate or socially beneficial." A South American activist asserts, "by certifying large-scale tree monocultures such as these, the FSC is weakening local struggles against them." More>> Source: FRA Bulletin - September 28,2006
Composite wood producers concerns in California
It's been reported that in the coming months, California regulators could approve strict limits for formaldehyde emissions from composite wood products. The standards, if adopted, would have a profound impact on panel manufacturers, importers, and retailers that do business within the state's borders and beyond.
The regulations have been proposed by the state's Air Resources Board (CARB), and released most recently in draft form in June. Implementation is been proposed in two phases. By July 2008, producers of particleboard, medium-density fibreboard (MDF), and hardwood plywood must reduce emissions to levels that many U.S. manufacturers are already achieving.
A more strict set of limits would go into effect in July 2010, when producers of particleboard and hardwood plywood would be required to reduce emissions to 0.08 parts per million and 0.03 ppm, respectively. Manufacturers of MDF would have another two years to meet 0.08 ppm levels. The regulation is primarily targeted at urea-formaldehyde (UF) resins, the most commonly used binder in composite wood products.
Manufacturers are most concerned about the second-tier thresholds. Current technology can be used to meet Phase I but the Phase II reductions will force technology and have the potential to put quite a few companies out of business. There is concern that the regulation will increase prices of composite wood products and will be difficult to verify emissions levels of imported products.
It is reported that at least one manufacturer is not waiting to see the outcome of the California regulations to develop cost-competitive alternatives to UF-based resins. Columbia Forest Products is almost complete with conversion of its seven North American hardwood plywood plants to a manufacturing process that employs a patented soy-based adhesive. Source: McGraw Hill Construction
New capacity in China threatens trade swings
Chinese suppliers like Shandong Huatai are ardently courting North American newsprint buyers, and contacts say that in the second half of 2006 about half a dozen U.S. publishers will test imported Chinese newsprint. China's export push in North America is being driven by a surge in new capacity that has swamped its domestic market. About 700,000 tonnes/year of capacity came online in 2005-2006 and another 80,000 tonnes/year is scheduled for late 2006 and early 2007.
As a result newsprint production in China will climb from 2.96 million tonnes/year in 2005 to 3.53 million tonnes/year this year and 4.21 million tonnes/year in 2007 on its way to 4.96 million by 2010. But newsprint demand growth in China is slowing, and with additional capacity far exceeding demand, overseas shipments from China are expected to soar as producers seek to export their way out of a worsening oversupply position.Source: RISI Pulp & Paper
Reviewing Old Growth forests in Victoria
The Victorian Timber Industry is deeply concerned that the political campaign to "save" Victoria's old growth forests is based on misrepresentations and statements that are untrue. The current policy frameworks for the protection of old growth forests and the establishment of a sustainable native forest timber industry are based on a wealth and depth of scientific knowledge. This is being re-introduced into the debate on the future of Victoria's old growth forests with the release by VAFI this week of a "Review of Old Growth Forests". The document outlines arguments for maintaining access to the very small proportion of old growth that is available for sustainable harvesting and the social and economic benefits of maintaining the timber industry in county Victoria. A copy of the report is attached here as a PDF for your information.
European furniture firms prepare for anti-dumping case
European furniture manufacturing companies in Germany and Italy are preparing to file an anti-dumping complaint to the European Commission. They are alleging that China has been selling upholstered sofas, kitchen and office chairs and other types of seats at below domestic prices. This included rattan, metal, glass furniture, office and solid furniture. If filed, this would be the largest European antidumping case against China.
China became the world's largest furniture exporter in 2004 and about 40% of the exports have come from Guangdong. Due to the possible impact of the case on this province, Guangdong's General Chamber of Commerce and Guangzhou City's Furniture Association jointly held a "Seminar on Responding to European Furniture Anti- Dumping Investigation" recently to raise awareness among Guangdong furniture exporting companies.Source: ITTO TTM Report 1-15 September 2006
New Director for Forestry Tasmania
Pulp Mill Task Force head Bob Gordon has been appointed as the new managing director of Forestry Tasmania. Mr Gordon started work at Forestry Tasmania in 1978. He has a Bachelor of Forest Science and managed Forestry Tasmania's marketing before being seconded from Forestry Tasmania to the Pulp Mill Task Force at the end of November. As anticipated, his appointment is already causing controversy within some quarters. Mr Gordon said the pulp mill debate in Tasmania had "warmed him up" to take on the one of the state's toughest jobs - defending the forest industry.
Finnish industry rejects Greenpeace accusations
Finnish forest industry companies rejected firmly Greenpeace allegations that illegally logged timber from Keralia, Russia was being imported into Finland. The report "Partners in Crime: A Greenpeace Investigation into Finland's Illegal Timber Trade with Russia" claimed that illegally harvested timber was transported across the Finnish border to be processed by companies such as UPM and Stora Enso.
UPM responded that it had a wood tracing system in place for Russian wood since 1996 which was continuously developed based on stakeholder feedback. The system was based on a statement of origin, GIS mapping system, database and supplier audits that included logging site checks.
Meanwhile, the Finnish Forest Industries Federation (FFIF) said the origins of timber imported by Finnish forest industry companies were verified according to certified quality and environment systems such as ISO 9001, ISO 14001 and EMAS. FFIF added that WWF acknowledged that wood tracking systems of Finnish forest industry companies were one of the most efficient tools to support the legal sourcing of wood and that they had together decided to establish a working group to further develop these systems.Source: ITTO TTM Report 16-30 September 2006
China establishing wood processing zone in Russia
China will establish its first wood processing zone in Russia, following an agreement between 18 wood processing firms from Wenzhou, China and the Russian government. The zone of 1.5 million m2 will involve an investment of about US$80 million. The firms will mainly produce sawn-wood, finger jointed timber and medium and high density fibreboard. The project is one of China's six foreign industrial zones being supported by the government. The Chinese Ministries of Commerce and Finance have provided US$25 million) as counterpart contribution to finance the 18 firms.Source: ITTO TTM Report 1-15 September 2006
US$670 billion investment needed for Indian housing
According to a study done by the Associated Chambers of Commerce and Industry in India, the demand for houses in India will reach 80 million by the year 2015 and require a total investment of about US$670 billion. The demand will grow to 90 million by 2020, requiring a minimum investment of US$890 billion. According to the study, the housing sector in India currently faces a shortage of 20 million units. The ongoing growth in housing provides huge potential for New Zealand Pine products in India, especially in the furniture and fit-out markets. Source: NZT&E, 31 August 2006, marketnewzealand.com
....and one to end the week on...who want's to be a millionaire?
Mick appeared on the Irish version of "Who Wants to Bea Millionaire" and was nearly at the end of the quiz with winnings of $500,000.
"You've done very well so far," said the show's presenter, "But to get the $1million, you've only got one lifeline left - Phone a friend. Everything is riding on this question...will you have a go?"
"Sure," said Mick. "I'll have a go!" "OK. The question is, 'Which of the following birds does NOT build its own nest? a) Robin, (b) Sparrow, (c) Cuckoo or (d) Thrush."
"I haven't got a clue," said Mick, "so I'll use my last lifeline and phone m' friend Paddy back home in Ballygoon."
Mick called up his mate, told him the circumstances and repeated the question to him. "Ye gods, Mick!" cried Paddy. "Dat's simple.... it's a cuckoo." "Are you sure, Paddy?" asked Mick.
"I'm sure al'right." Mick hung up the phone and told the TV presenter, "I'll go with da Cuckoo as my answer." "Is that your final answer? Lock it in?" asked the host.
"Dat it is, Sir. Lock it in" There was a long, long pause, then the presenter screamed, "Cuckoo is the correct answer! Mick, you've won $1 million!"
The next night, Mick invited Paddy to their local pub to buy him a drink. "Tell me, Paddy? How in God's name did you know it was the Cuckoo that doesn't build its nest? I mean, you know nothing about birds."
"Ah bejaysus!" laughed Paddy. "Everybody knows a bleed'n Cuckoo lives in a clock!"
And on that note, have a great weekend. Cheers.
Brent Apthorp
Innovatek
PO Box 904
Level Two, 2 Dowling Street
Dunedin, New Zealand
Ph: +64 3 470 1902
Fax: +64 3 470 1904
Web page: www.innovatek.co.nz
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