Home Issues Adverts Events Letters Jobs New Eqt Used Eqt Buy/Sell Tech Showcase

Friday Offcuts – 12 January 2007

growing trees cutting and milling timber forest products
Welcome back. We trust you and your family had a well deserved break over the Xmas period. Like us you're pleased to be back at work and looking forward to the upcoming year - right? So, what presents did Santa bring the forest products industry this year?

For the Australians, the industry was well rewarded. It was the decision that had been put on hold for a number of months. The tax deductibility issue flared up among Coalition MPs earlier in 2006 year when the Government tried to wind back the tax breaks for managed investment schemes. About AU$2 billion had been invested in forestry plantations since 2000. There were concerns that some of the managing firms were skimming off millions of dollars in fees and other charges. Some MPs said the schemes distorted regional economies and they urged the Government to remove the tax-deductible status. This was backed up by a strong campaign through the media and to politicians in the back half of last year. The timber industry went on the offensive.

Just before we broke for Xmas the Federal Government announced that investors in forestry Managed Investment Schemes (MIS) will be entitled to immediate, up-front tax deductibility for all expenditure from 1 July 2007. However, at least 70 per cent of expenditure must be directly related to developing forestry (i.e. those costs associated with planting, tending and harvesting of trees at any time over the life of the investment as well as the annual costs of the land used to develop forestry, whether that be effective rental costs or lease payments for land.). The forestry industry of course welcomed the decision as it left to head off on holiday.

The New Zealanders must have done something amiss during 2006. In a year where the planting of new forests had all but dried up and a net loss of forest area through conversion to other land uses was occurring, the Government released its draft set of options for "Sustainable Land Management and Climate Change" with less than a week to go before the Xmas break.

The industry come Xmas time was still picking itself up off the floor. The document contains some positive measures to encourage new plantings. However, after numerous discussions it appears to have ignored advice from a wide cross section of the forestry industry and the investment community. A suggested deforestation tax and its failure to recognise the value of carbon credits from existing forest owners certainly wasn't the present the industry was expecting. There is real anger and a deep sense of injustice being felt by forest owners and New Zealand forestry companies.

From an outsiders point of view it appears there very definitely were winners and losers on both sides of the Tasman over Xmas. We're looking forward to working with you our readers in 2007 - bringing you the news - first - and highlighting breaking issues that will impact on each of your businesses. Subscribe a friend

This week we have for you:

Government supports plantation forestry investment

The Australian plantation industry has welcomed the conclusion to the Commonwealth Government's review of taxation arrangements for Australian plantation forestry. Representatives from the peak plantation industry bodies, A3P and TIMA, said the announcement by Assistant Treasurer Peter Dutton and Forestry Minister Eric Abetz reaffirms the Government's commitment to maintaining a supportive tax arrangement for plantation investment.

A3P and TIMA welcomed the decision to retain the full deductibility of expenditure on plantation development, which is available to other agricultural investment. The main difference under the new arrangements is that investment in retail forestry will now be deductible under a specific provision in the Tax Act, rather than under the general deduction provisions.

The new arrangement also replaces the 12-month prepayment rule for retail forestry projects, while still enabling plantations to be established in a seasonally appropriate manner that maximises survival and growth. The ATO's product rulings programme will still be used to provide tax certainty for investors, and to scrutinise and regulate the industry, as has been the case for nearly a decade.

A3P CEO Mr Neil Fisher added that the plantation industry is willing to provide feedback to the Government and the Tax Office over the coming months as more precise detail about the new legislation and the administrative procedures is worked out. "A3P will also work constructively with the Government to encourage the development of secondary market trading in plantation interests, which is crucial to attracting more investment in long-rotation sawlog plantations", said Mr Fisher.



NZ forest owners feel deep sense of injustice

The Forest Owners Association says its members are very disappointed by the proposed land use climate change policies announced on 18 December by ministers Jim Anderton and David Parker.

"There is anger, and a deep sense of injustice, among many of those with forests planted both before and after 1990, the starting date for Kyoto accounting," says NZFOA executive director David Rhodes.

"The possibility that owners of forests planted before the Kyoto Protocol even came into existence will be taxed up to $13,000/ha if they change land use is hard to believe. These people have no ability to gain anything from the carbon absorbed by their forests, yet they are still going to be penalised if they harvest".

"Under such a regime, forestland will be instantly devalued relative to other land. Maori landowners in particular will be disadvantaged given pending treaty settlement claims. To remain internationally competitive, the country's primary sector needs to be flexible - to be able to change land use in response to market signals", he says. "The answer to reducing deforestation is not taxing landowners into submission, but to make it more attractive for them to remain in forestry". More>>



Pan Pac sets NZ sawn production record

There has been an ongoing rivalry in 2006 in New Zealand between Pan Pac Forest Products located in Napier and Red Stag in Rotorua as to who is the "top producing" lumber operation in New Zealand. The record was again broken late last year on the 19th December, this time by Pan Pac with a daily production (18hrs) of 1842m3. Several other Pan Pac records were also surpassed on the same day. Kevin Banks, Plant Manager - Lumber Division at Pan Pac says the pre-planning, with the full-on effort and focus by the operators and maintenance team contributed to this milestone. His message to Red Stag, "crank it up a notch boys."



Sweeping changes to Weyerhaeuser "down under"

Just before Xmas Weyerhauser announced a number of senior management changes for its Australian operations. It followed the appointment of a new CEO at the company's US headquarters. Nick Roberts, Weyerhaeuser Australia's Managing Director (also, chairman of Pine Solutions Australia and the inaugural chairman of the Australian Plantation Products and Paper Industry Council) announced he was leaving the company. As part of sweeping top level changes, John Simon, Managing Director of Pine Solutions Australia and Peter Zed, group operations director, Weyerhaeuser Australia also left the company.

It has since been reported that John Simon has been appointed Managing Director of Hudson Building Supplies, based in Sydney and Chris Peterson, who has spent the last two years as general manager of Weyerhaeuser's Uruguay joint ventures has been appointed as the new managing director of Weyerhaeuser Australia. Chris is well known to the local industry having worked as the director of operations for Pine Solutions in Australia from 1999 to 2004.



ArborGen to invest in forestry partnership

US forestry research giant ArborGen - part-owned by Rubicon - is putting millions of dollars into a partnership with Crown research institute Scion. The three-year R&D agreement that is seeking to build expertise in "biomaterials" - expected to be the first stage in a long partnership - is aimed at improving plant fibres and wood properties. The size of ArborGen's investment was not disclosed in an article in the NZ Herald but Tom Richardson, Rotorua-based Scion's CEO, is reported at putting it at under NZ$10 million. More>>



New Zealand log prices December 2006

 
Overall Log Index
In $US terms export log prices have surged $10 a metre on average to reach price levels only ever exceeded once before, in 1993. Shipping rates have steadied rather than declined as was predicted last month. Even after allowing for the continued strength of the $NZ, which is sitting above 69c US, wharf-gate prices in $NZ terms were still up a theoretical $NZ10/tonne. Actual prices averaged only about half this rise, because many contracts are negotiated quarterly. For this reason further price rises are expected in January as first quarter contracts come into force, even though overseas $US prices are expected to be steady in January.

The Agri-Fax Log Price Index, which measures returns from the whole forest, was up almost $1/tonne to $79.30 (delivered mill/wharf basis). The Index has risen 15% this year. Rising sawlog prices, particularly export grades, more than offset lower pruned log prices. The key for 2007, apart from the hardy annuals of exchange rate and shipping costs, will be the extent to which Russia can boost production in the Northern hemisphere spring and summer.

Log price changes:
North Island

  • Domestic: Pruned prices are down by up to $10/tonne. Unpruned sawlog prices are slightly stronger, with industrial grades and chip logs steady. Roundwood prices have weakened in the south.
  • Export: Export log grades have repeated last month's $3/jas metre average increase. Pulp log prices are unchanged.

    South Island:
  • Domestic: Pruned grades are down by up to $10/tonne, while unpruned prices are steady to up $2/tonne. Chip prices are unchanged.
  • Export: Most export grades are again up $2 to $5 per jas metre on average, although pulp log prices are mostly unchanged.
    For more detailed reports contact Agri-Fax at: www.agri-fax.co.nz/enquiries.cfm


    One million tonnes of sawlog to be salvaged from Tumut fire

    Salvage plans are well underway following a fire near Tumut, NSW on 10 December that affected 11 000 hectares of pine plantation. The fire damaged 8500 hectares planted with trees, while the remaining area included roads/easements, environmental exclusion zones and areas already clearfelled in preparation for another crop.

    The damaged area represents about eight per cent of Forests NSW plantation resource in the region. Forests NSW acting director Bob Orman said Forests NSW was going to try and salvage all of the sawlog (up to a million tonnes) and as much of the smaller pulp logs as possible.

    "The aim of the salvage program is to find a market for all of the burnt wood. We will be assigning contractors to carry out the salvage, and every effort is being made to minimise the short and long term impact on the processing industry, haulage and harvesting contractors and Forests NSW ability to supply fibre," he said.

    Mr Orman said a salvage management group had been formed under the leadership of Gavin Matthew from Forests NSW Commercial Services based at Sydney. "Mr Matthew is working with the region to come up with a broad strategy. The first stage was a meeting with the local timber industry held at Tumut on 1 December, which was attended by 50 people".

    "The next stage was to send some trial loads of salvaged logs to the Hyne mill at Tumbarumba and the Weyerhaeuser mill at Tumut. Depending on the outcome of these trials, Forests NSW will negotiate with customers to get as much burnt wood into the local industry as possible," he said. Mr Orman said timing was all important as the variation in the severity of the fire affected the time frame for the salvage program, which is expected to take up to 12 months. Source: NSW Department of Primary Industries


    APP China plans another major expansion

    APP China has unveiled plans to build a massive US$1 billion pulp and paper mill at a greenfield site in Qingzhou city, Guangxi province, China. The location is around 300 km north of the group's 1 million tonne/yr pulp mill on Hainan Island.

    The group's subsidiary, Guangxi Jingui Pulp & Paper, is spearheading the project, which includes a 300,000 tonne/yr bleached chemi-thermomechanical pulp line, a 300,000 tonne/yr coated woodfree paper machine and a 300,000 tonne/yr cartonboard machine that will make beverage packaging.

    Civil engineering work at the site began on June 23. Startup is penciled in for 2008. The group has set its sights on expanding the mill's pulp capacity to 1.8 million tonnes/yr and its paper and board capacity to 3.1 million tonnes/yr at a later date, at a cost of RMB 50 billion.Source: RISI Pulp & Paper



    Colour and temperature treatment for wood unveiled

    Mahild Drying Technologies GmbH, N


    Japan revises regulation for wood packaging

    Japan's Ministry of Agriculture, Forestry, and Fisheries (MAFF) has adopted new measures for quarantine inspections of wood packaging materials. These measures will be implemented in April 2007, following a grace period of about six months. The "Guidelines for regulating wood packaging materials in international trade" were based on the International Plant Protection Convention's (IHHP) International Standards for Phytosanitary Measures (ISPM) No.15.

    Under the new quarantine regulations, the exporting country is responsible for carrying out phytosanitary measures and marking the approved packaging material. Packaging materials should undergo heat treatment (HT, 56


    New Chair in Timber Design at UC

    A new professorship at the University of Canterbury in New Zealand will help increase the use of timber in non-residential construction. Professor Andy Buchanan is the inaugural appointment to the Chair of Timber Design within the Department of Civil Engineering and will oversee a team of interdisciplinary researchers.

    The team will work with industry in investigating the fire safety, earthquake resistance, durability and sustainability of new timber construction systems for buildings up to six stories tall. The new structures will have solid timber beams, columns and walls pre-manufactured from glue laminated timber and laminated veneer lumber (LVL), assembled on site with steel connection devices and pre-stressing cables - similar to pre-cast concrete construction. Other components will be made from radiata pine and Douglas fir timber and plywood.

    The new Chair is jointly-funded by the forestry industry and the Government - through its Forest Industry Development Agenda. Professor Buchanan has had a distinguished career as a structural engineer and academic. He studied civil engineering at the University of Canterbury in the 1960s before moving into a professional career. He traveled overseas to pursue a Masters degree in structural fire engineering at the University of California in the 1970s and a PhD in timber engineering at the University of British Columbia in the 1980s. He is an international expert on the fire safety and earthquake resistance of timber buildings.



    Europe sends message on climate change

    A European Union announcement today of its most ambitious policy ever on climate change sends another strong signal to New Zealand to also act or run the risk of future trade restraints.

    The European Union's executive branch has now proposed the 27-nation bloc reduce greenhouse gas emissions by at least 20 percent by 2020 compared to 1990 levels, with the possibility of going to 30 percent if other developed countries join in.

    The targets are part of new European Commission proposals for a broad EU energy policy that aims to boost production of renewable fuels, cut energy consumption, and reduce the dominance of big utility companies over EU gas and electricity markets.

    The new goal goes beyond an existing target for an eight percent cut in emissions from 1990 levels in the 2008-2012 period adopted by the 15 members of the EU before its 2004 enlargement, which several countries are struggling to meet and is now subject to approval by member states. More>>




    Jobs

    Used Equipment

    Buy and Sell

    ...and one to start the year on...the cure for snoring

    A soldier was granted a leave pass for the weekend to a local town. By the time the soldier pulled into the little town, every hotel room was taken.

    "You've got to have a room somewhere", he pleaded with a proprietor.

    "Well, I do have a double room with one occupant, but he is an Air Force guy" admitted the manager, and he might be glad to split the cost. But to tell you the truth, he snores so loudly that people in adjoining rooms have complained in the past. I'm not sure it'd be worth it to you.

    "No problem." the tired Army guy assured him, "I'll take it."

    The next morning the soldier came down to breakfasts bright-eyed and bushy tailed.

    "How'd you sleep?" asked the manager.

    "Never better", said the soldier.

    The manager was impressed. "No problem with the other guy snoring all night long?"

    "No, I shut him up in no time", explained the soldier.

    "How'd you manage that?" asked the proprietor.

    "Well, he was already in bed, snoring away, when I walked into the room, so I gave him a kiss on the cheek" explained the soldier.

    Then, I whispered in his ear 'Good night beautiful', and he sat up all night watching me."


    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


    This week's extended issue, along with back issues, can be viewed at www.fridayoffcuts.com

    We welcome comments and contributions on Friday Offcuts. For details on advertising for positions within the forest products industry or for products and services, either within the weekly newsletter or on this web page, please contact us.

    Unsubscribe
    Subscribe! It's Free!
    Advertise Here
    Copyright 2004-2010 © Innovatek Ltd. All rights reserved
    		•