Friday Offcuts – 12 February 2010

This week we have for you:

• Wood supply chain logistics & operations innovations
• Forestry's bright future subject of Finance Conference
• Transport infrastructure to cater for future growth
• Calls for end to forestry tax breaks
• Expressions of Interest - WOOD ENERGY 2010
• The rise of E-Books: what impact on paper?
• Twice the benefit from forest deal
• Weyerhaeuser recognised as forestry practices leader
• Australian tissue producers wanting to reinstate penalties
• Timber people on the move
• Oldest living tree found in Sweden?
• Weyerhaeuser & Mitsubishi jointly exploring biomass
• Jobs
• Used Eqt
• Buy and Sell
• ...and one to end the week on...talking in heaven

Wood supply chain logistics & operations innovations

As physically remote countries, the quality of New Zealand and Australia's international supply chains have a significant impact on the ability of companies to compete in global markets. The structure of the supply chain has been a major issue for the forest products sector in maintaining its international competitiveness. Volatile wood fibre costs, increasing energy prices and shifting product demand have all created significant pressures on forestry and wood products companies to reduce their costs and take advantage of demand opportunities.

In Australasia the supply chain tends to be horizontal rather than vertically stratified between each of the major players; forest owners, wood processors, manufacturers and distributors. As a result, there is a high degree of separation between each of these operations. Rather than maximising the overall net return to each company, companies look to access margins at each stage of the supply chain. The result is an overall process that's maximising returns and a fragmented industry with few end-to end supply chain participants.

Wood Supply Chain Optimisation 2010 is a technology series being set up for the Australasian forest products sector. It runs in Melbourne on 19-20 May 2010 and again in Rotorua for New Zealand forest products companies on 24-25 May 2010. It builds on two very well supported programmes; Value Chain Optimisation that ran in Rotorua and Melbourne in 2007 and the Forest Industry Strategic Summit which was run in New Zealand in 2008 which focused on improving Wood Supply Chain Competitiveness.

Wood Supply Chain Optimisation 2010 is going to detail successful strategies that have been adopted to improve planning, logistics and operations through the wood supply chain.

The Wood Supply Chain Optimisation 2010 series will include;

- Analysis of successful international models for supply chain optimisation,
- Optimising value recovery through improved harvesting systems,
- Remote sensing and real-time tracking of logs and wood products,
- Materials handling, packaging, freight forwarding and distribution developments,
- Key issues facing the freight, shipping and transport industries, and
- Radio frequency and electronic identification technologies.

Further details on the programme can now be found and downloaded from www.woodsupplychain.com.

Forestry's bright future subject of Finance Conference

Financing future forestry growth is the focus for a new forestry conference which is drawing a wide audience from both the finance sector and many new participants in the industry. "Many people in both the finance industry and the investment sector are waking up to the real opportunities which are happening now in New Zealand forestry", said conference organiser John Stulen of the Forest Industry Engineering Association.

"Annual forestry exports were up over 6 percent during 2009 compared to the previous year when the rest of the NZ economy was in decline. In fact the forestry sector had excellent export shipments throughout 2009 and with growth prospects through 2010 looking even better", he added. Many of the countries that are key wood export markets are now rebounding from recession with resulting increases in demand.

"Key finance companies, Maori trusts and investment managers are three key groups that have recognised the importance of forestry now to the export economy of New Zealand" said Mr Stulen. "Both groups have been signing up for this conference in droves - which will make for a wide cross-section of people at this event and a great networking opportunity for everyone involved." Two of the key topics on the agenda are global developments in bioenergy markets, particularly the potential in Asia-Pacific, as well as commercial realities for carbon credits for forest owners.

The conference is led by Forest Industry Engineering Association working with the New Zealand Forest Owners Association, Wood Processors Association, Forest Industry Contractors Association, Federation of Maori Authorities, Resource Management Law Association, the Southern Wood Council and the Institute of Finance Professionals. Event sponsors include bnz partners and RISI - a major USA-based international forestry adviser.

"Important structural changes in forestry ownership through treaty settlements have added significant Maori ownership of the timberlands. With Maori communities now making up a big percentage of the workforce in traditional forestry their new land ownership role bodes well for the industry's future" said Stulen. A similar programme has been set up with forestry companies, industry associations and financial institutions in Australia which runs on 1 and 2 March 2010.

Further information on both events can be found on www.forestryfinanceevents.com

Transport infrastructure to cater for future growth

The Victorian Government has recognised the need to upgrade roads and transport infrastructure to cater for a growing forestry and timber industry, including the introduction of high productivity freight vehicles. According to Government details, an estimated additional 138,000 semi-trailers (equivalent to 93,000 B-doubles) are expected to join the annual current estimated 90,000 truck movements into the Port of Portland alone.

Improvements to the freight system were included in the Victorian Timber Industry Strategy (VTIS) announced late in December. According to the Government, Freight Futures is the long-term strategy for an efficient and sustainable freight network for Victoria. Freight Futures recognises that plantation timber harvests in coming years will pose freight challenges to some Victorian regions, particularly in south-west Victoria, northern Victoria and Gippsland.

Through the Victorian Transport Plan and Freight Futures, the Victorian Government is supporting the development of Freight Action Plans for regions facing specific freight challenges. The plans maximise the ability of key regional areas to respond to commodity growth.

The Victorian and South Australian Governments and respective Local Governments, in partnership with industry, have developed the first of these plans - the Green Triangle Region Freight Action Plan. This plan addresses the anticipated increased infrastructure use by harvest and haulage vehicles in the State's south-west.

The Green Triangle Region Freight Action Plan investigates options for the rail sector to assist in the movement of woodchips and pulp products. The plan recognises much of the freight task will be managed by trucks.

Calls for end to forestry tax breaks

Hardwood forestry managed investment schemes received tax-based subsidies of between AU$900 million and AU$1.2 billion in the five years to 2008, according to Australian National University economist Judith Ajani who spoke at the National Conference of the Australian Agricultural and Resource Economics Society in Adelaide this week.

Dr Ajani said that, as a result, wood was now competing unfairly with food for agricultural land, water and other resources. She said government assistance to forestry and logging was equivalent to 42 per cent of the industry's unassisted value added, with tax-based subsidies through managed investment schemes making up 77 per cent of that assistance.

"Government assistance to grain, beef and sheep, which includes drought-related payments, is around 7 per cent of their unassisted value added," she said. She warned that if managed investment schemes combined with forestry for carbon credits under an emissions trading scheme, vast areas of land would move from agriculture to forestry.

She said many investors in managed investment schemes would recoup just 25 per cent of their money. Dr Ajani said the return from Great Southern's hardwood plantation MIS was an estimated 1.9 per cent per annum. The immediacy of the upfront tax deduction seems to blind the more considered judgment about wise investment.

She was critical of the Australian Tax Office for "providing a dispensation" to plantation managed investment schemes. "To receive that dispensation, the ATO must consider these investments are commercially viable. Without that deduction capability, most of these (schemes) would collapse."
Dr Ajani said there was mounting evidence the schemes were not commercially viable and she called for tax-based assistance to forestry schemes to end, and for a Treasury review of the tax office treatment of forestry schemes.

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Expressions of Interest - WOOD ENERGY 2010

WOOD ENERGY 2010 - Wood Fuels for Efficient Heating - is a new technology programme that builds on the two-yearly and very popular Residues to Revenues programmes that have been run for the forestry sector in Australasia every two years. Because of a significant increase in interest and recent conversions by schools, hospitals and other commercial buildings and manufacturing operations to wood pellet and wood chip boilers, a new practical programme, Wood Energy 2010 has been set up in New Zealand.

Wood Energy 2010 will look more closely at the growing wood energy market, commercial opportunities, the economics and options for industries outside the forestry sector to use wood to more efficiently meet their energy requirements. Initially it will be set up for New Zealand in 2010 with the event being promoted into Australia.

For this inaugural event and for the first time in New Zealand, practical guidelines for both the producers of wood residues for energy use outside the forestry sector and the end users of woody biomass will be drawn together as part of this two-day programme. Wood Energy 2010 will include workshops, managed exhibitions, demonstrations and field visits. It is aimed at heat and power producers, energy consultants, local councils, major industrial users of energy, forest owners and managers and wood and wood waste suppliers.

The New Zealand programme is being designed with industry at the moment. For any companies/organisations that would like to be involved in presenting, exhibiting or participating in this event planned for Rotorua on 21-22 July, please contact brent.apthorp@fiea.org.nz before FRIDAY 19 February.

The rise of E-Books: what impact on paper?

MP3s have done it to CDs and the Internet is doing it to newsprint, so will e-books wipe printed books and magazines out of the markets? Amazon has released their Christmas sales statistics: on Christmas day customers purchased more e-reader books than printed books for the first time ever in the USA. E-book sales have been supported by the strong sales of e-readers.

Forrester Research estimates that sales of e-readers will increase to approximately 6 million units in 2010 (up 100%) in the USA alone, and their 2009 estimates were just updated from 2 million units to 3 million units -- impressive. And for the first time ever, more book-related applications were launched for the iPhone than game applications in September 2009.

We can find an analogy in the music business. Vinyl records moving to new platforms of C-cassettes to the CD to MP3s and other digital formats of music. Is it possible that a similar kind of shift from one platform to another can also happen for paper? The Internet has done it for newsprint already. Newsprint demand fell by 16% in the first five years since its peak year of 1999 in North America. In 10 years demand has fallen 57%.

Uncoated woodfree demand in North America has fallen by 33% since 1999. In Western Europe the market has matured during the last decade, and we estimate that newsprint demand in 2010 will be 24% below the peak year of 2000.

If the analogy of the shifting platform materializes in the coming years, demand should decrease by 50-75% in the first 10 years after the peak year and by 75-98% in 15 years. That would mean that demand for uncoated woodfree in Western Europe would be only 2.3-4.7 million tonnes by 2014 (from a current estimate of 7.1 million tonnes) and only 187,000 tonnes to 2.3 million tonnes by 2019. Coated mechanical paper demand should drop to 144,000 tonnes to 1.8 million tonnes by 2022. Source: RISI

Twice the benefit from forest deal

A pioneering deal in New Zealand involving a farm-to-forestry conversion and the subsequent sale of carbon credits from the forests is being heralded as a major win for the Waikato economy and the environment. Environment Waikato Chairman Peter Buckley said the agreement clearly demonstrated the potential economic benefits available to farmers, foresters and those needing carbon credits under emissions trading legislation while also protecting Lake Taupo's water quality.

Under the deal, the Lake Taupo Protection Trust - funded by the Government, EW and Taupo District Council - has reached an agreement whereby it will compensate two Ngati Tuwharetoa entities for changing their farming operations. This change will achieve a 22,000 kilograms a year reduction in the amount of nitrogen entering the lake. Nitrogen leaching to the lake decreases water clarity and increases algal growth.

As part of the change, one of the Tuwharetoa entities, Puketapu 3A Incorporation, will convert 500 hectares of its farmland to forestry and sell the carbon credits it gains to electricity generator Mighty River Power under the Emissions Trading Scheme. The involvement of both nitrogen reductions and carbon trading is the first of its kind in New Zealand.

Weyerhaeuser recognised as forestry practices leader

Weyerhaeuser Company, one of the world's largest forest products companies, was among 35 international companies recognized by the investor-backed Forest Footprint Disclosure for leadership in managing their operations and supply chains to minimize the effects on forests worldwide. The report also named Weyerhaeuser best performer in the Industrial and Auto sector. Weyerhaeuser was the only U.S.-based company named a best performer.

The FFD is a new UK government-supported initiative created to help investors identify how an organization seeks to minimize deforestation through its activities and supply chains. Modelled after the successful Carbon Disclosure Project, it aims to create transparency for investors concerned about global deforestation.

The study asked participating companies to disclose how their operations and supply chains are affecting forests worldwide and what companies are doing to manage those effects responsibly. Complete information and results of the inaugural report is available at www.forestdisclosure.com

Australian tissue producers wanting to reinstate penalties

SCA Hygiene Australasia Pty. Ltd. and Kimberly-Clark Australia are believed to be preparing a federal court challenge to an Australian legal decision last month to drop penalty charges on allegedly dumped tissue imports, The Age reported on Tuesday.

Attorney-General Robert McClelland decided to drop the charges on imports by companies associated with Indonesia's Sinar Mas Group, parent of Asia Pulp & Paper Co. Now tissue product producers want Australians to help prevent what the manufacturers argue are job losses in the potential thousands.

Paul Thompson, president of the Swedish-owned SCA, said Australians spent AU$38.67 a year each on toilet paper. Reinstating penalties on dumped imports would cost only another AU$3 per capita, said Thompson, reported The Age. Thompson said that dropping the duties opened the door for imports and ultimately threatened the profitability of his company and others. AAP reported on 14 January that Kimberly-Clark Australia also was considering an appeal of Attorney-General McClelland's decision. Source: www.forestweb.com

Timber people on the move

1. John Scott, HewSaw representative in New Zealand and Australia for 12 years is retiring from the wood products business. From a small single pass machine in 1998, the HewSaw business has grown during John's time into several single pass machines and complete saw lines including two trio lines. John will be working on a couple of final projects during the year and in the mean time, for enquiries on HewSaw equipment, contact can be made directly with Kenneth Westermark in Finland or through the company's sales office in Melbourne through
mauri.nikkinen@veisto.com.

2. Experienced timber products technician Andy McNaught has been appointed technical manger of the Engineered Wood Products Association of Australasia. The new appointment means a return to the EWPAA (formerly the Plywood Association of Australasia) for Mr McNaught; he was CEO of PAA from 2004-2006, joining the organisation after working with Weyerhaeuser in America.

Mr McNaught will be overseeing the integration of laboratory testing and certification services following the merger last year of the Australian Wood Panels Association (AWPA) with EWPAA. The merger creates a new body to promote the use of wood panels in Australasia and represents plywood, LVL, particleboard and MDF member producers in Australia, New Zealand, Papua New Guinea and Fiji. The AWPA test centre laboratories are located at West Burleigh on the Gold Coast and Mr McNaught will supervise these operations and those of EWPAA in Brisbane.

3. Dr Paul Biggs has informed the Board of the Forest Products Commission in Western Australia that he will be relinquishing the position of General Manager of the FPC. Dr Biggs has been the General Manager of the Forest Products Commission since it was created as a separate trading enterprise in November 2000.

Minister for Forestry Terry Redman said he would like to extend his thanks to Dr Biggs for his service and commitment to the West Australian forestry industries, particularly over the past ten years. Pauls contributions to the forestry industries are acknowledged, appreciated and respected across Australia, Mr Redman said. Dr Biggs has agreed to remain as General Manager pending the appointment of an Acting GM expected in the near future.

Oldest living tree found in Sweden?

We ran a story in last week's issue of the "oldest living tree" that was found in Sweden. An Australian reader came back with;

"Except that by their own rules this one is older, by about 1000 years." Check out this huon pine story and link supplied by our reader.

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Weyerhaeuser & Mitsubishi jointly exploring biomass

Mitsubishi Corporation and Weyerhaeuser Company have announced that the two companies signed a Strategic Memorandum of Understanding (MOU) to explore the possibilities of collaborating in the biomass-to-energy business.

The companies are specifically interested in assessing the feasibility of jointly investing in and operating a commercial-scale bio-pellet production facility in the United States by 2011. Depending on the success of the joint feasibility study, more facilities could follow in addition to the initial production facility, in aspiration to become a world class bio-pellet producer. The bio-pellets will be produced using wood based biomass, targeted from U.S.-sourced sustainably managed forest resources or by-products and sold to utilities and industrial users for energy production.

The agreement signals the belief of both companies that there are existing and emerging opportunities in an expanding bio-energy market. The MOU brings together two industry leaders and leverages the strengths of both companies: Weyerhaeuser's capacity to produce renewable biomass at scale from its sustainably managed forests and Mitsubishi Corporation's worldwide network and experience in the energy sector and bio-pellet manufacturing business. Mitsubishi Corporation currently operates two bio-pellet facilities in Japan and is also actively involved in the management of Vis Nova Trading GmbH, a major producer of bio-pellets in Germany.

Jobs

Used Equipment

Buy and Sell

...and one to end the week on...talking in heaven

Two Ladies Talking in Heaven

1st woman: Hi! Wanda.

2nd woman: Hi! Sylvia. How'd you die?

1st woman: I froze to death.

2nd woman: How horrible!

1st woman: It wasn't so bad. After I quit shaking from the cold, I began to get warm & sleepy, and finally died a peaceful death. What about you?

2nd woman: I died of a massive heart attack. I suspected that my husband was cheating, so I came home early to catch him in the act. But instead, I found him all by himself in the den watching TV.

1st woman: So, what happened?

2nd woman: I was so sure there was another woman there somewhere that I started running all over the house looking. I ran up into the attic and searched, and down into the basement. Then I went through every closet and checked under all the beds. I kept this up until I had looked everywhere, and finally I became so exhausted that I just keeled over with a heart attack and died.



1st woman: Too bad you didn't look in the freezer---we'd both still be alive.



One more for you. A burglar broke into a house one night. He shined his flashlight around, looking for valuables when a voice in the dark said, 'Jesus knows you're here.'

He nearly jumped out of his skin, clicked his flashlight off, and froze.

When he heard nothing more after a bit, he shook his head and continued.

Just as he pulled the stereo out so he could disconnect the wires, clear as a bell he heard

'Jesus is watching you.'

Freaked out, he shined his light around frantically, looking for the source of the voice.

Finally, in the corner of the room, his flashlight beam came to rest on a parrot.

'Did you say that?' he hissed at the parrot.

'Yep', the parrot confessed, then squawked, 'I'm just trying to warn you that he is watching you.'

The burglar relaxed. 'Warn me, huh? Who in the world are you?'

'Moses,' replied the bird.

'Moses?' the burglar laughed. 'What kind of people would name a bird Moses?'

'The kind of people that would name a Rottweiler Jesus.'

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