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Friday Offcuts – 3 October 2008

We're after your input next week. All of our readers will have the opportunity of going into a draw to win a new 4GB Apple I-Pod Nano. Next Wednesday we'll be sending out a short e-mail to all Offcuts subscribers. To enable us to meet your needs every week, we'll be asking you to update your contact details. As well, we have drawn together a new list of categories that you can tick which best describes what you're after from the weekly e- newsletter. The task shouldn't take any longer than a minute - I kid you not.

What it will enable us to do is to better segment and target the content we're providing in the weekly e-newsletter - to ensure that you're getting from Offcuts what you're really after every Friday morning. Friday Offcuts has been out now in the Australasian Forest Products industry in its current web-based format for over three years. With ongoing input from our readers, it's now grown into its current format.

It was a leader back then. It still is. It's the most widely read and distributed e-newsletter in the Australasian forest products sector. It's still free. What's more - the momentum hasn't stopped with the number of new subscribers signing up every week still as strong as when we first started out. For your time and for your support over the past three years - we'll be putting all of you who respond - into the draw for the I-pod Nano prize. We'll let you know who the lucky winner is shortly. Thanks for your help, your time and your ongoing support.

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NZ forestry production and trade figures released

As expected, the March 2008 year was challenging for the New Zealand forest industry. An international decline in demand for timber and panel products coupled with record freight rates were the main drivers behind this. The recent housing contraction in the United States directly impacted on demand for New Zealand sawn timber.

Total sawn timber production for the year ended March 2008 was four million cubic metres, down 6.2 percent on 2007. New Zealand residential consents fell 4.9 percent over the period and domestic consumption of sawn timber decreased six percent to 538 cubic metres per capita.

Total paper production for the year ended March 2008 was 871 000 tonnes, down 0.1 percent on 2007. From 2000 to 2008 total paper production increased five percent. During this period other paper and paperboard production increased 28 percent, more than offsetting the 21 percent decrease in newsprint production. Total pulp production rose one percent to 1.55 million air dry tonnes over the March 2008 year.

The volume of production of all panel products fell during the year ended March 2008. Veneer had the most significant movement, falling 26 percent to 513 000 cubic metres over this period. In contrast, plywood production fell one percent to 175 000 cubic metres. There were significant plywood and fibreboard imports over the March 2008 year. This increase in imports may be due to the strong New Zealand dollar and a reported surplus of cheap panel products currently on the international market, potentially making it cheaper to import panel products rather than sourcing them domestically.

For full details on the forest products statistics, check out www.maf.govt.nz


New Zealand Log Prices - September 2008

Following last month's strong price increases in export logs, further increases have occurred this month. While overseas prices remained reasonably steady, shipping rates declined another US$5 per metre, and
currency movements were was in the exporter's favour by 4%. Overall the combined effect was to boost the Agrifax Log Indicator price by $9 per metre. Wharf-gate prices being offered by NZ exporters rose $5 to $8
per metre in all areas, except Otago/Southland, where the rise was only $2 per metre. This difference may be a function of timing of boats and contracts.

Shipping rates have continued to fall, mainly due to the lower iron ore demand by China. The use of the more cost competitive containers, especially on the route to India, is also having some impact on the spot prices. At US$65 per metre for the Korean journey, prices are now back $11 from their peak last November, but are still US$10 above their three year rolling average.

The demand in Korea remains sluggish because of the slowing economy, but they need to continue paying the market price to obtain logs. Chinese prices have held for the next quarter, due to solid demand. In India there is an adequate inventory for the current flat demand, which is really the same story for the Japanese industrial market. It now seems likely the current turmoil on Wall Street is going to impact on world log markets with the uncertainty now likely to slow the previously predicted price rise over the next two quarters.

The NZX Agrifax Log Price Index, which measures returns from the whole forest, improved by $2.50 to $75.60 a tonne, due to the improved export returns and the lift in pulp log prices. The index is now above the 10 year average by $6 per tonne, and should go higher next month

Some forestry consultants are now up-skilling on measuring the carbon inventories of forests planted after 1990. Indications from some areas are that the trees will change from production forestry to carbon forestry, as the carbon credit returns will outweigh current logged returns. This will have the effect of reducing log supply and improving returns for those still in logging mode.

Log price changes:
North Island:
  • Domestic: Prices remain steady in the north and are up by $2 per tonne in the southern NI. Pulp logs have increased in the central NI by $2 per tonne.
  • Export: Most export log grades are up $5 to $8 per metre on average, with chip logs up $2 per metre.

    South Island:
  • Domestic: Most domestic grades are unchanged on average, although round-wood is up $5 per tonne in Otago.
  • Export: Export grades are up $5 to $8 per metre on average in Canterbury/Nelson, but only up $2 per metre in Otago/Southland.

    For more detailed reports contact Agri-Fax at: www.agri-fax.co.nz/enquiries.cfm


    Australian carbon credit price doubles

    The price of credits in the Australian carbon market has more than doubled over the past 12 months. As Australia heads toward the introduction of an emissions trading scheme, the price now is close to $10 a tonne of carbon dioxide, compared with $3-4 a tonne a year ago. And it's only going to get tougher, as big business is required to meet regulatory targets through the introduction of the Rudd Government's Carbon Pollution Reduction Scheme, warns the director of the up-coming Carbon Market Expo Australasia, Michael Whitehead. "It's a sellers' market at the moment in Australia," he said.

    "There are not that many carbon credits yet on offer - and the large energy users and companies with significant greenhouse emissions are now seeking out the lowest-cost options to meet their voluntary targets and the regulatory targets that will be introduced as part of the CPRS. The large energy users and other businesses required to participate in the Federal Government's forthcoming emissions trading schem e are positioning now to find the lowest cost sources of carbon credits. Whitehead warns that businesses that don't start forming networks with suppliers of carbon credits now will end up struggling when the CPRS comes into effect. Source: Carbon News 2008


    Australian Timber Standard released for public review

    Standards Australia has recently released the draft revision of AS/NZS 4063 for public review. The revised standard, entitled "Characterisation of structural timber" is presented in two parts; Part 1: Test methods and Part 2: Determination of characteristic values. The A3P Solid Wood Technical Committee is currently considering the draft which is available for download free from the SAI Global web-site at www.saiglobal.com. The closing date for comment is 29 October 2008. Source: A3P Canopy


    Emissions rising faster this decade than last

    For all you sceptics out there, the latest figures on the global carbon budget to be released in Washington and Paris last week indicate a four-fold increase in growth rate of human-generated carbon dioxide emissions since 2000.

    "This is a concerning trend in light of global efforts to curb emissions," says Global Carbon Project (GCP) Executive-Director, Dr Pep Canadell, a carbon specialist based at CSIRO in Canberra. Releasing the 2007 data, Dr Canadell said emissions from the combustion of fossil fuel and land use change almost reached the mark of 10 billion tonnes of carbon in 2007.

    Using research findings published last year in peer-reviewed journals such as Proceedings of the National Academy of Sciences, Nature and Science, Dr Canadell said atmospheric carbon dioxide growth has been outstripping the growth of natural carbon dioxide sinks such as forests and oceans.

    The new results were released simultaneously in Washington by Dr Canadell and in Paris by Dr Michael Raupach, GCP co-Chair and a CSIRO scientist. Dr Raupach said Australia's position remains unique as a developed country with rapidly growing emissions.

    "Since 2000, Australian fossil-fuel emissions have grown by two per cent per year. For Australia to achieve a 2020 fossil-fuel emissions target 10 per cent lower than 2000 levels, the target referred to by Professor Garnaut this month, we would require a reduction in emissions from where they are now by 1.5 per cent per year. Every year of continuing growth makes the future reduction requirement even steeper."


    Kiwi company claims world first for charcoal

    A world-first invention was unveiled in Blenheim in New Zealand this week with a multi-billion dollar earning potential and the ability to impact on carbon capture on a global scale. Carbonscape has developed and patented a process for manufacturing charcoal using microwave energy - a vastly more energy efficient process than what is currently used.

    The company has begun batch-scale production but hopes to raise capital to scale up to a fully-integrated continuous production. Carbonscape says that its technology can address existing biowaste streams and that it has been invited to its their technology on pine waste on site in commercial forests.

    The company is also fielding international approaches, including a United States interest looking at using corn waste as a raw material for charcoal production. Carbonscape's unit traps the carbon fixed in waste plant material in the form of charcoal, which can be returned to the soil as biochar.

    The invention came about when scientist Professor Chris Turney was attempting to cook dinner in a hurry and accidentally blew up the family microwave. He realised he had created pure carbon, and immediately saw its potential in the marketplace.

    Carbonspace's prototype machine, dubbed "the black phantom" was manufactured by a local design and engineering team, and can be fitted into a 40-foot shipping container. This means that it can be taken into remote places.

    "It is also possible to use the technology on a large scale either by combining several smaller plants or by scaling up to one big unit," says Carbonscape director Nick Gerritsen. "It could be set up on a forestry skid site with a generator," he says. "This means that wood waste could be processed on-site leaving the forest owner with only the finished charcoal to transport out of the forest." Source: Carbon News 2008


    Huge wood cogeneration plant in Texas proceeds

    The city of Austin, Texas at the end of August approved an agreement between its electric utility, Austin Energy, and Nacogdoches Power, an estimated one million tons/year wood energy concern, in what is expected to be a US$2.3 billion contract over 20 years. The plan calls for Austin Energy to purchase all of the electricity produced at Nacogdoches Power's planned 100-megawatt wood powered facility upon completion in 2011-2012. Source: RISI


    MAF grants NZ$0.93m for new forests

    The Afforestation Grant Scheme's (AGS) first public tender round has granted nine recipients in New Zealand a total NZ$927,000 to plant new forests; and further applications are being called for, the Ministry of Agriculture and Forestry (MAF) have announced. The $927,000 grant from the first public tender pool will be spread over the next two years.

    The grant monies will be allocated to nine projects in the Bay of Plenty, Hawkes Bay, Wairarapa, Marlborough, Canterbury and Otago regions. The nine projects will create 447 hectares of new forest in 2008 and 2009 at an average price of NZ$1829 per hectare. It is expected 124 hectares will be planted this year.

    MAF hopes to further increase new plantings in 2009 and a second public tender pool round is currently open for applications. The tender round closes on 31st October. For further information on the AGS or to download an AGS Public Tender Form, see: www.maf.govt.nz


    New Forest Education Portal - Go Forestry!

    In Australia and New Zealand, websites and resources designed to attract students are being and have been designed. In Australia we have www.forestworks.com.au and in New Zealand, www.fitec.org.nz. FITEC is currently rebuilding the Careers Section of the site and will soon be launching a centralised vacancy system. In Canada, amidst the doom and gloom, they have just launched a new website to inform and attempt to attract students to look at forestry as a real career option. You can check it out on goforestry.ca


    Australia among $6 billion climate change donors

    Australia is among 10 industrialised countries which have pledged more than $6.1 billion to international investment funds aimed at helping developing countries to adopt cleaner technologies and mitigate growth in greenhouse gas emissions.

    The first projects to benefit from grants, highly concessional loans and loan guarantee instruments from the Climate Investment Funds are expected to be announced in early 2009, the World Bank said. Representatives of 10 countries - Australia, France, Germany, Japan, the Netherlands, Norway, Sweden, Switzerland Britain and the United States - attended a donor conference hosted by the bank in the weekend.

    Two trust funds are being created under the Climate Investment Funds, which will be administered by the World Bank and by multilateral development banks. The Clean Technology Fund will invest in projects and programmes in developing countries that contribute to the demonstration, deployment, and transfer of low-carbon technologies. The projects or programmes must have a significant potential for long-term greenhouse gas savings. Source: Carbon News 2008


    Timberland investments - the new frontier for TIMOs

    Long talked about, US timberland investments overseas actually began in earnest just in the early 2000's, mostly in New Zealand. More recently, as traditional US land sales slowed, investment appetite expands into un-chartered and increasingly far-flung regions, now including Oceania, South and Central America, Asia, Europe and Southern Africa. "But relatively few, overall, have closed so far," according to Timberland Markets Report.

    In all, a dozen global transactions have occurred since 2002, totalling about 2 million acres. At the same time in recent years, new investor types moved in, some with the greater tolerance necessary for international risk, including private equity, hedge funds and others. Interestingly, Rayonier and Weyerhaeuser, both early players, have chosen to exit the offshore stage.

    Currently, about 11% of TIMO ownerships, or 3 million acres, are overseas. By far, New Zealand is the largest destination, holding more than half the total invested base, followed by Australia, as both are considered "safest" outside North America, contacts said. One TIMO analysis noted the surge in offshore investment this decade, from only US$850 million in 2000 (or 12% of the total TIMO allocation at the time) to US$3 billion (or 20%) in 2007.

    Not surprisingly, Hancock Timber leads in such investments, with positions in three Southern Hemisphere countries. However, Global Forest Partners (GFP), the earliest pioneer, is rapidly growing its share, across six countries, and has more than US$2 billion invested currently.

    GMO and the Harvard timber fund each have timberland in three or four countries. Forestland Group closed its first of two acquisitions in Central and South America last year and RMK broke ground in Uruguay with a reported 50,000 acres in 2007, much of that converting pastureland to trees. So far this year, several TIMOs are reportedly "hunting property aggressively" in Brazil (as was the case last year in Uruguay). However, no acquisitions have been announced yet. Source: RISI


    International forest group sues US government

    The American division of Forest Stewardship Council's (FSC) is suing the US government for allegedly steering US$350m into timber industry-dominated forestry foundations as part of a "backroom deal. FSC says the money, linked to the softwood lumber agreement which resolved a long-running dispute between the US and Canada over softwood imports was steered into two groups - the American Forest Foundation and the US Endowment for Forest and Communities.

    FSC says while it works tirelessly to promote the highest standards for forest management and provide the public with an opportunity of rewarding responsible forestry through buying FSC-labelled products, the US action was damaging. The administration's action is a huge setback that, if left unchecked, could significantly lower the bar for what is represented as sustainable forestry," said FSC president of US operations, Corey Brinkeman.


    NZ Timber Design Awards planned for 20 October

    Each year, the New Zealand Timber Design Awards recognise and encourage outstanding design, engineering and construction practice using timber. The 2008 Awards Function in Auckland starts with cocktails at 5.30pm. The winners will be announced and guests will be able to celebrate their contribution to innovative and skilful timber design. The guest speaker will be Gary Williams of Timber Systems Ltd in Canada and the host for the awards function, Dave Currie, Chef de Mission for the New Zealand Olympic Games team in Beijing 2008. For further information contact info@nzwood.co.nz




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    ...and one to end the week on...never be late

    A priest was being honoured at his retirement dinner after 25 years in the parish. A leading local politician and member of the congregation was chosen to make the presentation and to give a little speech at the dinner. However, he was delayed, so the priest decided to say his own few words while they waited:

    'I got my first impression of the parish from the first confession I heard here. I thought I had been assigned to a terrible place. The very first person who entered my confessional told me he had stolen a television set and, when questioned by the police, was able to lie his way out of it. He had stolen money from his parents, embezzled from his employer, had an affair with his boss's wife and taken illegal drugs. I was appalled.

    But as the days went on I learned that my people were not all like that and I had, indeed, come to a fine parish full of good and loving people.'...

    Just as the priest finished his talk, the politician arrived full of apologies at being late. He immediately began to make the presentation and gave his talk: 'I'll never forget the first day our parish priest arrived,' said the politician. 'In fact, I had the honour of being the first person to go to him for confession.'

    And the moral of the story: Never, Never, Never Be Late

    And on that note, have a great weekend. Cheers.

    Brent Apthorp
    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

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