Friday Offcuts 9 September 2022
What’s needed to plug the gap? Either more imports or if looking to self- sufficiency, establishing as much as 468,000 hectares of additional softwood plantations. If looking to meet that demand, obviously, planting needs to start immediately. A link to the full report is provided in this week’s lead story. It provides an historical overview, detailed description and analysis of the supply and demand of sawn softwood timber in Australia over the last two years. It also charts the course of both demand and supply to 2050 and explains the basis for the projections that although worrying, must be considered a call to urgent action to ensure Australia will continue to have capacity to build using its own resources.
Hot on the heels of the July announcement by Swedish companies SCA and Scania that they’d rolled out the world’s first electric log truck, an electric log truck (an electrified logging B-double) is about to be trialled in the Green Triangle region in South Australia by Fennell Forestry. Rather than purchasing a new vehicle, the NSW start-up, Janus Electric, has developed a technology that’s going to allow businesses to convert their existing diesel engine trucks into electric powered vehicles. Full details and an explanation from Janus Electric on how they’re converting diesel engines across to electric is contained in a video linked to the story below.
And, in the forest technology space this week, we’ve built in a story and video of a Swedish company providing software-based services for forest data acquisition and analysis that’s just introduced autonomous drones to complement their manual measurements of tree stem diameters. And we provide an update on the European Space Agency's BIOMASS satellite. It’s taking shape and it’s still on track to be launched in 2023. It’s also big, several metres high, weighing more than a tonne and it’s going to be housing a 12-metre radar dish. With this set- up, it’s going to be taking a technology called P-band radar into space for the first time which is going to enable very detailed measurements of forest biomass for the first time - across large areas – and from space.
And finally, we’ve built in another refreshing and informative update from the team at Forest360 on NZ log exports. The current state of the Chinese construction industry along with a number of other major issues facing our largest log export market are likely to impact on both future supplies and prices. Read more below. And that’s it for this week. Enjoy.
This week we have for you:
New market report presents sobering outlookOn current trajectories, Australia faces the prospect of being consistently unable to meet demand for new housing, because of a persistent and growing gap between demand and supply of sawn softwood timber, in particular.
Taking immediate action to establish new softwood plantations, Australia can mitigate the risk and increase its sovereign supply capability for its most critical and sustainable building resource, a new report for FWPA finds.
By no later than 2050, Australia will have:
- A population between 33.62 and 39.97 million people
- New housing demand around 259,000 dwellings per annum
- 5.175 million additional households whose demography will demand a marginally different housing mix to the current distribution of housing formats
- Sawn softwood demand of 6.507 million m3 per annum
- Almost 2.0 million m3 per annum higher than 2021
- Local sawn softwood production static at between 3.600 and 3.800 million m3 per annum due to constraints on sawlog supply
- An Implied Gap between demand and local production of 2.638 million m3 per annum, equivalent to 40.5% of total demand.
To bridge the Implied Gap, Australia could establish as much as 468,000 hectares of additional softwood plantations, commencing immediately. Ultimately, a continuing role for imports and an expanded softwood plantation estate and domestic production must each be part of the solution that will see Australia bridge the current gap between constrained local production capacity and future demand.
These are important considerations because plantations established today will not yield the bulk of their wood until very close to 2050.
Click here to download a copy of the report .
First electric logging truck for Green Triangle regionOne of Australia's largest forestry regions hopes to transform the freight industry with a local harvester trialling an electric truck.
Fennell Forestry is set to take possession of the Green Triangle's first electrified logging B-double this month with a purpose-built charging station under construction in its yard. NSW start-up Janus Electric developed the technology allowing businesses to convert their existing diesel engine trucks into electric powered vehicles, with zero emissions.
General manager Lex Forsyth said the team had developed a modular conversion system allowing it to transform most prime movers, trucks, and OEM products. "There are currently about 105,000 registered Class 8 trucks in Australia," he said. "Our solution is well suited to around 80 per cent of the market here in Australia."
Mr Forsyth said the significant capital investment needed to purchase a new truck versus converting an existing vehicle was a key factor in Janus' modular design.
"We've gone down a conversion model because the reality is we only produce 5,000 new trucks a year for our market," he said. "If we were going to try and change the way we consume energy and go to a greener transport and logistics task, it would take us 20 years if we started producing brand new trucks today.
"The big thing for fleet operators is that after five years, trucks are due for an engine rebuild anyway. So rather than rebuilding the diesel engine, [they can put] in a new electric motor and get away from the diesel costs and the maintenance of operating a diesel vehicle."
Unlike electric vehicles which plug into a charging station, Janus' electric system replaces a truck's batteries like a race car replaces its tyres during a pitstop. "We've created an exchangeable battery technology to alleviate the problem of vehicles being parked to charge and fleet operators losing utilisation," Mr Forsyth said.
"There are two batteries on the truck … that go into where the fuel tanks were on the vehicle and they swap out. We're currently doing it with a 3-tonne forklift, and it takes about four minutes to swap both batteries." But in the future, Mr Forsyth envisages a more automated approach.
Forest360 NZ log export market updateLast month I made the comment that there was some light at the end of the tunnel in terms of increased export log prices, but we weren’t quite sure what that light was. As it stands now, that light started shining very brightly and the tunnel got much shorter in September as export prices rose around $NZ10/m3 across the board. It appears though that the tunnel length wasn’t the problem and that now we are barreling down the tracks with a full head of steam, the bridge has washed out, we’re overloaded, oh and the brakes are dodgy.
The lift in export prices has absolutely zero to do with increased demand in China, it is purely a reflection of reduced shipping costs and foreign exchange. There has been a push by some exporters to increase the CFR (sales price in China in $US) price up for September deliveries but this has been met with a firm and resounding ‘are you serious?’ by the market.
And to be fair there isn’t much basis for a price lift as in-market log inventories are only marginally down on August and demand has flatlined. NZ has just come out of the wettest winter with the highest fuel prices in memory and log prices that are well below the three-year average resulting in a reasonable drop in log supply. We were hoping that this would result in a sharp reduction in Chinese log inventories and trigger an increase in demand and hence price, but it looks like those hopes are flushed well past the S bend now.
The outlook for the Chinese construction sector is about as rosy as Rotorua’s motel strip with house sales down around 30% on this time last year and stalled projects country wide. There’s much talk of government stimulus to boost the construction sector but this is likely going to be in the form of assistance to complete half built projects rather than start new ones.
Announcements were made last week by China’s housing and finance ministries that $US23.9 billion will be provided in ‘special loans’ to complete unfinished residential housing projects. There’s still an abundance of empty housing throughout China and the ability for the government to continue to use residential construction to falsely project economic growth is starting to wane.
To top it all off, with covid now spreading to most major cities the Chinese govt is still using lockdowns as a covid control, doing nothing for economic growth or productivity. This week, China’s 6th largest city, Chengdu, home to 21 million people, is the latest lucky lockdown recipient in covid roulette. As of last week, around 65 million people in China were under lockdown in one form or another. Maybe Xi Jinping should have a read of Jacinda’s covid playbook to see how well that worked out economically.
To read this week’s full commentary, click here.
Marcus Musson, Forest360
CLT features in NZ Building Industry AwardsThe New Zealand Institute of Building ( NZIOB) announced the winners of the 2022 New Zealand Building Industry Awards on Friday, 2 September at a spectacular gala evening at the Cordis Hotel, Tāmaki Makaurau/Auckland.
Chief Executive Pamela Bell said, “The Institute congratulates all this year's winners and finalists, their employers, families and supporters, and our family of sponsors. These Awards showcase and celebrate the commitment of those working right across the built environment and contribute to the Institute’s goal of raising quality across the industry.
“We are really impressed with the entrants who have embraced new technologies and we recognise the positive impact this technology has had on construction programmes. That reflects a global uptake in technology adoption across construction, driven by the considerable investment into companies focused on improving how we design and deliver the built environment."
The GIB® Supreme Award was won by Darren Cutfield from Built Environs NZ for the Auckland City Mission HomeGround Development on Hobson Street, Tāmaki Makaurau/Auckland. HomeGround is the Auckland City Mission’s newly constructed NZ$110 million multi-purpose headquarters.
The complex uses an innovative Cross Laminated Timber (CLT) solution for most of the structure - a strong, lightweight, renewable and sustainable material. The building is the tallest CLT building in New Zealand and has championed the adoption of mass timber across New Zealand.
For further details and a list of all the winners, click here
Source: New Zealand Institute of Building
Govt partnership to explore sustainable wood productsA new partnership between the NZ Government and Oji Fibre Solutions could boost the development of sustainable wood products, hydrogen and bio-fuels at the Kinleith Mill near Tokoroa, creating jobs and reducing emissions across the economy Forestry Minister Stuart Nash announced on Thursday.
“This partnership is one of the first tangible actions from the draft Forestry and Wood Processing Industry Transformation Plan I launched in August. A key focus of the Plan is how to add value to the forestry sector by processing logs domestically rather than sending them off-shore for other countries to extract value” Stuart Nash said.
• A joint feasibility study between the New Zealand Forest Service and Oji Fibre Solutions will explore the opportunities to develop the Kinleith Mill to commercially produce wood products such as biofuels – including sustainable aviation fuel – lignin, green hydrogen, bioplastics and fuel pellets.
• Costs and economic modelling for an upgrade to Kinleith Mill’s energy boilers, known as the ‘Energy Island’ will also be updated as party of the study, along with investigating opportunities for third-party investment into the bioeconomy.
• Oji Fibre Solutions’ Kinleith site is New Zealand’s largest industrial site, located on 2,400 hectares of land near Tokoroa.
• The site could also help to spur bio-innovation and entrepreneurship through facilities piloting and commercialising new bio-products.
• The feasibility study is expected to be completed in early 2023, after which decisions on next steps will be taken.
• The NZ$2 million study will be funded jointly, with the New Zealand Forest Service contributing up to NZ$1 million.
New biomass satellite taking shapeIt is the first satellite to take a technology called P-band radar into space - and it should help scientists to distinguish the wood from the trees.
In a dust-free cleanroom in Stevenage, the European Space Agency's BIOMASS satellite is finally taking shape. And as science missions go, it's a big one. The spacecraft is several metres high and weighs more than a tonne.
It has to, in order to accommodate a 12-metre radar dish that folds up like an umbrella along its side for launch, unfurling once it's in orbit at the end of next year.
"It really will be quite a sight I think to behold," says engineer Vicki Lonnon at Airbus Defence and Space. You can't really simulate what it's going to be like in space fully, on the ground, so it's all essentially modelling at this stage, so (it) will be quite exciting to see that happen."
The engineering team are testing the release and unfolding mechanism again and again because the dish's collapsible antenna is crucial to its mission: to see, from the cold emptiness of space, the humid woody depths of Earth's forests in a completely new way.
BIOMASS is the first satellite to take a technology called P-band radar into space. It's a radar with a long wavelength - 70cm - and while it requires a big, cumbersome antenna, it will reveal things scientists have never been able to see from space before: the wood from the trees.
"If you looked at a forest with this wavelength, the leaves and little branches would be totally invisible," says the project's lead scientist, Professor Shaun Quegan, of the University of Sheffield.
"It would just look like the framework of a tree. And that's where the biomass is. And it's measuring that biomass, especially as we face a climate crisis, that's so crucial for scientists. "
Orbost timber workers face an uncertain futureThe current timber supply shortages in Victoria, Australia, brought about by vexatious legal action against VicForests is causing anguish among the people of Orbost, where 37% of its workforce faces the axe.
Already thrown into an atmosphere of uncertainty with the announcement in 2019 that the Andrews Government would inexplicably shut down native timber harvesting by 2030, Orbost is the canary in the coalmine as many regional Victorian centres face similar crises.
Parkside, which is Orbost’s second largest employer, is running on the last few loads of log supply and will need to take steps similar to Mectec sawmill in nearby Newmerella. Mectec was forced to lay off its casual workforce and put its permanent staff on whatever annual leave they had left after Covid stripped much of that.
Now the 37 staff at Parkside face a similar fate. Should these mill’s close, along with the contracting businesses which supply them, the estimated direct timber job losses to the Orbost/Marlo area will be 115. That represents 24% of the current workforce (there is an 470 estimated full-time jobs among a population of 2866).
One contractor said that his business and other contractors in the area employ 46 people, which equates to an estimated AU$4m in wages lost to the town each year. The impacts will be far greater on peripheral businesses such as mechanics and tyre fitters servicing trucks and other vehicles, engineering services, fuel depots, etc.
It’s estimated those services represent another 60 jobs in the area making it a total of 37% of the workforce directly impacted by the current timber supply shortages and oncoming closure of native forestry. The psychological impacts on those people and the families they support cannot be underestimated.
Forest & Wood Communities Australia went to Orbost last week to speak with what we thought would be a few families to get an idea of what they are going through. Overwhelmingly, 50 people came to meet with us and shared stories of an uncertain future.
Source: Forest & Wood Communities Australia
12 months of uncertainty for WA forest industryONE year on from the State Government’s decision to ban native forestry from 2024, the WA forestry industry is reflecting on 12 months of frustration, broken government commitments and ongoing uncertainty for impacted businesses.
Despite being promised a Just Transition Plan by the State Government, Forest Industries Federation WA (FIFWA) Chief Executive Officer Adele Farina said businesses remained as unsure today as they were when they were blindsided with the shocking announcement.
“The State Government has failed to develop a Just Transition Plan setting out its vision for the industry post-2023 and in particular, what impacted businesses are to transition to,” Ms Farina said. “Indeed, the Government is now suggesting this is not its role and that three funding pillars suffice as a Just Transition Plan”.
“Impacted businesses are yet to receive a cent of financial support from the government. The Government has also failed to deliver on its sweetener to grow the softwood plantation estate, with just over AU$20,000 of the AU$350 million spent and one property purchase agreement finalised.”
Photo: Bianca Kate Photography
Source: Forest Industries Federation WA
Katam launches new service for capturing tree dataBy using autonomous drones for video recordings, Katam, a Swedish company providing software-based services for forest data acquisition and analysis, has introduced an additional method for acquiring forest data.
A new service offered by Katam Technologies utilises autonomous drones to complement manual measurements of tree trunk diameter. Traditionally, drones are used in forestry by flying above the tree canopies. However, when flying above the trees, information about the trunk diameter cannot be captured.
However, now very affordable consumer drones are equipped with advanced navigation and collision systems that support flying within the forest itself, at just a few metres up. By using the drones for video recordings, Katam has introduced an additional method for capturing trunk data that serves as input to the Katam forest analysis system.
The new recording method using autonomous flying drones is a result of ADACORSA, an EU-funded project where Ericsson, Lund University, and Katam Technologies constitute the Swedish partners of the consortium.
ADACORSA aims to strengthen the European drone industry. Its mission is to increase public and government acceptance of BVLOS (Beyond Visual Line-Of-Sight) drones by demonstrating technology for safe and reliable drone operation in all situations and flight phases. Katam brings domain knowledge of the forestry use case in addition to significant AI analysis experience.
NZ building material costs continue to soarSuppliers predict that building product prices in New Zealand will increase a further 9% over the next 6 months, according to the latest Construction Supply Chain Update from EBOSS.
The 2022 EBOSS Construction Supply Chain Q3 Update highlights that while some pressures impacting the market appear to be improving, the price of building products sold in New Zealand has increased 32% on average over the last 12 months, and suppliers are predicting a further rise of 9% over the next 6 months.
Matthew Duder, the Managing Director of EBOSS says that construction costs for new homes are set to increase further despite demand beginning to soften, with continuing international cost increases and pressure to have more product on hand leaving building product suppliers taking on even more risk.
“The 2022 EBOSS Construction Supply Chain Q3 Update shows that the New Zealand building industry is still facing significant challenges when it comes to the cost and supply of building materials,” he says.
“Almost all suppliers (95%) report that rising freight costs are creating inflationary pressures on their business, while 63% say this increased cost is impacting their ability to supply the market — down just 4% from July 2021. And while global supply chain issues have eased a little, 83% still say they are experiencing international freight issues,” says Duder. “Add to that rising overseas material costs — the biggest inflationary pressure cited by suppliers — and the cost of New Zealand building products has nowhere to go but up.”
Duder adds that the New Zealand building industry is heavily dependent on international supply with 90% of building products either sourced as finished products or reliant on components from overseas.
“It is unsurprising then that while domestic pressures begin to ease — 21% fewer suppliers cited delays at domestic ports as an issue compared to July 2021 — it is really international factors that are controlling the ability to supply affordable products to the NZ market.”
While the 2022 Q1 survey saw suppliers predicting that they would raise product prices to match any increases in buy-in costs they themselves face, Duder says the EBOSS Construction Supply Chain Q3 Update shows that on average sell prices have increased 4% less than buy costs over the last six months.
“Suppliers of structural products are feeling the strain, having taken on a 45% increase in the cost of their products on average over the past year, while only having increased their sale price by 33%,” says Duder. “This discrepancy, paired with an increase in stock holdings of 46% on average across the board risks the stability and solvency of building product supply companies across New Zealand.”
Duder notes that ultimately, the EBOSS 2022 Construction Supply Chain Q3 Report paints a picture of an industry that is caught between the pressure of continued cost increases to freight and product costs internationally and a domestic market that is showing signs of slowing.
“With many suppliers now holding significantly more stock, and not yet having passed on full cost increases to their customers, they are taking on additional financial strain which, if not resolved, could cause issues further down the line.”
The Q3 survey of 154 suppliers, conducted by EBOSS, is part of a six-monthly research series that aims to provide an update on the current and future state of the building product supply chain and help developers, architects and builders to better plan ahead.
View or Download the full 2022 Q3 Update
NZ carbon market: NZU auction Q3 2022On Wednesday, New Zealand Units (NZU’s), also known as Carbon Credits were released by Government in their third quarterly auction for 2022. There were just 4,825,000 units available, as all of the units allocated to the Cost Containment Reserve (CCR) for 2022 were purchased at the previous auctions held this year. The units traded were priced at $85.40. Ahead of the auction the spot market was trading at just over $87/NZU.
Spot prices have trended higher over the past quarter with a significant uplift in the market in late July when the Climate Change Commission (CCC) recommended the Government should reduce the volume of NZU’s auctioned (from next year onwards) and also significantly increased the price which would trigger release of additional units from the CCR.
In 2022, the trigger price was set at $70 meaning all of the units in the CCR were allocated in the first two auctions held this year. The CCC proposes a two-tiered pricing mechanism for next year with the trigger price for the first tier set at $171 and the second tier set at $214. If the Government decides to act on this advice the volume of NZU’s allocated next year would be 38% lower than this year assuming that pricing does not reach the trigger level ($171) and therefore additional units are not released from the CCR.
If pricing exceeds $171 this will trigger the release of an extra 2.9m units, i.e. total offer volumes would be 27% lower. There were 26 participants in this auction, which was the same as the previous auction, of which 23 were successful in securing units. Additional background information about NZ’s carbon market is available in ANZ’s previously published papers: Carbon 101 and Carbon markets 102 – what drives the carbon price.
For further details on ANZ’s coverage of the third quarterly auction for 2022 of NZU’s, click here.
Sustainable native forest biomass is renewableThe Australian Forest Products Association (AFPA) urges the Federal Government to heed the international scientific consensus and advice from the United Nations’ International Panel on Climate Change (IPCC) that sustainably sourced forest biomass is a renewable energy feedstock, following this week’s announcement of a review into its inclusion in the Renewable Energy Target.
AFPA Chief Executive Officer Ross Hampton said Australia should not close the door to a dispatchable renewable energy source that is widely used around the world at a time when we need more renewable energy sources. “Bioenergy produced from sustainable biomass wood residues is carbon neutral and recognised internationally as a renewable energy resource,” Ross Hampton said.
“For the Government to disincentivise wood bioenergy would make no sense when it wants to drive a carbon constrained economy and achieve ambitious emissions reduction targets. These practices mean less wastage of tree products in the manufacturing process. “We will engage in the consultation process and strongly urge the Government to listen to the science, and not the rhetoric from anti-forestry groups that use this as a political football,” Ross Hampton said.
The significant potential for the forestry and forest products industry to contribute to climate change mitigation – including through renewable bioenergy – is acknowledged in the 4th assessment report of the IPCC, which states:
A sustainable forest management strategy aimed at maintaining or increasing forest carbon stocks, while producing an annual sustained yield of timber, fibre or energy from the forest, will generate the largest sustained mitigation benefit.
“The fact is that the use of native forest residues for electricity in Australia is negligible. Our native forests are primarily managed for high-value hardwood timber products such as floorboards, decking, furniture and joinery. The industry then tries to find the highest value uses for the residues,” Ross Hampton said.
“The woody biomass like sawdust, timber offcuts and forestry waste produced from wood processing activities has great potential to complement local operations, fight climate change and help Australia drive down emissions. It makes no sense for the Government to disincentivise these activities,” Ross Hampton concluded.
Manufacturers need to become talent creatorsThis recent article is written for the US market but the same issues on attracting skills and talent into manufacturing operations in this part of the world apply.
Our nation is facing a dire shortage of manufacturing workers. The National Association of Manufacturers forecasts that by 2030, the United States could have 2.1 million unfilled manufacturing jobs. A March 2022 survey from Deloitte and the Manufacturing Institute found that nearly half of manufacturing executives said they have had to turn down business opportunities because they lacked enough workers.
We’re not going to grow our way out of this problem. As baby boomers retire and millennials reach middle age, the Congressional Budget Office predicts that the American labour force will grow by less than 0.2% per year through 2031. As America renews its promise of investing in infrastructure, it is vital that we build pipelines to fill these jobs.
To meet their employment needs, manufacturing companies must become talent creators. Operating under the old model of talent consumption isn’t an option when there simply aren’t enough workers, skilled or otherwise, to hire. Because hiring is expensive, it makes financial sense to invest in models that let companies harvest the rewards of growing their own talent.
To this point, there are a growing number of examples of companies awakening to this reality. Electric vehicle maker Lucid Motors wanted to start production at a new Arizona plant and didn’t have time to hire and train new workers. So it partnered with local government, the local community college and the state’s economic development agency to build and equip a state-of-the-art training facility. By last September, when the new plant began production, more than 700 workers—the entirety of Lucid’s hourly workforce—had used this training facility.
Another car maker, Germany’s BMW, used the grow-your-own approach out of necessity when it picked South Carolina as the site of its first American plant. As the plant grew to more than 11,000 employees, BMW expanded its commitment to worker training. BMW’s apprenticeship program now works with four area community colleges, and the company recently announced plans to open new training avenues for high school seniors and people with degrees or experience in select technical fields. This summer, BMW expects to open at its South Carolina plant a new $20 million training center that it will use to conduct professional development and technical instruction.
Even smaller companies have committed to creating and nurturing their own talent. Taco Comfort Solutions, a family-owned HVAC manufacturer based in Rhode Island, works with local two-year and four-year colleges to provide in-house, on-site training for both new hires and valued long-time employees. These company-paid learning opportunities include job-related skills training as well as education toward degrees ranging from a GED to a Masters’ degree.
Upskilling and reskilling of existing employees is also a vital piece of this employment puzzle.
Buy and Sell
... and one to end the week on ... telling it as it is
On that note, enjoy your weekend. Cheers.
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