There are growing concerns a crash in log prices will lead to the loss of up to 1000 jobs in New Zealand. The price slump, caused by cheap product from Russia and Scandinavia flooding into China, has left New Zealand logs piling up on Chinese wharves. However, this is not the only issue facing the industry says Don Carson, who warns of a series of events that have created the "perfect storm" for New Zealand forestry.
The Country's Jamie Mackay talks to Forest Owners Association communications manager Don Carson about how Donald Trump, China's Belt and Road Initiative and a European spruce bark beetle are causing a headache for forestry.
Mackay: I want to start with the elephant in the room as far as the forestry industry's concerned at the moment and this is the crash, no other word for it, of log prices. Is this a temporary blip? Or is this going to play out on a longer scale?
Carson: Well it's one of those things that I agree - probably the only thing I agree - with Keith Woodford when he talked to you a few days ago, is that there are longer and there are shorter term things going on here.
What has happened, it's a bit of a perfect storm. You can blame a collection of bark beetles in Europe, Donald Trump and John Falloon.
We've had a subsidy on forest plantings in the 90s. They've come into production at a time when China had a massive appetite for logs. Any commodity producer will know that these things fluctuate, certainly the dairy industry. The big thing they had to worry about was when they had prices of more than $8 a kilo for milk solids and that led to a crash that lasted quite a while.
So the same thing has happened with forestry. Record prices, a harvest that probably in many instances was going too early but it was meeting the market, the ports here were congested, the wharves in China were congested, so that was meeting the market.
But - at the same time we've had this trade war between the United States and China and the tariff on wood products out of China, some of which are made out of New Zealand wood, slowed down that trade.
But the really interesting bit on all of this is of course the trade going across China now, and that's a combination of the One Belt One Road Chinese electrification and "railisation" if you can call it that, across China, through Russia and into Europe, and that is a major world shift. Ever since the days of the Dutch East India Company, major trade around Europe and Asia was by sea and it's now going to be by rail.
Mackay: Don as you pointed out, it is a perfect storm. Can I just go back to the beetles that are attacking the spruce?
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Yes that's the other interesting bit. There's been a series of very long, hot summers in Eastern Europe in particular, and that's resulted in the spruce beetle - and you have to be an entomologist to get to the core of this I guess - but it usually has a couple of cycles a year and now it's been having three.
That means that the bug really gets into these trees and what the Europeans are doing is that they're chopping trees down before they get too degraded - a lot of storms also have knocked some of them down - they're putting them on the trains and because all of the traffic out of China goes into Europe and goes back without anything on it, then it's cheap freight for these salvage logs, spruce logs, and they're a good timber, coming out of Europe and into China.
Now that's obviously a short-term thing. The other things, perhaps structurally, are long term things.
Listen to the full interview below:
How long this will all go on for Jamie, is anybody's guess. It's certainly not going to be weeks, it's more likely to be months before this correction and the log supply diminishes. A lot on the skids, along in the ports, everywhere else, it's going to take some time for that to work through.
But the advantage compared with dairy is that the logs you can keep them as trees for a couple of years longer. You don't have to harvest them.
The big worry of course is all of the infrastructure has to be maintained, people are out of work, people are hurting. The logging crews, the truck drivers, the people on the ports - everywhere in that infrastructure - is going to be a diminished job opportunity, and we have to maintain that infrastructure for when things eventually do pick up.
Mackay: Yeah Don that is the worry for me. Something like 25,000 people or more employed in the forestry industry in this country. It is our third biggest export earner behind dairy and red meat and I'm worried about job losses and maintaining the infrastructure as you say, of the industry. We're talking at this stage of up to 1000 job losses but it could well be more than that.
Carson: We don't know Jamie, and certainly the bigger companies who have the deeper pockets, because of the bigger investment, are going to make a big effort to make sure that their logging crews, their infrastructure is maintained and they will probably continue to be producing logs that they're not making much, if anything, on just to keep the operations going.
• Also in today's interview: Carson talks about Associate Transport Minister Julie Anne Genter's comments that climate change is this generation's World War II.