A forecasted demand for lumber due to a boost in Chinese housing projects could support a new saw and pulp mill near Kaikohe, creating a $45 million industry in Northland and up to 500 jobs if the project progressed.

Powered with low-cost heat and energy from the neighbouring Ngawha geothermal power station, it would require $600 million in private investment to complete, according to the Northland Growth Study, which said the project was now being assessed by Northland Inc, the Ministry of Primary Industries and the New Zealand Trade and Enterprise (NZTE).

Increasing domestic investment into housing projects in China, the continuing China Urbanisation Plan, as well as a surge in young Chinese middle-class seeking housing, were cited in the Northland Growth Study as potential lifelines to this region's industry growth.

The mill would focus on producing low-grade lumber to be used for furniture, packaging and construction.

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Exporting lumber to China, and other developing South East Asian markets would also yield revenue for Northland.

China already gets 72 per cent its log and woodchip from New Zealand and the report said that Northland now needed a "front desk" to go out to market and bid for contracts.

Markets in Auckland could also yield revenue and were worth pursuing.

The report's authors, Martin Jenkins Consultants, pointed out in the report that demand from China was expected to be strong due to a government investment in housing projects.

However, the report said the facility could have a detrimental effect on existing saw mill operators in the region and further afield.

A smaller scale facility would be more "realistic", it said, however the competitiveness would then be challenged. A feasibility study into the facility option was due to be completed this year.

The Forestry Advisory Group was now drawing up a forestry action plan to look at market demand and investment opportunities.

Expanding

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The NZ Government report also said expanding the industry to processing totara and other indigenous trees had potential to grow to $70 million in revenue in seven years, or a $7.5 million industry in just three years.

The opportunity analysis was undertaken by Northland Inc, Scion and the Tane Tree Trust, which identified that there was about 200,000 ha to 350,000 ha of totara in unmanaged stands across Northland.

This option would resonate with iwi, who would be seeking land use options outside of radiata pine.

The next steps involved further market analysis looking at demand, pricing, financial modelling, harvesting planning, piloting processing and developing a base of keen investors and business partners to create a full business case.

Processing 1-1.2 million cubic meters of logs per annum, instead of exporting it, would result in up to 450,000 tonnes of sawn timber and 250,000 tonnes of pulp.

There are 16 sawmills in Northland and two existing main centres for wood processing are Kaitaia (sawmill, tri-board) and Marsden Pt in Whangarei (sawmilling, laminated veneer lumber). Golden Bay Cement in Portland also uses forest biomass for energy.

In 2013, there were about 2200 people employed in the forestry industry, which included the wood processing sector. However, employment in the industry over the past 10 years dropped 1.9 per cent per annum.

A total of 48 per cent of employment in forestry and processing exist in Whangarei, with 37 per cent in the Far North.

Wood-processing plant at Marsden

A new wood-processing plant is due to set up shop at Marsden, having entered into a long-term lease agreement with Marsden Maritime Holdings (MMH) for two hectares.

However, mystery surrounds the identity of the plant operators who, according to MMH chief executive Graham Wallace, will be establishing a log-processing plant on the site.

The plant will border the port terminal and the existing Eastland log debarking facility and is expected to be up and running in mid-2015.

Mr Wallace said it was "an encouraging example of the uplift in leasehold demand" that MMH was starting to see for its developed industrial estate.

Kathy McVey, spokeswoman for the Eastland Group which has the debarking plant on the neighbouring site, confirmed that none of Eastland's businesses had signed the lease and had no plans to do so.