Forest owners value the domestic market and are keen to see more processing developed. Photo / Bevan Conley
Forest owners value the domestic market and are keen to see more processing developed. Photo / Bevan Conley
Forestry stands to be a major export earner in coming months and the country needs to focus on maximizing those gains as the lockdown is lifted and harvesting resumes, IFSGrowth chief executive James Treadwell said.
Harvesting could have continued safely during the past two weeks and he said there isno reason for it not to resume on a regional basis where infection rates are low, suggesting the East Coast, Far North and central North Island as possible early contenders.
Pent-up demand for logs is strong in China, this country's biggest market, but he said people need to remember that its economy is also likely to slow during the rest of 2020 as its major markets in Europe and the US struggle through the wake of covid-19.
Supplies of wood from Europe, where spruce beetle infestations are killing forests, will also start flowing into China again in the next six to 18 months, and that will also weigh on prices as they did late last year.
"There is no doubt about it that, come start-up, the export demand for logs will be high and the prices will be high – particularly from where they were," Treadwell told BusinessDesk.
"But that export demand is definitely going to come down."
Foresters and processors are pushing for a resumption of harvesting and production of all grades of timber to get sites working again and to meet expected domestic and overseas demand for logs, timber and packaging.
But Forestry Minister Shane Jones this week called for new measures, ranging from levies to a licensing regime, to ensure processors have access to affordable log supplies - ahead of exports – in order to help them survive during the expected tough year ahead.
IFSGrowth manages forests around the country and advises on forestry development. Its roughly 300 contractors aren't working and the firm can continue paying them for only about two months, said Treadwell, who has also taken a 70 percent cut in salary.
Getting people working is key for the economy and it's important government measures don't inadvertently restrict harvesting and slow the sector's recovery, he said.
Supply for mills is important and many of the larger sites have long-term contracts to ensure wood flows.
But he said his company would struggle to advise small woodlot owners coming to harvest to accept a discount – potentially of $20 to $50 a tonne - to supply local mills rather than sending logs to export.
Expanding forestry and the country's wood processing were key planks of the New Zealand First election campaign. Jones has overseen the government's one billion trees planting programme, and wood processing has been a beneficiary of the government's Provincial Growth Fund aimed at boosting jobs and capability within the regions.
This week he told BusinessDesk that expansion of processing has become more important to create new jobs and he is keen to help make that happen.
Private investors have plans to upgrade and expand some processing sites, but are being held back by the cost and risk of uncertain resource consenting processes, he said. He wants to see those barriers removed and is also open to co-investment by the Crown if that helps push projects ahead.
Wood processors tend to buy just under half the country's annual harvest. But in recent years some have complained of not being able to get wood when international prices have been high. Some smaller, older mills have shut.
Treadwell said forest owners value the domestic market and are keen to see more processing developed. But he said the immediate priority needs to be getting as much of the sector working as soon as it safely can.
Covid-19 clusters in Bluff and Matamata meant that was unlikely to be in Southland or Waikato respectively any time soon, he said, but other regions should be able to resume work.
"We could have actually carried on harvesting and sending logs to the sawmills and the ports with all the social distancing that is required," he said.
"Basically now, most people harvesting are working in a machine and they drive to work in their own cars and they tend to work in their own little bubble."
