7  Opportunities and constraints

Opportunities

Increases in wood availability

Wood availability forecasts indicate that over the next 10 years the harvest in Marlborough has the potential to increase from the 2005 total of just over 630 000 cubic metres to between 900 000 and one million cubic metres. The actual size of the increase will depend on the harvesting decisions of the many small-scale forest growers.

For Nelson, the availability forecasts indicate little change over the next 10 years, with harvest levels in the range of 1.3 to 1.4 million cubic metres. In this region, yearly fluctuations in harvest mainly reflect the intentions of the large forest growers. The wood availability from the small forests is fairly constant.

The Nelson/Marlborough region has the potential to increase the annual harvest from 2.3 million cubic metres in 2005 to about 3.2 to 3.5 million cubic metres towards 2020. The higher level of harvest, however, would only be sustained for about 12 years. The increases in wood availability will mainly depend on the harvesting decisions of the many small-scale forest growers and will happen earlier in Marlborough than Nelson. There are more than 700 small-scale forest owners in Nelson/Marlborough.

The increase in wood availability presents an opportunity for the industry to expand. However, it is important to recognise that some existing processing plants already have capacity to increase production (for example, by employing an extra shift). This potential increase is estimated to be in the order of 500 000 cubic metres above the actual 2005 processing level.

An increase in the level of processing in the region could also come from processing some of the million cubic metres of logs currently exported; and from the potential increase in wood availability of a further million cubic metres.

New processing opportunities

Taking into account the capacity of some existing processing plants to increase production, and the potential expansion of some processing plants, there still appears to be potential to develop an additional large processing plant in the region. A log input of 300 000 cubic metres could be achieved even if log exports stay at the 2005 level.

In the shorter term, the potential increase in harvest in Marlborough will produce more chip-wood material. The desire to improve returns for this material will make the development of a chip export operation from the Port of Picton a likely consideration.

Innovative people

Some of the biggest gains in the forest industry in Nelson/Marlborough have come about through the vision and actions of innovative people. Such developments include:

  • a world-class MDF plant;
  • the development of GoldenEdge Liteboard which is 20 percent lighter than regular MDF;
  • the establishment of Zindia to export logs from Marlborough direct to Indian sawmillers;
  • the development of New Zealand's largest producer of posts and poles;
  • the establishment of a resin plant (required for MDF production), next to the Nelson Pine Industries site.

It is likely that future opportunities will come from innovative people in the forest industry making bold investment decisions and looking for product developments that differentiate New Zealand radiata pine from competitor's products.

Industry structure

Large-scale forest owners with over 54 percent of the Nelson/Marlborough forest area are also involved in processing and exporting. This vertical integration has provided a degree of resilience and stability to the forest industry.

The Nelson/Marlborough forest industry has a diversified processing capability, with 56 percent of the harvest processed into timber, MDF, LVL, and posts and poles. However, the overall level of processing is lower than the New Zealand average of 72 percent of the log harvest. So there is still considerable potential for growth in the wood processing sector.

Biofuels potential

Energy production from unused wood fibre has been identified as a potential opportunity for the forest industry. Under the Forest Industry Development Agenda (FIDA), the government has made $2.8 million available to fund bioenergy programmes across New Zealand. Overseas interests have also recently made inquiries about the availability of biofuels in the Nelson/Marlborough region. Higher energy costs may make this opportunity economically viable.

Raised industry profile

The Marlborough Forest Industry Association has lifted the profile of the forest industry through media articles, a revamped website, sponsorship and field days. In Nelson, the industry is a major sponsor of sporting, cultural and industry events; has been active in providing student scholarships; and welcomes visits to forest operations and processing plants.

The involvement of local government in forest ownership and port shareholding has raised the wider public's awareness of the economic, social and environmental benefits of forestry to the community.

However, there is no collective body in Nelson to promote forestry and represent the industry on local issues. A more coordinated approach would further lift the industry's profile throughout the value chain. It could also assist the local industry associations such as the Institute of Forestry, and the Forest Industry Engineering Association, which at times struggle to attract membership and attendance at meetings.

The possibility of establishing a collective body in Nelson has been discussed by industry representatives over the last 10 years and has lacked support, but the time may be right to reconsider it.

Positive attributes of the region

The Nelson/Marlborough forest industry has many attributes that could help it develop over the next 15 to 20 years as wood availability increases. The advantages of the region for the forest industry include:

  • the closeness of the forest resource to processing facilities and ports;
  • a forest resource that has fairly uniform characteristics;
  • a mature Douglas-fir resource;
  • a mature pruned radiata pine resource (with about 10 000 hectares older than 25 years);
  • the strength and stiffness of locally-grown radiata pine;
  • a reasonable level of infrastructure (ports, roads, engineering);
  • a diversified processing industry with potential to expand;
  • a well-managed forest resource;
  • a highly skilled workforce experienced in cable logging;
  • land available for expansion at some existing processing sites;
  • the potential to increase the level of processing and the area of forest;
  • an absence of major land-use change pressures, compared with some other regions.

Constraints

The likely key constraints on the development of the forest industry in Nelson and Marlborough over the next 20 years are described below.

National constraints

Several national-level constraints will affect the Nelson/Marlborough region. These include, among others:

  • requirements under the Resource Management Act (RMA);
  • compliance costs;
  • skill shortages;
  • road and sea transport costs;
  • the fluctuation of the New Zealand dollar;
  • the fragmentation of the industry;
  • New Zealand's distance from its markets;
  • increased competition from low-cost producers;
  • non-tariff barriers;
  • market pressure from wood substitutes.

Processing expansion constraints

Increased wood availability will not automatically lead to new processing capacity. Timber companies will establish new processing facilities only if their product ranges can compete in the international market. Will the products be any different from those produced by New Zealand's competitors? Economies of scale, increased wood processing efficiency, the use of innovative technology, improved productivity, and reduced costs are all important factors in competitiveness, as well as the type of product produced.

Attempts to zone land for forest processing, and the establishment of new greenfield facilities have often met with public resistance. This resistance has encouraged timber companies to expand existing plants rather than build new facilities.

Changes in the local industry structure

In the past the large forest owners and processors have provided important leadership for the forest industry. If forest sales and change of ownership result in more fragmentation of the forest industry it is likely to weaken the leadership and profile of the forest industry at a local level.

The Nelson/Marlborough forest industry could suffer some short-term uncertainty with the unknown future ownership of the Weyerhaeuser Joint Venture forests and sawmill, and the potential sale of Nelson's Carter Holt Harvey forests. These two companies own 50 percent of the forest resource and also have significant sawmilling capability. The new owners'intentions will influence the development of the industry in the region.

Need for infrastructure development

The increase in wood availability will require more infrastructure development. An increase in harvest of 300 000 cubic metres would increase the number of logging-truck loads by about 40 a day. In Marlborough, some of this volume will be transported by barge. The increase in wood availability in Marlborough will come mostly from small-scale forest growers. The dispersed and more fragmented nature of this forest resource will have an impact on transport infrastructure.

Consideration of energy availability and supply in Marlborough needs to be part of any major processing expansion proposal. The 2005-2015 Asset Management Plans for Marlborough Lines does not include any allowance for potential increase in electricity supply. Any increase in energy demand for proposed new or expanded processing plants will need to be identified well in advance of the requirement.

Increased forest harvest volumes could create a need for covered storage for processed forest products at the Port of Picton. At present all sawn timber is exported through Port Nelson. The storage areas for logs and processed forest products at Port Nelson are to some extent limited by the topography.

Requirements of the Resource Management Act

The detailed requirements for forest growing and processing under the Nelson/Marlborough Resource Management Plans can be obtained from the councils.The main points to note are as follows.

  • Commercial forestry is a restricted discretionary activity in the Marlborough Sounds.
  • In the Tasman District there are constraints on forestry in the Land Disturbance Area 2 which encompasses the Separation Point granite terrain.
  • The planting and harvesting of production forests near rivers and the coast are governed by riparian zones and coastal marine areas which introduce constraints.
  • Harvesting activity in most of Nelson/Marlborough is a permitted activity subject to constraints, such as permits for substantial earthworks and stream crossings.

Major companies in the region have actively met the challenges of the RMA by developing Best Management Practices, certification of their operations (e.g. ISO 14001) and good relationships with the local authorities.

Getting RMA approval for new processing facilities is often a costly and uncertain process which can take years. In some cases this cost and uncertainty has encouraged forest companies to expand existing plants instead of building new ones.

Resource Management Act issues that could arise in the Nelson/Marlborough forest industry in the future include:

  • additional processing sites needing resource consents;
  • pressure on processing sites to meet national air quality standards;
  • the impact of forests on water availability;
  • boundaries with rural lifestyle subdivisions providing a potential source of objectors to resource consent applications;
  • the public's negative image of forestry driving objections to resource consent applications;
  • fumigation requirements for export forest products;
  • the impact of discharges to water from forestry activities on fresh and marine water quality.

The forest industry can help the RMA process. The Resource Management Plans for Nelson/Marlborough fall due for 10-year reviews over the next four to five years. This will provide an opportunity to ensure that potential wood processing initiatives are appropriately accommodated in these plans, and to challenge areas of concern in the existing plans.

The Marlborough Forest Industry Association consults with the local authorities and fronts for the industry in Marlborough. In Nelson there is no such local forest industry group carrying out this important role. This lack might act as a constraint.

Shortage of skilled labour

A training-needs analysis undertaken in 2003/04 by Forme Consultancy identified the shortage of skilled labour as "a factor having the most significant impact on future employment in the industry". It also "accepted that a poor industry image along with the need for better retention strategies and more targeted training are other factors that contribute to the shortage of skilled labour in the forest industry".

The Nelson/Marlborough Institute of Technology stopped offering the National Diploma in Forestry in 2002, because of low enrolment, and the forest harvesting course in 2003. Forestry training is now undertaken through the Forest Industries Training Education Council (FITEC) programmes. The local forest industry is very supportive of the FITEC on-the-job training programmes, and in recent years forestry jobs have attracted people from other industries as well as school leavers.

Currently the workforce is being maintained in line with the steady harvest. However, there is doubt as to whether additional skilled workers will be found when the harvest increases in Marlborough and as some of the older workers leave the industry. There is also doubt about whether the current training structure will be able to serve the industry through these changes.

Concluding comments

The forest industry in the Nelson/Marlborough region faces both opportunities and challenges over the next few decades. The region has many positive features, and wood availability forecasts show an increasing harvest over the next harvest cycle. The challenges will be greatest in Marlborough, where the industry has less wood processing infrastructure and an increasing level of wood flow from the large numbers of small-scale forest holdings. The industry here, and in many areas in New Zealand, needs to produce differentiated forest products that can sucessfully compete in international markets. Innovative people and a raised industry profile will be important ingredients for a productive future.

Contact for Enquiries

Policy Adviser
Pastoral House
MAF Policy
PO Box 2526
Wellington 6140
NEW ZEALAND
Fax: +64 4 894 0741
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