Situation and outlook for New Zealand agriculture and forestry (August 2007)
11 Forestry
International log prices (expressed in United States (US) dollars) picked up significantly in the second half of 2006 compared with the first half due to reduced domestic supplies from Southeast Asia and low stocks in South Korea. In some cases, countries switched from using their higher value hardwoods in plywood manufacturing to using imported radiata pine. Higher prices for hardwoods have caused Korean and Japanese manufacturers to substitute hardwoods with New Zealand logs, and they have bid up the price in the process. India and China have also increased demand for logs, which has reinforced higher prices.
The Russian Federation accounts for about 40 percent of world softwood exports. On 5 February 2007, the Russian Federation Government announced its intention to increase export taxes on its softwood log exports to 80 percent by 2009. The outlook for international log prices hinges on the implementation, enforcement, and longevity of these taxes.
The impact of the Russian export taxes on the Chinese, Japanese, and South Korean log markets will be significant. For example, of the 10.3 million cubic metres of logs Japan imported in 2006, the Russian Federation supplied 47 percent, while the Russian Federation’s share of Japan’s 8.47 million cubic metre sawn timber imports was 12 percent. A moderating influence on international prices over the forecast period will be increasing log exports from Africa and New Zealand, and increased domestic supply in Asia. But overall, international log prices are expected to increase gradually.
International sawn timber prices are expected to decline over the forecast period. This is in response to housing starts continuing to falter in the US and Australia after several years of expansion, weaker gross domestic product outlooks, and the overhang of historically high household-debt levels. In the longer term, the Russian Federation may become a larger international player in the export of processed wood products, placing competitive pressure on international prices.
International pulp prices are expected to decrease over the forecast period as increased international capacity depresses world prices. While the average US dollar paper price New Zealand is getting for its paper exports has risen over the last two quarters, this can be put down to a change in the product mix of New Zealand’s paper exports with the closure of one of the paper lines in July 2006. International paper prices are forecast to remain flat or decline.
While international forestry product prices decline overall, the assumed exchange depreciation of the New Zealand dollar against the US dollar means export prices in New Zealand dollars are likely to rise steadily over the forecast period.
Exports
More than 70 percent of roundwood equivalent produced in New Zealand is exported. For the year ended 31 March 2007, the export value was $3.56 billion (see Figure 11.1).
Key destinations for forestry exports are South Korea for logs (with 53 percent of logs by value); Australia for paper products (60 percent); and Japan for panels (49 percent).
The 13 percent increase in the value of forestry exports in the year ended 31 March 2007 was mainly due to rising prices and volumes for logs and sawn timber. The value of panel exports fell because of reduced export volumes, in part because a fire damaged a production line in one mill. (See Table 11.1.)
Table 11.1: Forestry prices and volumes
| Actual | Forecast | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Year to 31 March | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
| Logs and chips | |||||||||
| FOB1 price ($/m3) | 82 | 78 | 84 | 105 | 114 | 122 | 136 | 145 | |
| Export volume (000 m3) | 8 136 | 5 649 | 5 753 | 6 532 | 6 798 | 7 089 | 7 394 | 7 713 | |
| Timber | |||||||||
| FOB price ($/m3) | 421 | 438 | 396 | 415 | 393 | 410 | 449 | 477 | |
| Export volume (000 m3) | 1 624 | 1 847 | 1 818 | 1 939 | 1 939 | 1 969 | 2 008 | 2 048 | |
| Panels | |||||||||
| FOB price ($/m3) | 476 | 511 | 451 | 454 | 473 | 492 | 536 | 558 | |
| Export volume (000 m3) | 1 069 | 1 132 | 1 125 | 994 | 1 021 | 1 053 | 1 093 | 1 143 | |
| Pulp | |||||||||
| FOB price ($/t) | 594 | 585 | 559 | 734 | 680 | 668 | 719 | 763 | |
| Export volume (000 t) | 716 | 839 | 854 | 810 | 815 | 815 | 815 | 814 | |
| Paper | |||||||||
| FOB price ($/t) | 897 | 810 | 798 | 981 | 919 | 977 | 1 084 | 1 152 | |
| Export volume (000 t) | 458 | 625 | 682 | 521 | 507 | 506 | 506 | 506 | |
| Total forestry export | |||||||||
| value ($ mil) | 3 125 | 3 255 | 3 164 | 3 562 | 3 542 | 3 788 | 4 274 | 4 646 | |
Note
1. Free on board – the value of the goods delivered to the port of export and loaded onto a vessel for transportation out of the country of origin.
Source Statistics New Zealand and MAF.
From the year ending 31 March 2007 to the year ending 31 March 2011, the value of forestry exports is projected to rise 30 percent to $4.65 billion. Forty percent of the rise in export value will come from increasing volumes and prices of logs.
Figure 11.1: Forestry export destinations, by value, year ended 31 March 2007
Source Statistics New Zealand.
Production
New Zealand has about 1.8 million hectares of plantation forests. Radiata pine accounts for 89 percent of the total area.
Log harvesting peaked in the year ended 31 March 2003 at 22.5 million cubic metres of roundwood, and then fell to 18.8 million cubic metres in the year ended 31 March 2006. The reasons for this decline were lower international log prices, rising exchange rates, escalating shipping costs on the back of high oil prices, and capacity constraints for Handysize vessels. Furthermore, new forest owners in New Zealand wanted to increase the age structure of their forests, whereas previous corporate owners had tended to harvest their forest estates at younger ages to meet cash-flow requirements. The low point was in the quarter ended 30 June 2006, but since then improving international log prices have stimulated a lift in harvesting.
New Zealand’s plantation forests could support a steady rise in wood availability from current levels up to 30 million cubic metres a year before declining again. Future harvesting levels will be determined by the demand for logs and forestry products and the strategies of forest owners.
Forest Industry Development AgendaIn 2004/05, the Government worked with the forest industry on a joint industry development process called the Forest Industry Development Agenda. The Government’s high-level objectives for the agenda are to ensure forestry makes its optimal contribution to New Zealand’s sustainable development and plays a key role in New Zealand meeting its environmental goals. A market development initiative resulted in projects to promote wood products, to promote new ideas for building houses with solid wooden walls, and to reduce the use of pesticides in forests. A market access initiative is funding projects addressing non-tariff barriers affecting wood exports. A bio-energy initiative is looking to develop the use of woody residues as a bio-energy source. A labour and skills initiative is funding the development of facilities at the Radi Centre in Rotorua for wood-processing training. An excellence in wood design initiative has created two professorships at the Universities of Auckland and Canterbury. Table 11.2: Forestry Industry Development Agenda funding
Source MAF. |
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