Forestry
Introduction
New Zealand exported $3.68 billion in forestry products in the year ended March 2003 with the main exports being:
- Lumber (sawn timber): $920 million
- Logs: $809 million
- Paper products: $511 million
- Wood panels: $539 million
- Wood pulp: $491 million
- Other products: $412 million
| Key forestry export earners Years ended June (NZ$million fob) |
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Source: Statistics New Zealand
New Zealand is a small player in the international forest industry, accounting for 1.1 percent of the world’s total supply of industrial wood and 1.3 percent of the world’s trade in forest products. In comparison Canada accounts for 18.8 percent, Sweden 8.2 percent, Russia 2.2 percent, and Chile for 1.1 percent of trade.
New Zealand exports forestry products largely to Australia, the US, and key Asian markets such as Japan, Korea, China and the Philippines. In 2002 the US overtook Australia as New Zealand’s main export market for lumber both in volume and value terms. Australia has historically been New Zealand’s major export market for structural building components. However, it is becoming increasingly self-sufficient in softwood lumber and its overall forestry competitiveness is improving. The largest markets for New Zealand log exports are Korea, China and Japan, followed by India and the Philippines. An increasing volume of the logs exported to China is processed into higher value added products such as furniture and re-exported.
Where the forests are
As at 1 April 2002
Overview of sector structure, size and dynamics
The forestry industry is principally made up of plantation forestry, pulp and paper and other large-scale processing, sawmilling and solid wood products manufacturing, and consultancy and engineering solutions sectors. There is also a very small but potentially quite valuable sub-sector based on sustainable management of indigenous forests, with the wood harvested being processed in New Zealand into high value finished products such as furniture.
Plantation forestry
The key features of the plantation forestry industry are the dominance of radiata pine, the geographic dispersal of the resource and its ownership structure.
Dominance of radiata pine
Radiata pine makes up 89 percent of New Zealand’s 1.81 million hectares of plantation forestry and the industry’s competitiveness is based to a great extent on its fast growth rate and its suitability over a wider range of sites. Radiata’s advantages include versatility, suitability for preservative treatment, good painting, gluing and machinability and excellent finishing/sanding properties. It is suited to medium density fibreboard (MDF) because of its colour, and has some advantages in newsprint and paperboard strength.
Radiata’s weaknesses include its high variability in wood quality both within tree and between regions, poor natural durability and lack of dimensional stability and hardness. This means that in applications where these factors are critical such as structural framing, flooring, window frames, some furniture surfaces and other higher added value uses it is vital that radiata is appropriately processed, handled and utilised.
Radiata is acceptable as a construction timber in the building codes of Australia, New Zealand, and the UK and is recognised within the Japanese JAS 6000 standards for structural timber where it is ranked in the same category as spruce, pine and fir. Radiata is fully accepted as a structural timber only in Australia and New Zealand, while in other markets it is regarded as a poor substitute for Douglas fir or it competes against Ponderosa pine at a price discount.
Some of radiata’s weaknesses are being addressed through quality control and technological solutions. For example its strength variability for structural end uses is being partially overcome by the increasing use of machine stress grading (which better identifies lumber suitable for construction grades) and development of engineered wood products such as laminated veneer lumber (LVL).
As noted above there are substantial regional and site variations in the properties of radiata. Wood from northern regions of New Zealand is generally higher density while wood from Otago and Southland is of lower density. This regional variability is being compounded by an increasing proportion of juvenile wood in faster grown trees making correct processing and selection for timber for specific applications even more important than in the past.
Geographic dispersal of the resource
Around 32 percent of the forestry estate is in the central North Island, and because it is the most mature major forest resource it produces more than half New Zealand’s wood supply. Other regions with significant maturing forests are Northland, Gisborne, Hawkes Bay, the southern North Island, Nelson and Marlborough and Otago and Southland. However, in a number of regions this resource is fragmented which increases transport and other costs and may also limit capital and scale intensive processing investments, such as kraft pulp mills or MDF mills.
Ownership structure
The plantation forestry industry is 92 percent privately owned, with major forestry owners including Carter Holt Harvey (CHH), Fletcher Challenge Forests (FCF), Rayonier and Weyerhaeuser. Over 40 percent of the plantation resource is owned or managed by companies wholly or majority-owned by overseas interests. A large part of the central North Island forestry estate is currently in receivership and is managed as a going concern by a company called Timber Management Co. CHH and FCF also own significant forest resources in this region, though FCF has recently signalled its intention to sell its forest resource.
About 14 percent of plantation forests are on Maori-owned land. Most forests on Maori land are owned by non-Maori and managed without the involvement of the Maori landowners. Since the early 1990s much of the new forest planting has been by a large number of small-scale independent forestry owners, and consequently these owners will play an increasing role in the sector as their forests reach maturity.
Plantation forest ownership
Net stocked planted production forest area as at 1 April 2002
Source: National Exotic Forest Description
About 14 percent of plantation forests are on Maori-owned land. Most forests on Maori land are owned by non-Maori and managed without the involvement of the Maori landowners. Since the early 1990s much of the new forest planting has been by a large number of small-scale independent forestry owners, and consequently these owners will play an increasing role in the sector as their forests reach maturity.
Pulp, paper and other large-scale processing sector
Large scale wood processing includes pulp and paper, wood panels, MDF, particle board, a host of commodity products and some proprietary added value products, e.g. Triboard.
New Zealand’s large-scale pulp and paper sector is not very vibrant and appears to be losing market share. There have been no major new greenfields investments in pulp and paper in the past 15 years. However, there have been substantial upgrades (i.e. extensions and redevelopments of existing processing plants). There has been some growth in MDF and LVL production. Pulp, paper and other large scale processing tends to be capital and energy intensive and future prospects depend on factors such as the availability of large-scale capital investment, regulatory issues, wood fibre costs, security of supply and energy costs.
Sawmilling and solid wood products
The sawmilling industry utilises over 7 million cubic metres of wood per year and on-supplies more than 3 million cubic metres of residues per year to the pulp, paper and panel sectors. It is a critical part of the New Zealand forest industry in that it adds considerable value, is proportionately a large regional employer, and has been instrumental in opening new markets for radiata. The sawmilling sector has traditionally relied on the domestic and Australian markets, both of which are now mature. In the case of Australia, volumes of locally produced lumber are increasingly significant and it is predicted that Australia will soon become self-sufficient in lumber.
Solid wood product manufacturers typically process sawn timber produced by the sawmilling sector into products such as parts for windows, doors and stairs, fingerjointed products and mouldings, engineered wood products for use in buildings such as posts and beams, furniture componentry and furniture.
Two good examples of high value-added small to medium-sized businesses in the wood products sector are B J Abraham Ltd and MacIntosh Timber Laminated. B J Abraham Ltd, a furniture company based in Waimate, started as a one person business 30 years ago and now employs 50 people and exports most of its production. This company processes the wood from logs costing $3,000 into furniture worth between $50,000 and $100,000. McIntosh Timber Laminates specialises in the design, supply and installation of high quality, timber engineered packages with 60 percent of its production being for overseas markets in Australia, the Pacific, Micronesia, Asia, the Middle East and North Africa.
Wider cluster businesses
New Zealand has not been successful at developing a wider forestry cluster industry comparable to those developed around the forestry industries of other countries such as Finland and Sweden. However there is considerable potential for growth, for example in timber drying kilns and process control systems. An example is Windsor Engineering which manufactures kilns and industrial air and filtration systems. Over the past ten years, Windsor has increased in size from a $6 million per annum turnover company to an $18 million per annum company, employing over 80 staff. This growth is largely due to a substantial increase in export business. Another example is Brightwater Engineering, which employs more than 200 staff. Its core business is building engineering components for the forestry industry. A large part of its business is building bio-energy components for wood processing plants and it also makes machines used in forest harvesting.
Future growth potential
The forestry industry has great growth potential. However, it should be stressed that there are major impediments to the industry fulfilling its potential. Resource dispersion, infrastructure and environmental constraints, limited skills, a poor market image of radiata pine in some markets, and lack of both foreign direct investment (FDI) and domestic investment in wood processing continue to limit industry growth. There are also risks to its current performance, and a lot of effort may need to go into ensuring the industry does not go backwards. Growth potential is associated with:
Increasing production volumes
Forecasts suggest that there is enough wood potentially available for the current annual harvest of 22 million cubic metres from plantation forests to increase to 31 million cubic metres by 2010 and 34 million cubic metres by 2020, and this illustrates the growth potential in the industry. Forestry export earnings are forecast to rise by 18 percent to $4.12 billion in 2006/07 as a result of higher volumes of log, lumber and panel products and higher prices for pulp and paper.
While processed product exports are increasing in total volume terms it should be noted that a decreasing proportion of the total forest harvest is subject to lue-added processing on-shore in New Zealand. For the year ended December 2001 only 65 percent of the harvest volume was processed beyond the grading of logs. Log exports have increased from 4 percent of the total harvest volume in 1985 to 35 percent in the year ended December 2001 and they are expected to rise to 40 percent by 2004/5. However, price returns are expected to be weak.
Solid wood product manufacturing
The Pine Manufacturers’ Association (PMA) estimated its members exported $30 million in 1990, and by the year ended March 2002 export earnings had soared to $475 million, illustrating what is possible from this part of the industry. There is potential to establish a leadership position in manufacturing high-value products from radiata and, simultaneously, manufacturing technologies relevant to plantation-grown wood. However, rapid expansion of processing overseas, particularly large scale, capital intensive facilities in China, means that many solid wood products are becoming increasingly commoditised and economies of scale are important if New Zealand is to be competitive.
Sawmilling industry
Lumber exports have increased from around 500,000 cubic metres in 1990 to over 1.6 million cubic metres in 2002. As harvest volumes increase over the coming decade, volumes of unpruned logs will also increase significantly. Developing new high value markets for this unpruned material is important if New Zealand is to maximise returns from the forest. Sawmilling is probably the most important sector in identifying and developing these new markets.
Knowledge-based services and allied products
New Zealand is developing an international reputation as a leading-edge nation in some aspects of wood-based product manufacturing. There may be growth potential from knowledge-based products (e.g. consultancies, licensing, research, education etc.) and allied innovative products (e.g. processing machinery, control systems, wood-based chemicals and new wood-based products).
Diversification of the forestry resource
There is a substantial Douglas fir resource developing, especially in the South Island, and there are good opportunities for Cypresses and other “minor” species in added value markets. Diversification of the forestry resource is obviously a very long-term strategy and given the advantages of short rotation radiata there is no guarantee it will happen to any great extent, although the minor species are important to farm-foresters and other small-scale independent growers.
Contact for Enquiries
Monitoring and Evaluation
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
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