In This Issue

• Introduction
• Clarky's Comment
• Harvesting Short-Rotation Hardwoods
• Log Market
• Safer and "Greener" Biosecurity Treatment of Export Logs
• Strong Interest at Mystery Creek
• New Tree Stock Harvesting Machine Increases Productivity and Reduces Injury
• Update on Kokako Programme

Introduction

Breaking news (received Friday 19 June 2009)… Legislation to amend parts of the NZ Emissions Trading Scheme (NZ ETS) relating to forestry has been introduced and is expected to pass into law by 30 June 2009 - they all relate to pre-1990 forest land.

Key elements of the proposed legislation are:

• New deadlines for notification of deforestation and surrender of credits.
• Deferral of deadline to apply for 50 hectare deforestation exemption to a still-unspecified date.
• Giving the ability for the government to suspend, re-notify or withdraw altogether, any notified draft allocation plan (for free allocation credits).

It appears the government's intention is to withdraw the current draft Forestry Allocation Plan and not progress the issue of free allocation to pre-1990 forest land owners until after the ETS Review Committee has reported its findings. There is speculation that an offsetting scheme (planting forest elsewhere to cover deforestation liabilities) may be gaining traction in lieu of the free allocation of units.

The ETS Review Committee is due to report towards the end of July.

If the free allocation process goes ahead (which is anything but certain) pre-1990 forest land owners may not receive their allocation credits until mid to late 2010 once all the due process is concluded.

Looking ahead, according to Nick Smith's press release, it is the government's intention to introduce a substantive climate change amendment Bill later in the year once the ETS Review Committee has completed its work.

Earlier in the month EcoSecurities announced a small sale of Assigned Amount Units (AAUs) derived from 300 hectares of forests under the Permanent Forest Sink Initiative (PFSI) to a Japanese purchaser. This is a significant sale in that it is the first sale of forest-derived carbon credits from NZ on the international market. The only other sale of forest-derived carbon credits was the sale of 50,000 New Zealand Units (NZUs) from a NZ forest owner to a NZ industrial firm a few months ago.

PFSI projects suit a limited number of situations since heavy restrictions are placed on harvesting the trees.

Clarky's Comment

Korea Free Trade Agreement

During the week commencing 8^th June, I joined 32 other Kiwis in Seoul for the Korea New Zealand Business Round Table. Organised by the NZ International Business Forum www.nzibf.co.nz and the Korea International Trade Association www.kita.org this event had the objective of engaging with senior Korean business leaders in support of the Free Trade negotiations that were taking place in the same week in Seoul. The event was endorsed by President Lee, Myung-Bak of Korea and Prime Minister John Key, and was attended by Trade Minister Tim Groser and his Korean counterpart Jong Hoon Kim.

The gathering and concurrent FTA negotiations were covered extensively by the press in Korea.

In addition to the two governments concluding the Free Trade Agreement, the event explored ways for NZ and Korean businesses to make the most of the free trading environment. The big winners will be dairy, meat, kiwifruit, seafood and other food producers that currently face very high tariff barriers in Korea.

But forestry should also be a winner. Our single biggest (by volume and value) export to Korea is logs. While logs attract just 2% tariff at present, sawn timber, veneers and plywood attract tariffs at 5% - 8% from NZ and 0% from Chile. This is sufficient, along with other factors to discourage Korean firms from establishing processing facilities in New Zealand. Other factors that are moving the economics in favour of processing in NZ rather than shipping logs are:

• The high and volatile cost of bulk shipping.
• The heavy reliance of Korea on imported fossil fuels for electricity generation, and the rising cost of those fuels.
• The real possibility that Korea will take on binding emission reduction targets or introduce domestic measures that put additional cost on energy generated from fossil fuels, based on CO₂ emissions, to encourage development of renewable generation.

In addition there is a strong case for increased use of wood in Korean buildings. President Lee is strongly promoting "green growth" as the way forward for Korea, and has devoted a lot of government funding and resources to finding ways to achieve that.

Harvesting Short-Rotation Hardwoods

Since 1997 PF Olsen in Northland has been involved in establishing, managing and harvesting Acacia mearnsii (black wattle) and Acacia dealbata (silver wattle) on behalf of a Japanese-owned NZ-based company, NZ Plantation Forest Company Ltd. The purpose of their investment in the growing of this short rotation hardwood is to reduce the harvesting pressure on naturally grown tropical hardwood forests such as you find in the Amazon Basin. The product is harvested, taken to the Portland chip mill just south of Whangarei, chipped and exported out of Marsden Point to Japan where it is used in the production of high quality paper.

The harvesting of this forest crop with piece-sizes <0.15 m³ is very challenging, and it became clear that a new approach was needed to harvesting the trees efficiently and to prevent a cost blow-out. That new approach includes a high degree of mechanisation. PF Olsen is working with an innovative company called Fibre Resources Ltd which is experimenting with different machine configurations to improve efficiency. Whilst there is still some way to go to find the optimum configuration, the following is showing promising results:

Felling head: A 28 tonne Timbco feller/processor equipped with a 22 inch Waratah fells and bunches the acacia on the cut-over.

Processing: A 22 tonne Caterpillar excavator with a Logmax 750 processing head debarks the trees and cuts them to length in the cut-over and lays them in bunches.

Extraction: A Timberjack 660D grapple skidder extracts the processed and bunched logs and carries them to the skid off the ground to minimise mud contamination.

Loading: A 22 tonne Daewoo excavator with a pulp grapple loads the trucks which take the logs to Portland for chipping.

Current trials involve using self-loading bin trucks to transport logs to the log yard as opposed to the conventional logging trucks. With such a large number of logs in each load you can see the advantage of a high-sided bin truck over a conventional logging truck.

Log Market

The domestic market is steady in its somewhat fragile state. Supply and demand for logs is more or less in balance at relatively low volumes as mills continue to adjust production to avoid large increases in inventory of finished product. The recent rises in the NZ$ will be further ill-affecting viability.

China continued to dominate export sales with large volumes heading to that market in May and June. Apart from some infrastructure limitations, the market seems to be coping with the increased volumes, as the NZ$70 billion Government infrastructure spend kicks in. Lanshan (featured in Wood Matters Issue 6 - China Trip Report is reported to have had four vessel steaming to its docks in early June. With limited capacity to discharge logs, the vessels had to wait in a queue to get serviced.

Whilst demand is still strong in China and price in US$ is lifting, adverse movements in foreign exchange and an unexpectedly large lift in ocean freight rates have lowered NZ$ at-wharf-gate prices by $3-$15/JAS m³. Ocean freight rates have moved from lows of early US$20s in March to early US$30s currently. Much of this has been driven by high levels of iron ore and steel imports into China, but more recently traders are describing a stand-off between ship owners and log traders relative to late June/July ship bookings. The ship owners are holding out for high fixture prices against log traders pushing for reductions in price.

The NZ Agrifax Combined Log Price Index, which measures returns from the whole forest, moved down by $2.30/tonne for June to $72.20/tonne.

Safer and "Greener" Biosecurity Treatment of Export Logs

Methyl bromide (MB) is a gas used by many countries, including New Zealand, for the phytosanitary treatment of export logs. MB is colourless, odourless and highly toxic to insects (but also animals if in high concentrations) and is a very effective fumigant. However, it is also an ozone depleting gas which has led to it being banned internationally for all but quarantine applications.

Currently New Zealand uses around 170 tonnes of MB annually, of which 70% is used by the forestry sector. Due to the environmental and health concerns, PF Olsen has been involved in a programme to reduce the use of MB since 2001 when PF Olsen's Special Projects and Seed Orchard Manager, Dr Wei-Young Wang, travelled with a New Zealand Ministry of Agriculture and Forestry officer to China and successfully negotiated the use of phosphine as an alternative fumigant for log exports to China.

Phosphine gas is toxic to insects but it doesn't harm the ozone layer and because it is used for onboard treatment of below-deck cargoes in transit, fumigation is done when ships leave the New Zealand port. It is estimated that the volume of MB used between 2002 and 2008 reduced by about 1,420 tonnes because of phosphine and saved the industry around 30 million dollars in fumigation costs.

The rapid increase in log exports to China and India in recent years has put more pressure on MB reduction (both Japan and Korea fumigate logs after they arrive at the destination port). The Stakeholders in Methyl Bromide Reduction (STIMBR), an organisation funded by a voluntary levy on MB and phosphine since December 2007, has initiated a number of projects to enhance market access while reducing MB use and release into the atmosphere. These include:

• MB recapture,
• port monitoring,
• identifying alternative fumigants and
• promoting in-transit phosphine fumigation.

To promote phosphine use, Dr Wei-Young Wang has been involved in organising a series of container log fumigation trials to demonstrate the efficacy of phosphine as an in-transit log fumigant so it can be accepted by the Indian government as an alternative fumigant in the near future. For more information please contact us or visit STIMBR website.

Strong Interest at Mystery Creek

Cold and wet conditions didn't deter large numbers of people attending the NZ National Agricultural Fieldays at Mystery Creek in mid-June near Hamilton. PF Olsen exhibited a stand in the Premier Feature (main) Pavilion. "We were pleased to have secured an indoor site this year, commented Sally Haddon, a PF Olsen Forestry Manager based in Rotorua. "At least people could get out of the rain for a chat".

It was great to catch up with old faces, and meet a whole lot of new ones. We could see there is widespread interest in forestry at many levels, and it is clear that increasingly, farmers are seeing an important role for forestry as a viable option for better matching land use with land capability.

The main themes of the PF Olsen exhibit were Harvest-Ready, Carbon Forestry, and Digital Mapping. "We had hoped that there would have been more certainty around Carbon Forestry at this stage", points out Peter Weblin, PF Olsen's Marketing Manager. "But we are still awaiting the outcome of the Select Committee's review of the Emissions Trading Scheme."

Thanks to everyone who supported our stand, it was great to see/meet/chat with you! We will try to contact all those that indicated they wanted follow up, but if you feel you are getting left out, please contact us on FREEPHONE 05008 PF Olsen (05008 736 5736), or e-mail us on info@pfolsen.com or visit our website www.pfolsen.com.

New Tree Stock Harvesting Machine Increases Productivity and Reduces Injury

For those that don't know, PF Olsen produces around 2.0 million of primarily GF Plus Radiata pine tree stocks at its tree nursery at Waiuku (South Auckland) every year. The tree stocks are grown in containers which differentiates them from the more common bare-rooted stock.

"The advantage of containerised stock is that their fine root system remains substantially intact. This makes them much more resilient to water stress and improves survival rates in dry conditions", points out Kevin Haine, PF Olsen's Nursery Manager. "It means that you can plant much later in the season if you need to - as late as September/October in most sites, and make better use of the land".

Kevin also has a disposition for inventing new gadgets. His latest invention is a tree stock harvester. This new machine/set up allowed despatching this year's first orders in record time. The key is increasing productivity by loosening the tree stocks in the tray and providing an ergonomically-designed work-place (including new rain cover to protect workers from the elements). The added benefit is minimising the risk of reducing repetitive strain injuries (RSI) and occupational over-use syndrome (OOS).

This year's tree stocks are particularly high quality. "The best quality we have ever produced", says Kevin. We still have plenty of stock available for planting this year. If you are contemplating planting some forest this year and need tree stocks, give Kevin a call and he will do a good deal for you: Phone 09 235 3877, Mobile 021 402 148, E-mail kevin.haine@pfolsen.com.

Update on Kokako Programme

We had some very positive feedback on our Kaharoa kokako piece featured in Wood Matter Issue 1 - Kokako Programme Achieves Milestone. This project seems to have captured the imagination and passion of a number of readers, some of whom are interested in replicating the model. Well, the news is good. A major relocation of kokako is being planned for August from the Kaharoa Conservation Area (just north of Rotorua) to Secretary Island, Fiordland. This is significant as it marks the return of the kokako to the South Island where they had previously become extinct.

The successful Kaharoa Kokako Trust represents the collaborative effort of the Department of Conservation and dedicated volunteers, with support from a number of other entities such as PF Olsen and one of our larger clients (OTPP Forest Investments NZ Ltd). The initiative has increased the number of pairs of the rare kokako from 12 to over 60 breeding pairs. Nationally there are only 681 known breeding pairs of this iconic NZ bird renowned for its distinctive, haunting bird-song.

For more information on the trust go to www.kokako.org.nz