Friday Offcuts – 10 August 2012
Gunns this week in a bombshell announcement to the ASX conceded its proposed Tamar Valley pulp mill faced an “uncertain future” (see story and link to the release below). As reported, the Tamar Valley project has been unable to find a backer despite repeated upbeat claims by the company and nearly eight years after the project was first proposed. Plunging woodchip prices means the company is going to slash between AU$700 and $800 million from the value of its net tangible assets for the year ending June - at least five times its last available market capitalisation. In the media release from Gunns, they say the board decision reflects the "decreased confidence that it has the ability to influence the mill project proceeding”. In New Zealand, as interest mounts for this regions annual meeting, Carbon Forestry 2012, figures released last week by the Ministry for the Environment detail just how the country’s Emissions Trading Scheme has fared after 12 months of operation (the link to the report is contained in the story below). Unfortunately, it shows what the forestry industry and others in the market have been relaying to the NZ Government for some time. The New Zealand market has been flooded with cheap European carbon credits as global carbon prices have continued to plummet. The impact on new forest planting has of course being substantial. The report says a staggering 73 percent of all units surrendered by NZ emitters in 2011 came from offshore sources. The 2.1 million forestry-based New Zealand Units surrendered for the 12 month period were also down, less than half the 5.3 million units surrendered in 2010, when the scheme had only run for six months. The NZ Government’s response to limit international units within the ETS, the industry’s stance and some of the key drivers to change over the next 12 month will be discussed by forestry and finance leaders in just under two weeks at Carbon Forestry 2012. Full details and programme information can be found on the event website.
This week we have for you:
NZ's ETS show cheap foreign carbon units being chasedNew Zealand's major emitters of greenhouse gases took advantage of the plummeting global price of carbon to offset their emissions in 2011, figures from the Ministry for the Environment show.The report ( view here) is the first to cover 12 months of the operation of the ETS and records the total number of carbon emissions units purchased and surrendered to the government to equate with their obligations to either reduce or offset their emissions under the ETS. Electricity companies, major gas users and transport fuels are covered by the ETS, although they are only required to account for one in every two tonnes of carbon emitted, and are not required to pay above $25 per tonne of carbon. However, international prices fell to as low as $8 a tonne by the last year, and have been even lower during 2012, as a glut of European carbon credits floods the fledgling global market. As a result, some 73 percent of all units surrendered in 2011 came from offshore sources and the 2.1 million forestry-based New Zealand Units surrendered for the 12 month period was less than half the 5.3 million units surrendered in 2010, when the scheme had only run for six months. Likewise, NZU's derived from other than forestry for the year totalled 2.3 million, compared with 2.6 million in the six month period a year earlier. By comparison, surrenders of Certified Emission Reduction units (CER's), derived from foreign carbon offset programmes, clocked in at 4.2 million, compared with just 133,150 a year earlier. Of these, 1.2 million units related to industrial gases, some of which were removed from the ETS in December. Some 4.3 million units of Emission Reduction Units, another form of foreign carbon credit, were surrendered, up from none the year before, and some 3.2 million Removal Units - a foreign credit not available in 2010 - were also surrendered. European carbon prices remain at historic lows, despite a plan announced late July by the European Union that is intended to bolster the market, and saw NZU prices fall as low as $4.55 per tonne of carbon earlier this week, and close the week close to $5 a tonne. Source: Scoop Quantifying Australia’s outdoor timber market.jpg)
How big is the Australian market for outdoor and infrastructure timber such as agricultural rounds, landscaping products, poles, and bridge and wharf timbers? A recent FWPA funded report examined the market size and priorities, and recommended the sector, which uses approximately 37 per cent of the sawn and round wood produced, be considered as significant in the industry.Over the last 10 years the overall market volume has increased considerably, with sawn treated plantation pine seeing the largest growth, particularly as landscaping sleepers. In general the use of sawn structural timber has increased. The agricultural round wood market on the other hand has declined to half the size it was when last measured in 2007. The report suggests this is a result of the prolonged drought that reduced demand and less new planting in the wine industry. In addition, there has been a reduction in the use of hardwood round as transmission poles. The most dominant product in the outdoor and infrastructure timber market by volume is treated plantation pine (such as radiata, slash and hoop pine), which represents between 84 to 86 per cent of the entire market. The other main species include Australian hardwoods with an in-ground natural durability of class 2 or better and imported species—the main one being merbau. The report forecasts some likely changes to outdoor timber use over the next 10 years and identified a number of areas requiring further R&D work. These include the impact of bushfire design regulations on exterior timber; requirements for disposal of treated timbers; improving long-term performance of timber finishes such as stains, coatings and paints; developing composite timber transmission poles; and identifying new resource for timber railway sleepers. Click here for the FWPA Report. Building Activity Update US building activityData recently released indicates the US housing bust is over. The volume of housing selling has increasing, as have prices. And the number of existing homes for sale has fallen. Building work commenced on 28% more privately owned homes in May 2012 than in May 2011. Permits were granted for 780,000 new privately owned homes during May 2012. This is a 25% increase on year ago figures. It is also the highest figure recorded for the month of May since the 2008 global financial crisis. Australian building activity Demand for new private housing in Australia remains low. The number of private sector houses approved in May 2012 was less that approved in April. This downward trend has now been present for 29 months. However the number of private sector dwellings not classified as houses did increase in May. Data shows approvals for this type of dwelling have rising 3.4% from a year ago, and the figures are even more significant when seasonally adjusted. New Zealand building activity During May building consents were granted for residential buildings with a combined floor area of 273,000m². This was an increase of 29,000m² on the previous month. The area for which residential permits were granted in May 2012 was 28% higher than in May 2011, and when measured in value terms was 37% higher than a year ago. But the strong figures for residential building consents was tempered by weaker figures for non-residential buildings. The floor area consented for non-residential buildings in May was higher than in April but was 17% lower than in May 2011. Despite the lower floor area of consents issued the value of the proposed non-residential buildings was on a par with the value consented for in May 2011. There are signs that the Christchurch rebuild is beginning to happen. Or rather there is more building activity planned for the Canterbury region. But much of this is planned for the surrounding districts rather than in the actual city. Consents were approved for 351 new buildings in the Canterbury region in May 2012. This was 100 more than in the same month in 2011. Source: www.nzxagri.co.nz/agrifax Canadian research organisation looking at ChinaThrough a new business strategy targeting the growth of its revenues, FPInnovations signed an agreement with RPM Sourcing Inc., a Vancouver-based company specializing in marketing and sales in China. As announced recently by Hervé Deschênes, FPInnovations’ Vice-President, Business Development, RPM Sourcing Inc. will promote a series of FPInnovations’ products and services in China and Taiwan in the areas of paper manufacturing, quality improvement and quality control.China is now the world’s largest paper and board producer and consumer, with roughly 100 million tonnes of capacity in 2010 and demand could reach close to 120 million tonnes by 2015. Canada holds a third of the market share for Chinese imports of market pulp, representing four million tonnes annually, making China the largest market for Canadian market pulp producers. Moreover, this burgeoning Chinese industry has created a high demand not only for the development of new technologies, but also for technical products and services associated with the pulp and paper industry. Many other countries in Europe as well as the US are making large efforts to provide technical services to China. This agreement is also important for FPInnovations members since it will allow maintaining activity level as well as the unique expertise in paper manufacturing, production cost optimization and paper product performance. It will also increase our understanding of the Asian market’s needs and enable us to identify market and business opportunities for our members and the Canadian industry. This three-year agreement will initially focus on introducing FPInnovations to five or six large industry groups, representing 25 to 30 mills and close to 200 machines. The second phase of the strategy seeks to establish a partnership with a local laboratory to directly supply our products and services, which will help pave the way for marketing Canadian forest products while eliminating trade barriers.Source: FPInnovations
Deal on composite product development announced
The Centre for Research and Innovation in the Bio-Economy (CRIBE) in Canada is partnering with GreenCore Composites to develop a new green technology process that will allow wood fibre to be used in a number of new products for the packaging and building applications, such as pallets and various containers.This new mixing process will be added to GreenCore’s existing NCell® technology allowing GreenCore to widen the type of products in which glass fibre and other compounds such as plastics can be replaced with wood fibre composite materials. This wood fibre composite has been successfully piloted in many applications, from automotive parts, to rigid containers, furniture, and industrial products. GreenCore has already demonstrated that they are capable of replacing glass fibre reinforced compounds which are used in a wide variety of products but are extremely energy intensive to produce with wood fibre composites using their patented pending NCell® technology. Wood modification, wood plastic composites, advancements in these technologies and a look at the impact that new Chinese technologies and the growth in these composite products is having on world markets and prices will be another focus for Australasian wood products companies in mid-October. Wood Innovations 2012 will open local producers’ eyes to an array of new solid wood, panels and composite products technologies that can be adopted. Full details on the programmes can be seen on the event website, www.woodinnovationsevents.com
Fire causes AU$2m damage to WA millThe new owner of a South West timber mill says a fire that raced through the mill causing AU$2m damage is a "body blow". Auswest Timbers bought and reopened the Deanmill Jarrah mill, near Manjimup, WA earlier this year after timber giant Gunns shut the near 100-year-old operation in February 2011, devastating the local community. The mill could be closed for at least six weeks. The mill's 42 workers have been stood down. It is hoped most will be redeployed at Auswest Timber's Pemberton operations.Source: The West Australian University of Waikato and Scion sign agreementNew Zealand’s forestry research provider, Scion and the University of Waikato have signed a Memorandum of Understanding that will see the two organisations working together in research and teaching and to enhance their contribution to the Waikato and Bay of Plenty regions, iwi and New Zealand.The agreement was signed at a function at Scion in Rotorua on 30 July. The Crown Research Institute specialises in research, science and technology development for the forestry, wood product and wood-derived materials and other biomaterial sectors. The agreement encompasses collaborative research programmes, commercialisation of research where possible, student projects and internships and the creation of executive education courses for the region and industry. More >> Gunns expects to record AU$700-AU$800M impairmentAs outlined in its update to the market on 2 July 2012, Gunns Limited has been reviewing its asset values with regard to the analysis it has been undertaking on the impact of the sudden and substantial decline in stumpage prices achieved in the export woodchip market.Although the Company’s analysis is currently incomplete and indefinite, based on analysis undertaken to date, the Company estimates that it will record an impairment in the range from AU$700-800 million in its financial statements for the financial year ended 30 June 2012. The impairment is expected against a range of the Company’s forestry related assets including its Tasmanian land and plantation estate, its interests in Managed Investment Schemes (MIS) and the development costs associated with the Bell Bay Pulp Mill Project (Mill Project). Reflecting this estimated impairment, and subject to end of financial year adjustments, the Company presently expects that its net tangible assets (NTA) value will be in the range of negative AU$50 million to negative AU$150 million as at 30 June 2012 (including FORESTS securities as liabilities of AU$120 million, and otherwise AU$70 million to negative $30 million if FORESTS securities are treated as equity for the purposes of this calculation). For full details on the release this week from Gunns, click here Ministers in last-ditch effort for forest peace deal Timber and green groups have failed to strike a deal to end Tasmania's forest wars, prompting the Gillard and Giddings governments to intervene in a last-ditch attempt to rescue the process reports the Australian. Despite more than two years of negotiations and an interim AU$276 million forest restructure package, timber and conservation groups on Monday announced they had failed to reach agreement. The breakdown in the talks came after revised data and modeling on wood supply showed it wasn’t possible to deliver the bottom lines of both sides. It had been hoped the modeling would show it was possible to protect about 525,000ha of native forests while still delivering an annual sawlog harvest of more than 140,000 cubic metres. For the second time in the negotiations, this means one or both sides will have to dramatically scale down their already modified expectations because of revised wood supply data. Negotiators have been discussing the impasse this week. Mr Burke and Mr Green join the talks today, with the expectation of a decision early next week on whether a conciliated deal was possible. PaperlinX to acquire NZ packaging companyPaperlinX has announced that it has entered into an agreement to acquire the business and assets of Canterbury Packaging Limited, based in Christchurch, New Zealand.Canterbury Packaging, a small distributor of industrial packaging consumables, hygiene, safety and hospitality products to customers predominantly in the Christchurch area, has annual revenues of AU$ 2.9m and is profitable. Canterbury Packaging will be combined with the existing Spicers business in New Zealand of AU$95m, and the purchase consideration of AU$2m will be funded from local credit facilities available within Spicers. Andy Preece, Executive General Manager ANZA Region commented: “The acquisition of Canterbury Packaging is a small but significant further step in our Diversified Products strategy. This acquisition will provide a building block for Spicers New Zealand to diversify and leverage our existing footprint and infrastructure to build a national business with the expertise from Canterbury Packaging. The additional packaging consumables will build on the existing strong market position of our profitable Spicers business in New Zealand.” The acquisition is expected to be completed on 1 October 2012. Tasmanian timber company winds upTasmanian Timber Engineering, which employs 32 people and manufactures wood products including trusses, frames and laminated timber beams, has gone into voluntary administration. The company is one of Tasmania’s largest building suppliers according to ABC News. The company has appointed an administrator and cited the downturn in the building industry as the reason for its problems and it is hoped the business will be sold as a going concern.A poem dedicated to all loggers and haulers
When it’s cold and blowing,And the snow moves in, Then it’s time boys, for winter’s Logging to begin. Cut your trails wide, And clean for that forested big machine. Keep your saws running well And your chains always sharp. For that’s the payback of a logger, Who always is smart. Somedays may be too cold And others a real bitch, But for all of us loggers, who think That someday, we’re going to get rich. For all those mills who reap The harvest from all us loggers, Who work the hardest. The tree cutter and the skidder’s operator, The log loader and the big truck that will take’r. Across the frozen roads of ice and snow Up long hills and out to valleys below. For all us loggers, who someday will grow old We have to feed our families and Treasure our forests, as if it were our gold. We leave behind a well managed Stand of good quality timber That our children will manage. By Weldon Lehman, Eganville, Ontario, A truly dedicated logger and log hauler since Oct 1975, Source: The Working Forest Newspaper AFS responds to ABC ReportThe Australian Forestry Standard was referenced in a segment on the ABC's 7.30 Report on Tuesday 31st July 2012. The story, 'Planet Ark sails in to timber storm,' included some negative commentary on the AFS.In last week’s AFS newsletter they said “at no time has the ABC contacted AFS Ltd to research the segment or any of the opinions expressed therein”. The AFS Ltd Chairman has written to the ABC to address the unsubstantiated criticisms of the Australian Forestry Standard. The letter is available as a link on the AFS Ltd website. READ IT HERE. The content of the piece was largely focussed on Planet Ark and a detailed, considered response from Planet Ark to the ABC can be found on the Planet Ark website. CLICK HERE Jobs
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...and one to end the week on...the true impact of Australia's Carbon Tax
And on that contentious note, have a great weekend. Cheers. We welcome comments and contributions on Friday Offcuts. For details on advertising for positions within the forest products industry or for products and services, either within the weekly newsletter or on this web page, please contact us.
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Sent in this week by one of our Australian readers. And here we were thinking the lack of Gold Medals (this was sent in before the late surge at the end of this week) this time around was related to the training regime or a bit of bad luck. It was of course directly linked to the introduction of the Carbon Tax at the beginning of last month. Graphs like this just don't lie. 