Poyry provides alternative view to FIMO 2014 delegates

Friday 2 May 2014

At FIEA’s thought-provoking Forest Investment & Market Outlook 2014(FIMO) conference series earlier this month, Brian Johnson from Pöyry, Auckland and Dr George Goroyias who leads Pöyry’s Asia Pacific Wood Products business put forward an interesting slant on the opportunities for the NZ wood processing industry.

Johnson says “Pöyry’s view is that the NZ wood processing sector could capture a competitive position in the Asia Pacific region by adopting an alternative operating model. The high expected growth of lumber and panel demand in China in particular, provides a major opportunity for NZ to capture additional value from processing.”

Pöyry’s view on the expected reversal of MDF trade flows (China becoming a net importer within 3-5 years) creates the business environment for NZ to develop the right operating models to capture the lumber and panel opportunity.

Whilst Chinese sawmills currently have the highest wood paying capability globally, it was highlighted that horizontal and vertical integration models can lead to higher returns on investment domestically. Although scale is very important for competitiveness in panels, Pöyry clarified that for sawmilling scale is only part of the answer.

The Oceania wood processing sector is constrained by the size of the local structural lumber markets. Therefore, the traditional operating model is not the answer for expanding the domestic processing of logs. Pöyry believes that what has to be developed is a non-structural based technical concept combined with integrated residue using processes on a common site.

Johnson added, “This could be further enhanced by clustering these operations around geothermal sites as suggested by Scion“.

Pöyry believes that a number of benefits will arise from reducing supply chain costs, capturing economies of scale and additional downstream margins. The integrated model is well proven in Europe with highly integrated mega-sites clustered around furniture and sawmilling. For this model to work, scale must be matched to the concentration of resource within an economic radius as has been done in Latin American, where forest plantations are developed in conjunction with a specific processing cluster.

Because of the New Zealand forest ownership structure, the European model is seen as a starting point for developing a customised NZ industry model. This model would also provide the opportunity to develop high value added technologies (biotechnologies, biochemical) around the traditional processing operations.

Pöyry believes that only through this new approach can New Zealand improve Radiata pines position in the value spectrum and create additional value for all domestic stakeholders.

Source: Pöyry (Poyry Management Consulting (NZ) Ltd

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