Friday Offcuts – 27 March 2009

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In a lead story this week we report on the first sale of NZUs - and the world's first sale of forestry credits - that's just taken place. The 50,000 tonnes of 2008 NZU's sold at $NZ20 a tonne - subject to delivery of credits to forestry owners who have registered with the Emissions Trading Scheme. The parties involved in the transaction are both NZ companies, one a NZ forest owner. The transaction is quite significant in that it is believed to be the first sale of compliance forestry credits anywhere in the world. It's also likely to have price setting implications.

In a Carbon News story this week, NZ Forest Owners' Association chief executive David Rhodes says that his members have welcomed the sale. Rhodes said that many forest owners however are still waiting for the ETS review to be completed and for greater certainty around the allocations of credits before committing to the process of registering. It has also been reported this week that at least two significant owners of post-1989 forests are seeking to engage with Japanese emitters with a view of selling New Zealand sequestration units offshore as AAUs.

In another story this week we cover the basic differences between the Australian and New Zealand emissions trading schemes as they currently stand. If harmonisation of the two countries planned schemes occurs - as has been suggested by the Australian and New Zealand Climate Change Ministers last Thursday - then forestry and agriculture are likely to be excluded. What's more, it appears that Kiwi forest owners could well stand to lose millions if the scheme is confined only to the trans-Tasman markets. As detailed below, NZUs at the moment can be traded freely worldwide.

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Forestry credits sale marks world first

Carbon News 2009 reports that New Zealand's emissions trading scheme has had its first trade. The deal is believed to involve the first sale of forestry credits anywhere in the world, and is the first ETS transaction outside Europe.

The 50,000 tonnes of 2008 NZUs sold at $NZ20 a tonne, about 20 per cent down on the current price of certified emissions reductions (CERs, or offset credits from emissions reduction projects in developing countries). The deal is subject to the delivery of NZU credits to the forest owners who have registered for credits.

OMFinancial's Nigel Brunel, who brokered the deal, said that the trade signifies the real start of New Zealand's emissions trading scheme. "Many people seem to think that the emissions trading scheme is on hold, but it's law and it's operating, as this trade shows," he said. "It's important for people to see that real efforts are being made to create a liquid transparent market. This trade is the first step in that direction."

Brunel says that the units came from New Zealand forests. Neither the buyer nor seller wants to be identified, but Brunel confirmed that they are both New Zealand companies who have a desire to see a liquid carbon market up and running in New Zealand.

Brunel is not surprised that NZUs traded at a lower price than CERs, given the fact that CERs are liquid, global and fungible. NZUs can be traded only in the New Zealand ETS, but can be converted to AAUs (international units) on application. Forestry owners wanting to claim credits for 2008 must register with the Ministry of Agriculture and Forestry by 31 March. Source: Carbon News 2009




5 Australian Print Associations in new alliance

In Australia an alliance has been formed involving the Australasian Paper Industry Association, the Australian Catalogue Association, Printing Industries Association of Australia, Graphic Arts Merchants Association of Australia, and the Australian Direct Marketing Association under the banner Sustainable Print Alliance. The objective is to form a common platform for getting the positive messages of promoting the sustainability of paper and print across to governments, business, and community at large.

A common web portal is being developed to provide information on sustainability with the focus on "Print....the only sustainable form of communication". It will encompass information on forestry, pulp and paper manufacture, pre-press and printing, distribution / circulation, and recycling. A letter is also being compiled on behalf of affiliation members promoting the benefits of paper and print, targeting the top ASX 200 companies.


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AU$600 million timber lost in fires

An Australian newspaper is reporting that VicForests, the body that manages timber harvesting in Victorian state forests, estimates 25,000 hectares of "merchantable forest" was burnt in the recent fires and it that AU$600 million of timber and economic activity related to its harvesting was lost. The two most valuable commercial species were mountain ash and alpine ash. The company is reported to be hopeful of salvaging 10 to 20 per cent of the affected mountain ash and alpine ash trees.

In addition to these native forest losses, an estimated 18,000 hectares of plantation timber, eucalypt and pine, were severely burnt in the fires. The hardest hit plantation timber company was HVP Plantations, which lost 10 per cent of its estate, or 16,500 hectares of timber. The timber lost was worth tens of millions of dollars and the company is now working to salvage as much of the fire damaged wood as possible in as shortest possible time.


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New Zealand Log Prices - March 2009

New Zealand's log export markets continue to be affected by the global economic situation. The average in-market price for a KS log has dropped around US$15/JASm on last month to sit at US$80/JASm and spot shipping rates have increased US$5/m
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Other materials closing the green gap on timber

The Ecobuild event held in Earl's Court, London, from 3-5 March reaffirmed that environmental issues are likely to play a key role in the UK construction sector despite the economic recession. This year's show featured 800 suppliers from across Europe, a very impressive increase on last year's 500 exhibitors given the current climate. Over 30,000 visitors went through the show.

While timber maintains a strong reputation as the green material of choice, the Ecobuild show also emphasized that other material sectors are intent on closing the gap and are now scoring green points. The plastics industry for example highlighted the recent achievement of an A-rating for uPVC windows in the Building Research Establishment (BRE) Green Guide, now a key reference for green procurement in the UK construction sector. The A-rating means that uPVC windows are now regarded by BRE as just as environmentally-friendly as wood windows. BRE justified the A-rating at an Ecobuild side-event, pointing to the efforts of the plastics industry to recycle a higher proportion of windows at the end of their life-cycle.

BRE were also playing a leading role at Ecobuild to prop up the dubious environmental claims of the UK aggregates industry - which like the plastics industry has set its sights on undermining timber's lead on sustainability issues. The UK aggregates industry promoted itself at Ecobuild as "the Responsible Source", a claim largely dependent on their anticipated conformance to a new BRE "Responsible Sourcing Standard".

The process to develop the BRE standard, which was chaired by Tarmac - a large UK aggregates supplier - was rushed through despite stiff opposition from the timber sector to fit with the procurement timeline for the London 2012 Olympics (which requires that all materials be "responsibly sourced"). The BRE standard is now being used by the aggregates sector as a tool to neutralize the wood industry's sustainable source message. Source: ITTO TTM Report March 2009


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US$80 billion demand for green building materials

In 2008 the U.S. market for "green" building materials generated sales of almost US$57 billion, according to a study from the Freedonia Group, Inc., a Cleveland-based industry research firm. This market is projected to expand 7.2% annually to over US$80 billion in 2013, outpacing the growth of building construction expenditures over that period.

Although green building materials are expected to account for an increasing share of materials used, growth will be driven primarily by the recovery of the residential market through 2013 as it rises from its depressed 2008 level, notes Freedonia.

Forest Stewardship Council (FSC)-certified lumber and wood panels are expected to be the fastest growing green products, albeit from small bases. As the supply of FSC-certified wood grows, demand for FSC-certified wood panels is projected to more than triple between 2008 and 2013, growing more than three times as fast as the overall market for wood panels. Source: TLA


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Benefits of harmonising Tasman emissions schemes?

Harmonising the Australian and New Zealand emissions trading schemes could cause massive losses for forestry firms here and bring fuels into the scheme six months early. The joint officials' work into aligning the schemes, announced by the two countries' climate change ministers last Thursday, creates even greater interim uncertainty for businesses in New Zealand.

Senior executives have said that the level of uncertainty over what will happen to climate change policy is now too high. It is understood some have gone directly to ministers asking for immediate clarification. There is no guarantee yet that Australia's ETS, the Carbon Pollution Reduction Scheme, law will pass a Senate vote. In New Zealand, Climate Change Minister Nick Smith has not said that this country will have an ETS regardless of the outcome of the ETS review that is also considering a carbon tax, and neither Smith nor Wong have said what will happen if it fails to become law. They have not announced a deadline for officials to report either. The uncertainty is creating problems for New Zealand business. New Zealand's ETS is already law (albeit subject to a select committee review) with forestry already covered and the fuel sector due to enter on January 1 next year. Stationery energy enters on January 1, 2011, and agriculture in 2013.

The Australian scheme proposes having all other sectors to enter on July 1 next year, which could mean that the New Zealand fuel sector would need to be delayed six months and stationary energy (including electricity) brought in six months early. As the larger country, Australia is unlikely to immediately extend its scheme to include agriculture and forestry.

If the eventual harmonisation means a single scheme, then forestry and agriculture are likely to be excluded. This means New Zealand won't have a price on the source of nearly half its emissions (from agriculture). That infers a major transfer of wealth from taxpayers to carbon emitting farm businesses.

Alternatively, if Australia includes agriculture it won't decide this until 2013 and its earliest possible inclusion date there mentioned so far is 2015. It could mean deferring New Zealand agriculture's entry another two or three years.
One of the major differences between the New Zealand and Australian schemes is that NZUs can be traded freely worldwide. Under the proposed Australian scheme, set out in the draft bill released this month, the Australian units will be only traded internally, so if New Zealand adopts the Australian scheme New Zealand firms trying to sell NZUs will not be able to sell worldwide.

The Australian scheme also has a cap on Australian unit prices. In the first five years, an NZU, if able to be traded within a trans-Tasman market, would never be worth more than AU$40. This means foresters here who earn NZUs by retaining and planting new carbon sink forests, who would otherwise be sitting on attractive capital gains in a global market, will see those lost under a scheme confined to the trans-Tasman markets only. They stand to lose millions. Reafforestation rates are also likely to fall and an opportunity to cut the Kyoto bill reduced. Source: Carbon News 2009




Big gain for Australian pine plantations

In collaboration with the forestry industry, CSIRO has completed a $6m research initiative estimated to help generate between $400m and $800m of additional income from Australia's one million hectares of pine plantations.

The JWI project has greatly advanced the understanding of the interplay between genetics and environment in controlling juvenile wood quality and the transition from weak juvenile wood to the stronger mature wood.

"Dissecting the genetic causes of juvenile wood formation is essential to the forestry industry's ability to design new ways to reduce or improve juvenile wood in radiata, slash and Caribbean pines," says project leader, CSIRO Plant Industry's Dr Harry Wu.

The JWI project, which began in 2003, has tackled this critical problem of the higher proportion of juvenile wood in harvested logs by integrating wood science, quantitative genetics, molecular biology, and bioinformatics. "The increase in juvenile wood in pines bred for faster growth has caused concern in many countries," Dr Wu says. "A result of this is the decision by ArborGen - a joint venture of three international companies - to become a partner in the initiative."

Australian partners in the project were: the Southern Tree Breeding Association (STBA) and its members, which manage the national breeding program for radiata pine; Forest Plantation Queensland, which manages breeding programs for slash and Caribbean pines; and Forest and Wood Products Australia (FWPA). These partners contributed a total of A$2.56 million to the project.

The project's 15 primary scientific findings and examples of their adoption by the industry were presented recently at a workshop involving representatives from the pine plantation industry, FWPA, STBA, national tree breeding organisations and scientists from CSIRO.


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25,000 laid off by Caterpillar this year

U.S. heavy equipment maker Caterpillar said last week that it would eliminate 2,454 jobs, bringing to nearly 25,000 the number of layoffs the embattled company has announced so far this year. The Peoria, Illinois-based company explained that the headcount reductions were taken "to deal with a very challenging global business environment. "Depending on business conditions, more layoffs and separations may be required as the year unfolds." The company chalked up its sixth consecutive year of record sales and revenues in 2008, but posted a 32 percent in fourth-quarter net profit amid a sharp global economic slowdown.


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Billions fewer plastic bags handed out

UK shops gave out 3.5 billion fewer plastic bags last year under a voluntary scheme which has, for now, headed off the threat of a government ban on free carrier bags. Figures from Wrap, the Government's anti-waste body, show that the number of plastic bags dispensed fell from 13.4 billion in 2007 to 9.9 billion last year, a drop of 26 per cent.

Wrap said that when taking into account increased recycled content in the bags, the use of virgin materials in the bags had been slashed by 40 per cent, well above the 25 per cent target set in 2007. Supermarkets have now agreed a target of reducing the number of bags by 50 per cent - from 2006 levels - by May.

In the UK, 21 leading supermarkets and high street chains agreed in February 2007 to cut bag waste by 25 per cent. Britain's biggest retailer, Tesco, introduced loyalty points for customers reusing bags, helping slash the number of bags by two billion, and other stores such as Sainsbury's have moved bags from the bagging area, putting the onus on customers to request them. Source: SnippETS


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Review of Green Star Sustainable Timber Credit

The chief executives of the Green Building Council of Australia, Romilly Madew and Australian Forestry Standard Limited, Kayt Watts, last week released a joint statement regarding the review of the Green Star Mat-8 Sustainable Timbercredit.

The Green Building Council of Australia (GBCA) commenced a review of the Mat-8Sustainable Timbercredit last year, as part of its ongoing process to ensure the Green Star suite of environmental rating tools for buildings reflected industry best practice.

"The fundamental aim of the review of the credit is to recognise the value of all certified timber products and to promote the important role which the Australian timber industry plays in the green building supply chain,"said the GBCA's Chief Executive, Romilly Madew.

As part of the review, an independent Timber Expert Reference Panel of nine people was formed. It undertook the review of the credit and explored the establishment of a fair and transparent framework for assessment of forest certification schemes against international best practice criteria.

"This independent review of the credit, in recognizing the Australian Forest Certification Scheme and its elements the Australian Standards for forest management and chain of custody, is an appropriate and fair way of continuing to ensure Green Star recognises the needs of the forest industry while achieving positive environmental outcomes" said Chief Executive of Australian Forestry Standard Limited, Kayt Watts.

"This is a very positive step for both the GBCA and the Australian forest industry," Ms Watts added. Key industry stakeholders will be briefed on the panel's recommendations in the coming days and a public announcement of the changes will be made shortly after those briefing sessions and following final GBCA Board approval.


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FITEC National Training Awards opened

Nominations opened in March for the annual FITEC National Training Awards in New Zealand. There are 11 awards altogether including three forestry categories: Modern Apprentice of the Year, Trainee of the Year and Training Company of the Year. There is also an award for Outstanding Business Performance through People Development and a FITEC award to celebrate their best Training Leader of the Year.

FITEC has made it as easy as possible to enter. Just nominate your top apprentices, trainees and companies by completing a simple two-question nomination form by Friday 29 May. The nomination form is used to help FITEC create a short list. This is followed by an interview, which allows FITEC to determine the finalists. Then a judging panel of industry representatives will decide the winners.

The nomination form, eligibility and criteria are available by going to www.fitec.org.nz/events


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Real horse-power is back...

A UK paper recently reported on the comeback of horses - for logging. The story says that this logging is making a comeback - presumably on smaller woodlots - as it is now seen as a more environmentally friendly method than using tractors.

Horse-logging almost died out a few years ago. In 1994 there were only three full-time horse-loggers across the UK. Now there are 15, many more are working part-time and the skills are in such demand that a new apprenticeship has been launched. A logger using horses interviewed in the article says that he moves an average of 10 tonnes of wood a day with one of his horses and once moved 35 tonnes in one day.


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February US housing starts up 22%

Maybe A spot of good news on the horizon. U.S. housing starts in February were at a seasonally adjusted annual rate of 583,000, up 22.2% from the revised January estimate of 477,000, according to the U.S. Census Bureau and Department of Housing and Urban Development. In February 2008 the rate was 1.107 million.


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Jobs



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...and one to end the week on...children - brilliant

A mother took her five-year-old son with her to the bank on a busy lunchtime.

They got behind a very fat woman wearing a business suit complete with pager.

After waiting patiently for a few minutes, the little boy said loudly,

"Wow, she's fat!

The mother bent down and whispered in the little boy's ear to be quiet.

A couple more minutes passed by and the little boy stretched his arms

Out as far as they would go and announced; "I'll bet her bum is this wide!"

The fat woman turned around and glared at the little boy.

The mother gave him a good telling off, and told him to be quiet.

After a brief lull, the large woman reached the front of the queue.

Just then her pager begin to emit a "beep, beep, beep".

The little boy yelled out, "Run for your f***** life, she's reversing.




And on that note, have a great weekend. Cheers.

Brent Apthorp
Innovatek
PO Box 904
Level Two, 2 Dowling Street
Dunedin, New Zealand
Ph: +64 3 470 1902
Fax: +64 3 470 1904
Web page: www.innovatek.co.nz


This week's extended issue, along with back issues, can be viewed at www.fridayoffcuts.com

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