How to attract a new saw mill to central North Island
WHAT DOES NEW ZEALAND have to do to encourage overseas investors to build a new sawmill in the central North Island to use the region’s growing resource?
Just days after a delegation from New Zealand, including Minister Shane Jones, visited China to press that question, the subject was hotly debated at the 2018 DANA Forestry Conference in Taupo last month.
And to put it squarely into perspective, Mark Smith of Forest Investment Advisors (FEA), showed conference delegates the result of a survey of mills from different parts of the world that highlighted the cost of producing and then shipping lumber to Shanghai, putting New Zealand among the most expensive.
The reasons, he says, are partly due to the high net cost of wood here and partly to our high saw mill costs.
A consortium of Taupo business interests has proposed a brand new $86 million mill that could make use of the latest milling technologies, along with geothermal heat for drying, consuming 400,000 tonnes of A-grade logs per year, which could lower some of those costs and make it competitive to some of the best mills in South America. But no investors have put up their hands to back the project.
Meanwhile, China continues to buy huge volumes of lumber from Russia and other countries, including Canada and we’re also seeing timber produced in China from New Zealand Radiata Pine logs being exported back here and sold for less than we can produce it.
Sequal Lumber’s Executive Director, David Turner, who visited China with the Jones delegation, has some ideas on how we can convince the Chinese to get on board with New Zealand lumber.
He says we need to consider what is important to China and currently it’s about providing and then protecting the jobs of its people.
Mr Turner says that New Zealand needs to convince China that the primary processing of logs into boards is not going to disadvantage its own workers. He says sawmills employ a small number of people, but downstream processing into products such as furniture employs far greater numbers of people and delivers added value and that is what we should be articulating.
But he adds that anyone exporting timber to China faces an “unfair” market because China tips the balance in favour of its own wood processors with use of local taxes and other barriers.
New Zealand also faces huge competition from Russia, according to Dennis Neilson, who also visited China recently to observe the wood market.
Mr Neilson says around six million cubic metres of sawmill capacity has been commissioned by Russia in the last three years and another three million cubic metres of production will be coming in the next three years. All of it aimed at the Chinse market – and Russia has the advantage of being able to ship it easily across the border on rail wagons.
With Russia recently announcing that it will impose even higher taxes on logs exports, there will be greater emphasis on milling the wood in future, he says.
Hopes are still high of attracting investment in a new sawmill in the central North Island.