NZ TIMBER
It would be an understatement to say that Tenon has been put ‘through the mill’ in recent years, after enduring the collapse of its mouldings business in the US, the Global Financial Crises, ownership changes and reduced supplies of pruned logs. But now the Taupo mill is buzzing and making plans for a brighter future.
THE FUTURE FOR THE TENON operations at Taupo is looking much clearer these days. But that wasn’t always the case.
The business has been on a rollercoaster ride over its 51 years of existence, with various ownership changes, including an uncomfortable period under the public glare when listed on the stock exchange, which also coincided with a torrid time during the Global Financial Collapse (GFC).
Now back in private ownership and away from the spotlight, Tenon is performing strongly, and quietly getting on with what it does best; producing some of the finest clearwood boards on the planet and selling them to a range of international and local buyers.
The company is very clear about the importance of its products, having
registered itself as the Tenon Clearwood Limited Partnership, under the strong committed ownership of a group of US and New Zealand investors.
Being the largest producer of clearwood products in New Zealand, why wouldn’t you want to highlight your hero product in your company name?
And contrary to some opinions within the forestry industry, as a result of reduced intentions to prune trees by a few forest owners, the people at Tenon believe there is a very bright global future for clearwood products made in New Zealand and the company is putting its money where its mouth is with upgrades to production facilities to improve processes.
We’ll come back to that contentious pruning issue shortly, but first to the recent changes at the mill, which were still being bedded in when NZ Logger / NZ Timber called in last month. This involved the installation of an USNR full colour scanner at the trimmer over the Christmas and New Year period to enhance quality. It’s one of a number of changes made at the Taupo plant in recent years to take advantage of new technology.
Originally set up as a sawmiller making industrial grades in the 1960s by Fletcher Timber, the business then converted to become a specialist manufacturer of mouldings and clear products under Fletcher Challenge, using the pruned supply coming out of Kaingaroa Forest, next door. This was targeted at the huge US new home market in the 1990s and became very successful.
But as the GFC decimated world economies in 2008, it caused new housing starts in the US to plummet from an annual rate of 2.2 million to just 500,000. At the same time, there was also a trend away from traditional mouldings in the market.
It hit Tenon hard and General Manager, Mark Taylor, says: “It really forced us to reconsider the wisdom about having such a big egg in a single market. We’d seen a lot of growth over a number of years, but then an unprecedented decline in a very short period of time.”
A full review of the business resulted in Tenon dropping production of mouldings to concentrate on producing clear boards from 2012 and going from a four-shift 24-7 operation down to three shifts, which helped the company return to the black.
That move was in recognition of a trend towards more varied use of timber around homes and in other applications. But it also underlined one of the key points
of difference about New Zealand-grown pruned Radiata Pine. Compared to pine grown in other countries, New Zealand trees are bigger and produce wider and longer clearwood, which appeals to a number of international customers.
“The boards market has become much more important because it’s stable and strong in terms of demand, and ultimately, it meets the price point that enables the whole pruning equation to work,” says Mark.
Tenon still sells a lot of its products into the US, where it now has many enduse applications including hobby boards, shelving and also in the manufacture of windows and doors. An interesting and ironical trend is a move to the use of cleaner
square-dressed wood for mouldings. Tenon has also found demand for LOSP treated and primed wood in the US northeast for trim to replace extruded plastic as a result of its superior performance (treatment and priming is done off-site in Taupo under contract).
Furthermore, Tenon sought to differentiate its products from other wood suppliers by capitalising on its Lifespan Solid Select brand of exterior wood products, that had been launched in 2006 and it’s now become a point of difference for customers seeking quality solid lumber for key projects.
In a bid to continue its global expansion and spread its risks, Tenon has been targeting other markets, including Europe, where it is making inroads against very tough odds, including Finland, possibly the furthest market from New Zealand and one that also has its own significant wood resources.
This is based upon targeting the increasingly important modified wood market, where Tenon sees New Zealand Radiata Pine having a clear advantage over many other species. And it’s this
emerging wood modification technology that is likely to become the basis for the future success of clear Radiata products in the future.
Tenon’s Technical Development Manager, Wayne Miller, says: “It was really when wood modification started to take off, and the recognition that Radiata Pine had a number of unique properties that made it very favourable for modification, that we started to get traction in Europe.”
He says Radiata accepts modification – both thermally and chemically – more easily than many other types of wood and the resulting appearance and performance are excellent.
This has led to an increasing supply of clears from the Taupo mill to key wood modification businesses in Europe, where it is sold as a replacement for hardwood species in various exterior and also interior uses.
The Tenon team sees wood modification growing exponentially in the coming years, not just in Europe. It's already seeing growth in sales of modified products across the Pacific rim including Australia and the West Coast of the US.
That belief is built upon dwindling availability of sustainable hardwood supplies in the future and the need to find a suitable substitute – and modified wood is ideal in that role.
The elephant in the room, however, is being able to source sufficient supplies of pruned Radiata to meet that future demand. This has been undermined to some extent recently by Timberland’s decision not to prune its trees anymore, in addition to some other forest owners.
Kaingaroa is a major source of pruned logs for Tenon and that’s caused the company to look further afield to secure ongoing supply when its neighbour runs out within the next 15-20 years.
“We have a plan that we are very comfortable with as to how we will manage this moving forward, even though it’s a long way out. There are a number of options available to us,” explains Mark.
“For those forest owners who are interested in providing long-term employment – not just cutting the tree down, but through several phases from planting, pruning and ultimately logging, as well as the potential employment opportunities from local wood processing jobs – the reality and advantages of having a mix of different regimes in their forest makes good sense to them. We’ve been talking to our current suppliers and potential suppliers, sharing our story, helping them to understand there is this emerging market in Europe, that there is continued demand out of the US and that there are customers around the world that truly value wide, long length Radiata clears and are prepared to pay for it.
“This is helping them make decisions on how to run their forests in the knowledge of not just hearing what one or two others are doing in not pruning, but by actually seeing what the end-market opportunity is, and hence the value that can be created for the forest owner from a pruning regime. The feedback to date has been very encouraging.
“We know what’s in front of us harvestwise. We know how that is likely to be split by region and we know what we need to do to continue to operate like we do.
“For example, one action we have taken is to expand our supply base options, and in this regard we have been pleasantly surprised by the number of southern contractors who actually welcomed the opportunity to supply a large-scale operation like ours and we’ve always said we are open for business 24-7. If someone has got 30 loads they want to sell us we can buy it and that will be gone in a shift. If someone’s got 5 loads we can buy that as well. So, for some of the southern forests that we’re buying from now they’ve really welcomed the ability to supply Tenon.
“That has allowed us to form some better relationships and while some of it is about price, it’s also about other things. Getting wood to the port is not as easy as it sounds – there are some constraints in getting the
product through the wharf. Being able to demonstrate to their customers that they have an extended supply base and one that they can rely on is helpful.”
The Tenon team also believes that the current no-prune sentiment among some forest owners may change in the future.
“It may stack up for them in the current environment, but we all know that forest ownership is a long-term game and circumstances can change dramatically and quickly, significantly altering the economics of decisions made today. You need to look out 30 years and ask if the same situation that we’ve got today is likely to be around in 30 years. I think you are drawing a really long bow if you expect that to be the case,” says Wayne.
“Will growing low grade logs/lumber and sending them anywhere, not just China, be acceptable? I think it’s high risk. Unfortunately, some people look at Kaingaroa and simply say if they are not pruning why should we. Some of the particulars of Kaingaroa are that they are very efficient essentially from the stump to the boat – sorting pruned logs and putting them on a logging truck and sending them to the likes of us is a much higher cost operation. We understand that. But other companies that don’t have that same sort of infrastructure have got a completely different set of economics.
“We hear that pruned logs need to be at a certain price relative to A-grade export to make it worthwhile and until they get that price they are not going to prune and currently we’re not there but it’s getting close. From our perspective, we look at that A-grade price into China and we believe it is artificially higher than it should be for the quality of the wood and the uses it goes to. That’s due to a whole number of factors but largely it’s down to subsidies from the Chinese government to support their own manufacturing. It’s artificial and our argument is that it isn’t sustainable. It will change and it’s just a matter of time.
“If you look at what clearwood offers, particularly in the modification area, I can only see that growing. The world has less tropical hardwoods and if you look at what’s available in durable, sustainable hardwoods the world is rapidly running out of it. They are really dwindling. And what have you got left – you’ve really got modified wood. Some of that will be other species but we know that Radiata, if it is available, will be the species of choice.”
The Tenon team aren’t sitting on their hands waiting for that day. They’ve been upgrading the plant at Taupo to make sure it becomes more efficient and produces even better quality clears, regardless of the timing of future developments.
The sawmill, in particular, needed more investment. A new optimising board edger was installed and commissioned in Sept 2015, followed by a SystemTM and Microtec scanner, cross-cutting and stacking line in the secondary processing area. The USNR equipment now being bedded in was another logical step. There’s more planned for the future.
“The ownership group is committed to seeing our operations expand and grow – investing in processing technology is a critical part of this mandate” says Wayne.
A quick tour of the plant begins with the break-down saw that has been working for half a century, now electronically controlled
with full shape scanning by operator, Junior Motautia in an air-conditioned cab to one side. Junior has been with Tenon (and its predecessors) for 30 years and doing this particular job for 19 years. His skill and experience, aided by sophisticated technology, ensures much of the log’s value is captured at the start of the process.
That value is further enhanced at each of the following phases, through to where the timber is assessed by the new USNR scanner on the trimming line resulting in a myriad of options, from 45mm to 290mm widths and long lengths of up to 5.4 metres.
The progress made by Tenon over the years is illustrated in an eerily quiet building towards the end of the production line. This is where timber that doesn’t quite make the grade is reworked into products. The reason it’s quiet today is because there is much less work thanks to better quality decisions being made through the introduction of scanning technology in the upstream operations – it’s currently working just four days a week.
“It will come down further as we make additional investments in optimisation and materials handling,” says Mark.
Workers in here are redeployed in other parts of the plant when this area isn't operating. Currently, Tenon has 265 staff, plus some contract workers who operate loaders and forklifts.
One surprising sight is the line of nine static drying kilns, rather than the latest continuous kilns that are currently in vogue.
“Drying is all batch operations and for us, batch works pretty well – they are big kilns,” explains Wayne.
“We’ve looked at continuous kilns and for us it doesn’t logistically fit well with our existing structures and product flows.”
All the kilns are fed from the geothermal field right next to the Taupo plant, which Mark describes as a fantastic resource.
“It’s enabled us to unlock the true potential of the kilns – the ability to dry like we do today has only been possible through the geothermal and that’s not because we are drying faster or more aggressively, in fact we’ve gone the opposite,” he says.
“What the geothermal allowed us to do was operate all nine of them as though there was only one. We can start several kilns at the same time whereas before we were always trying to stagger or stage start-ups. We have actually become less and less aggressive or kinder to the wood in the drying process versus how we may have dried 15 years ago.
“One of the challenges with Radiata is effectively being able to dry the thicker sizes and we’ve had some really good success. Feedback from customers who are very focused on wood quality say the measures made in drying the thicker sizes have been really positive.”
Tenon also goes to great lengths to ensure its overseas customers receive their timber in exactly the same condition it left the factory. Timber is packed carefully into containers and large inflatable air bags are pumped up between the vertical stacks so they don’t shift in transit, thus avoiding damage. More than 200 containers leave the site every month.
And with the environment and wastage in mind, plastic wrapping has been reduced to a bare minimum, which has also pleased customers.
The tour stops – somewhat fittingly – where the off-road highway road from Kaingaroa Forest also ends, at the log yard. Here, single loads of up to 100 tonnes arrive on a regular basis out of the forest, but the future will see a greater mix of on-highway trucks arriving from other areas.
Just one more change in a string of changes at the Taupo mill over the past 51 years. What is very clear is that there’ll be more changes ahead.
NZL