FOREST TALK

Some crews laid off but forest owners back others; contractors encouraged to access support; FICA seeks meeting with Ministers over downturn; what (if anything) went wrong in China; worldfirst robotic log truck scaling starts in Tauranga; scholarships for forestry women; US fixed head felling shears launched in NZ; Welier forestry brand to arrive in NZ early in 2020; female forestry training programme receives PGF boost; Fogmaker is a machine saver.

IT’S GETTING TOUGH FOR LOGGING CREWS operating in woodlots across New Zealand with many finding themselves out of work because landowners have halted harvesting.

But forest owners and managers are desperately trying to keep as many crews as they can in work for fear of losing them altogether should the sudden downturn become a protracted slump. Meanwhile, most of the larger, corporate forest owners are maintaining existing harvesting levels to keep crews active.

It’s been a tough month across the industry. The sudden price drop at the end of June shocked some buyers of our export logs to put their purchases on hold while they figured out where the price would end up. When the dust did settle, buyers who came back into the market were offering considerably less than at the price peak – down from a high of around US$140 to as low as US$100-$105.

Effectively, those lower price levels put many marginal woodlots into the red or severely curtailed income and many owners elected to stop harvesting altogether or put plans on hold.

PF Olsen, which runs a mix of woodlot and corporate forests in its portfolio, says it is working with contractors to try and manage the situation to avoid laying off crews unless it is totally unavoidable.

“We are doing our absolute best to minimise the effect on the wider industry,” says Te Kapunga Dewes, CEO of PF Olsen.

“Through leveraging the corporate forest component of our business, we have been looking to support some of the affected woodlot crews and ensure they have some work. It is very important for us to try and maintain that continuity.”

For some woodlot crews, such a lifeline has not been possible to provide, adds Mr Dewes and “regrettably there have been some terminations and they understand the situation”.

They could be joined by more crews soon, as a number of current harvesting jobs come to an end and new blocks that were to have been started are likely to be put on hold.

“We have some of those coming up for completion by the end of August,” says Mr Dewes.

To help absorb some of the effects of the decline, PF Olsen has also begun a “robust conversation” with all of its contractors still working about cost controls, in preparation for a prolonged period of low log prices and uncertainty in the marketplace.

However, Mr Dewes says the situation is “not as bad as it’s been painted” and prices appear to have bottomed out and even risen slightly. But he still believes harvesting volumes will dip 10-15% as the industry adjusts to the new pattern.

Manawatu-based forest manager, Forest360, deals with a number of private woodlot owners and some have also curtailed harvesting operations following the price slump.

“We are probably down about 30% across our supply base – we’ve had to lay some crews off,” says CEO, Dan Gaddum.

“Anyone supplying into the domestic market, those owners and those crews are in a lot better position than those who are export focused. The domestic market guys have been very good in not taking advantage of the situation.”

Mr Gaddum says remaining crews have been put on quotas and there is a major focus on savings costs, adding: “We’ve asked all our suppliers to come back to us on various things around roading and other areas – that’s over and above what we do as part of our everyday business.”

He’s not sure when the market will return to normal: “I suppose the question is ‘what is normal’? You could argue that the last couple of years haven’t been particularly normal.

“If you look at the last two years versus the last five on an average price basis, I think we have overshot the equilibrium point. Barring some unforeseen uptake in demand there is nothing to show we are going to get back to $140 again. That’s a forgotten era now.”

Rayonier Matariki Forests has a small number of crews working in woodlots that it manages on behalf of owners who have asked for harvesting to stop.

“It is very challenging in what we do with those crews and how we manage that – we are dealing with it on a case-by-case basis,” says Brendan Slui, Managing Director of Rayonier New Zealand.

“For the crews harvesting in Matariki’s forests we have agreed that there will be no over-cutting. We have set production rates and we need the crews to keep to those levels.”

As with most large forest owners, Rayonier Matariki Forests has supply agreements with many local mills and Mr Slui says those volumes are constant, which “allows us to continue through these difficult periods” while trying to manage the volatile export business. Rayonier Matariki Forests exports its own logs and its marketing team recently returned from a trip to China to report on the situation.

“It’s still difficult up there, the demand is slow and we are unlikely to see any movement in demand until late August at the earliest,” says Mr Slui.

“However, we are more confident now than we were a couple of weeks ago that things have bottomed out and steadied.”

For Hancock Forest Management, the largest forest owner and manager in New Zealand, there has been no change in the way it is harvesting at present.

“We are continuing to operate to our plan at this point in time and have given no additional instructions to our contractors or transport suppliers that anything will change until further notice,” says HFM’s Bill McCallum.

“We will continue to assess the situation. One of the options we have is to bring our contractors back to their target and to prevent any over-production, which might inevitably lead to having to stand crews down.

“We haven’t put that in place now but it would be a possible and probably likely next step but we won’t be making that decision yet.

“Our plan is to maintain a competent and capable employee and contractor workforce and for what we see as a typical commoditytype cyclical situation – we are playing a longer game. We are not going to do anything rash.”

Mr McCallum says the new, lower prices “aren’t that bad” and he believes we could see them at this level for some time before

there is a recovery.

Timberlands also says it has no plans to reduce harvesting in Kaingaroa Forest at this stage, unless the downturn is prolonged.

Forest owners in the lower South Island are keeping a close eye on developments in China to gauge how to react over coming months.

Southern Wood Council Chairman, Grant Dodson, says the ‘estate’ forest owners have been less affected than small woodlot owners.

Dunedin’s City Forests, which he manages was not considering laying off any staff yet, because it has the ability to ‘moderate and adjust production to suit on different blocks for what customers want, which may mean [cutting] Douglas fir instead of Radiata’’.

Wenita Forest Products CEO, Dave Cormack, is expecting ‘’a couple of difficult months ahead’’ but says Wenita is ahead of budget so would cut back on buying at the wharf gate and ‘’pull back’’ its production levels for the next two months, but there are no plans to lay off staff.

Around 20 crews have been stood down in woodlots in Northland, while several larger forest companies have instituted 10% quotas. This has led to shortages of some structural logs for local mills.

Log transporters are not expecting major cutback to their operations, given the shortage of drivers they have been experiencing recently.

SteveMcDougall, CEO of Manawatu-based McCarthy Transport, says: “We’ve had very little disruption and only with the woodlot operations which is about 30% of our work, however they’ve put crews on restrictions, not laid any off yet.

“We’ve reduced our sub-contractor use and haven’t – nor do we want to – lay any truck operators off. It’s taking us almost six months to get our infrastructure in place to service the growth in our region the last thing we want to do is start again.”

Meanwhile, Williams & Wilshier says it’s Bay of Plenty operations are still busy, but Gisborne continues to be affected more by shipping issues that saw a run of port closures since May that prevented ships loading.

“We are having to cart to Napier or park trucks up for a day or so,” says Warwick Wilshier, CEO of Williams & Wilshier.

“We won’t be laying people off and are still looking to recruit more.”