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Log exports to drop by more than a third

27 October 2021

Major changes are looming for the New Zealand forestry sector as the deluge of raw log exports fades amid dwindling supplies and demands increase from the building industry and other users. An industry report by investment house Forsyth Barr suggests the mainstay of the industry, log exports, will peak and then drop by more than a third within a decade.

“Export volumes will peak by 2026 then decline as insufficient planting activity after the 1990s boom means total harvest volumes will fall,” report author and head of research Andy Bowley said. “The use of wood domestically is undergoing a transformation through the use of trees to sequester carbon, power boilers and as a low carbon building material alternative.”

He said that would see the medium-term outlook driven by small forestry owners, who would influence export log volumes depending on demand and supply chain constraints.

Another wild card is the government’s plan to change the industry towards more domestic processing and higher value processed products. And a shift to net-zero emissions will further change industry dynamics as moves to biofuels and carbon sequestering may spur more planting and higher prices, but not for the export trade as it currently operates.

“Over the medium term this could be detrimental to export volumes but over the longer term could be very beneficial,” Bowley said.

Small forest owner’s rule – for now

Forestry Owners Association chief executive Phil Taylor said small forest owners would remain influential in the short term.

“Back in the 1990s, it was the small forest owners who largely developed or established new forests on the back of very strong markets at that time, so they currently represent quite a significant component of the harvest volumes coming out of New Zealand.”

He said small forestry owners would be harvesting many of the export logs in the near term, but that could change depending on market conditions. “Typically, the small forest owners have one opportunity in say, 28- to 30 years, to optimize the return on their investment so they are very sensitive to what’s happening out in the market, and they have the ability to either to harvest or stop harvesting at very short notice.”

Taylor said large owners had needs to fill production and earn cash which would see them weather out market downturns. But he said bigger challenges to the sector loom on the horizon with ambitions to encourage more local processing. “We may actually see a high proportion of the logs that are currently exported processed domestically, and then exported as a higher valued product.”

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Source: RNZ

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