FM Group Newsletter
Autumn 2024
Introduction
FROM THE DIRECTORS
Welcome to the Autumn edition of our newsletter.
Our industry is enduring yet another log price correction and also a lack of investor interest in the establishment of new estate.
It must be noted that we are not like most other primary sector players, in that our forests can stay on the hill if we don’t feel comfortable with the returns. Trees do not have a shelf life and forest owners can defer harvesting until they are more comfortable with the market.
This current downturn does indicate that our harvest level is not sustainable. However, with the cyclone salvage almost complete, the reducing private sector resource, and the limitation of harvest from the East Coast, the reality is that harvest levels will not reach the levels of the last few years. The down side of this, the impact on people as businesses downsize or exit our industry.
We currently have over 40,000 people engaged in our amazing industry and the reality is that forestry has a very positive impact on rural economies and, also on the environment. Public perception however does not back this up, and we currently have a poor negative image, much like the “Dirty Dairying” tag that still lingers to this day. The challenge we face is to overcome this perception and get our good news stories out there.
Glenn Moir
Director
ETS - Carbon Price Update
The Emissions Trading Scheme (ETS) is a market-based policy tool designed to reduce greenhouse gas emissions by putting a price on pollution. Participants are required to buy carbon credits (NZUs) to offset their emissions. Each NZU equates to 1 tonne of carbon dioxide.
NZUs were volatile throughout 2023 with the NZU price trading between the low $30s and a high of $88.50. This volatility has continued into 2024 with the market initially opening and trading above $70/NZU.
During 2024 the government ETS auctions failed due to the bids failing to meet the confidential reserve price requirements. All eyes were on the first ETS auction for 2024 in March to see if demand had returned under the new government administration.
The March auction saw 3.525 million NZUs offered for sale with a minimum reserve price of $64 in place. The March 2024 auction
partially cleared with 2.974 million NZUs sold at the minimum reserve price of $64.
Following the ETS auction, we saw a reasonable amount of NZUs appear on the market and this selling pressure dropped the price as low as $49.99/NZUs. Prices have recovered slightly and are currently trading around the $55/NZU level.
Outside of the NZ ETS auctions we continue to watch for announcements that relate to the ETS. Of note of recent is the Climate Change Commission's ("CCC") recent advice on ETS settings that indicated that the stockpile was too high and that it should be resolved by reduc 9g future auction volumes. Consultation on this will now be undertaken by the Ministry for Environment which will be followed by an update from the government by the end of September.
Longer term, the fundamentals still point towards a higher carbon price being needed to drive the emission reduction change required to meet our 2030 and 2050 goals. The recent CCC recommendations have maintained consistency with proposing a pathway of increasing prices for NZUs supplied from the government auctions.
Source: https://www.commtrade.co.nz
Forest Management Group Amalgamation
Forest Management, Tasman Forest Management, and Forest Management North Island are unifying under one umbrella: Forest Management Group. This is a significant step forward in our journey towards operational cohesion and enhanced service delivery.
This consolidation represents a move aimed at streamlining our operations, maximising efficiency, and providing a unified experience for our valued partners and clients. By bringing together the expertise and resources of these three entities, Forest Management Group will be better equipped to meet the evolving needs of the forestry industry while ensuring safety, great local service and environmental responsibility remain at the forefront of our operations.
As Forest Management Group, we will maintain the same level of commitment to excellence, reliability and innovation that you have come to expect from us. Our unified structure will enable us to deliver seamless service, tailored solutions, and consistent communication across all aspects of our operations.
What does this mean for our Clients and Customers?
Enhanced Expertise: By pooling the talents and knowledge of Tasman Forest Management, Forest Management Limited and Forest Management North Island, we will offer a broader range of expertise and solutions to address your specific needs.
Value Optimisation: Our larger team will continue to create value for clients in the establishment and growth of forests and in the harvesting at an optimal time and to the highest value options.
Health and Safety: We will continue to be an industry leader in this key area on behalf of our contractors, clients and stakeholders.
Continued Focus on Sustainability: Our dedication to sustainable forestry practices remains steadfast. Forest Management Group is committed to upholding the highest environmental standards and contributing positively to the communities in which we operate.
Over the coming months, you’ll notice our signage begin to change over to the Forest Management Group logo but your local contact will remain the same.
We are excited about the opportunities that lie ahead as Forest Management Group and look forward to continuing our successful partnership with clients and customers.
Log Market Update
It appears that the hang over from Chinese New Year caused a significant lack of optimism, with prices in late March/early April dropping by $19-$20 USD. A lot of this was predicted but not the quantum of the drop, and it seems that now the China Inventory is sitting around 3million m3 mark rather than 5million m3 mark pre-covid days.
With shipping also dropping by $9 USD, this has meant the NZ at wharf gate prices around the country are now $15 - $25 lower than the month of March. While the party seems over in China, it appears now in late April we have possibly hit the floor with volumes slowing and demand uplift of inventory more consistent. This will take 2 months to recover, but this is now the world we live in.
It is also interesting to see Chinese timber processors looking offshore from China with the interest to export to the USA and other countries to avoid tariffs.
Other export destinations like India have followed China pricing on a NZD FOB basis and are likely to be dumping grounds for unsold NZ China parcels of volume. But it is encouraging to see confirmed sales into India occurring by the bigger forest companies. We will see shipments in April/May and June going to India, mainlyin packaging and construction grades like A, K, KI and KIS and not so much Pruned.
Our domestic mills are having a reasonable run after the disaster that was 2023. Construction seems to be holding up and some processors have a full order book for the next 3 months.
Pruned demand continues to be strong with clearwood products going into the US and Europe. This spreads market risk for forest owners who have been very reliant on the China market. To have up to 65% (from only about 25% of the forests recoverable volume) of the value coming out of pruned logs that do not end up in Asia.
Overall, we see Winter being quieter as China corrects back to reality from being speculative over the last 10 years. We can definitely see NZ volumes being less in the next 18 months due to the cyclone and areas of the East Coast being under a new set of rules for harvesting environmentally sensitive areas. The big question is ‘how much less’?
FM Group Coast to Coast Challenge
The teams did it!
The 2024 Coast to Coast is done and dusted. Two days of jam-packed adventure racing that pushed both teams outside of their comfort zone.
First and foremost, CONGRATULATIONS to the Young Crop on taking the victory!
Tree Huggers Team: Adrian Loo, Dave Chandler and Patrick De Jong.
Young Crop Team: Bridget de Vries, Dom Cleary and Michael Lilburne.
Day 1 started out with Patrick leading the run off the beach which gave Adrian a good head start on the bike stage. The Tree Huggers took the lead with Dave Chandler entering the mountain run stage first. The old(er) boys were once again celebrating their early victory! The celebrations were short lived as Dom showed that youth can beat experience. Especially when the challenge involves an over 30km run! By the end of day 1 the Young Crop team had a lead of just over 30 mins over the Tree Huggers.
Day 2 was the big day in the kayaks for Patrick and Mike. Mike started in the water first with Patrick chasing him down. After 4 and a half hours of kayaking both Mike and Patrick finished with a time of 4 hours 32 minutes for the kayak leg. It was all down to the final cycle!
Bridget took to the road first with Adrian on the chase. Adrian made the most of the tail wind and managed to catch Bridget. Head down, legs spinning was the tactic to try and take the win. At the end of the battle the teams crossed the line after 14 hours of racing with less than 5 minutes between each other!
Tree Huggers Team: 14:10:44
Young Crop Team: 14:06:18
Despite being in a battle of bragging rights both teams worked together all weekend to make sure the challenge was a success for all. Without doubt the teams would not have been successful without the help of the support crews. A massive thank you for their mammoth efforts over the two days!
FM Group Scoots for a Cause
We are gearing up once again for an exhilarating adventure with a noble cause at heart! Forest Management Group is thrilled to announce our participation in the Tranzalpine Scooter Safari for the second time.
On 18th May, our intrepid team will embark on a daring 250km journey from Christchurch to Hokitika, braving the freezing cold (and hopefully minimal rain) along the way, on our little 50cc scooters. With 9 enthusiastic participants from all 3 entities of our Group, we’re ready to rev up our engines and hit the road.
But this journey isn’t just about the thrill of the ride; it’s about making a meaningful difference. The Tranzalpine Scooter Safari is a Cancer Society fundraiser, a cause that holds a special place in many of our hearts. Every twist and turn in the road will be a testament to our commitment to supporting those affected by cancer and funding vital research and support services.
As we zip through the stunning landscapes and conquer the challenges of the route, we’ll be fueled not only by adrenaline, but also by knowing that we can help to make a difference.
Photos to follow in the next newsletter, and if you’d like to support our cause, your contributions would be greatly appreciated.
Here are our brave riders and their fundraising links:
From the Backpage
Welcomes and Goodbyes!
Grace Hughes
We warmly welcome Grace, who joined the Forever Forests team in Christchurch.
Grace recently graduated from Canterbury University and comes from a forestry family. She likes going to the gym, travelling and outdoor activities.
Andrew Dennes
We welcome Andrew, who joined the Forest Management North Island team as Harvest Manager.
Andrew is based in Carterton and knows logs from working as a log truck driver. Andrew spends his free time with his family and enjoys hunting.
Roan Shellock
We also welcome another graduate from Canterbury University Roan to the Forest Management team in Oamaru in the position of Harvest Manager.
Before starting with us, Roan was working as a silviculture labourer in Nelson. Roan is very active and likes hunting, fishing and sports.
Mike Lilburne
After two years with Forest Management, Mike Lilburne is ready to spread his wings and explore the world. From Coast 2 Coast and other sporting challenges to the daily camaraderie, his presence will be missed.
Wishing him endless adventures and success in his travels abroad!
Previous issues
Spring 2022 Newsletter
In this issue: Log Market Update, ETS – Carbon Price Update, ETS – Key Updates, Canterbury West Coast Wood Council Awards
Winter 2022 Newsletter
In this issue: Log Market Update, ETS – Carbon Price Update, Cancer Society Tranz Alpine Scooter Safari