FM Group Newsletter

Log Market Update

It has been a challenging quarter. Wet conditions, Covid and Flu, a soft export market, and rising costs have all led to difficulties in harvesting.

Contractors have faced regularly volatile log prices, with reductions in volume to cut, ceasing harvesting altogether in some cases. Some regions have been fortunate to have fixed export supply contracts to insulate from this or a high percentage of wood able to be marketed domestically.

China has been in a weak position with daily consumption of around 60-65,000 cubic metres per day. Freight rates were exorbitant in May & June further decreasing NZD log prices.

Shipping congestion further added costs to the forest grower.

Domestic supply has remained strong and kept harvesting afloat in some instances. Pruned in particular is still in high demand, which enforces the idea of pruning young trees, possibly increasing market access and saleability in the future. However, the costs of pruning versus the premium achieved does raise some debate. The premium for pruned logs has increased to approximately $58 per cubic metre.

Below is a graph of “FMG’s Log Price Index” which is a stumpage value, calculated by applying average log prices (combination of export and domestic supply) and average costs (harvesting, engineering, cartage, etc.)

The Spot Monthly pricing is compared against the two-year rolling average, as a benchmark. Please note this has been used to show an overall indicator of the impact of log pricing.

Please contact the regional staff for more localised insight Current pricing is $21 less than the two-year average.

Forecast

June has seen the log prices bottom and now the market is showing improving conditions. We are seeing a trend of shipping rates reducing, some relief in the Foreign Exchange Rates, which will push the log prices in the right direction. August will likely see small increases in export pricing, and we anticipate September will see some further price increases.

Emissions Trading Scheme – Carbon Price Update

The carbon price throughout 2022 has continued to generally trend upwards. However, volatility has been present and the market appears to have been influenced by external factors such as the Ukraine war, rising interest rates and the volumes being acquired through the government NZ ETS auctions.

So far in 2022, there have been two government NZ ETS auctions. The first auction in March resulted in the sale of 10.5 million NZUs at $70.00 per NZU. The 2nd NZ ETS auction was successfully conducted on 15 June. 6.13 million NZUs were sold at a clearing price of $76.00 per NZU.

The NZ ETS auctions use a cost containment reserve method to suppress upward price movement. If the cost containment reserve is breached, this triggers more units to be released to reduce the auction clearing price.

In 2022 there were 7 million NZUs available at a trigger price of $70.00 per NZU to contain upwards price movements. During the June auction, all of the remaining cost containment reserves were sold, and there is no longer any volume available for the remainder of 2022. In 2023 the cost containment reserve price increases to $78.40 per NZU with another 7 million NZUs available.

Spot NZU trading activity has quietened since the last auction and NZUs last traded at $73 flat. Our trading exchange partners are reporting small volumes and light demand. We have continued to facilitate the sale of NZUs for forest owners and have been successful in achieving strong pricing in a low -demand market. Forest owners considering selling their NZUs will benefit from contacting us directly to discuss the options available to lock in a sale price at this time.

Looking forward we are still waiting to hear from the government on the governance consultation, forestry consultation (regarding exotics in the ETS), settings regarding auction volumes, changes to the cost containment reserve and the He Waka Eke Noa response.

We will keep you updated as announcements are made!

Emissions Trading Scheme

Forest Management Group has been involved in working with the Emissions Trading Scheme (ETS) since forestry became a participant in 2008.

Carbon in forestry adds a significant new income stream to traditional forest investment. The carbon market holds huge potential for forest owners as further industries are required to offset their emissions.

Forest Management Group offers specialist services in the ETS and can undertake work in a variety of areas including:

• Mapping of potential ETS eligible areas

• Registering post-1989 forests into the ETS

• Managing carbon flows to understand repayment obligations

• Planning and managing new planting projects

• Establishment of joint ventures

• Carbon forecasts and advice

• Carbon credits sales

Cancer Society Tranz Alpine Scooter Safari

The Scooter Safari is a fundraising event where 250 motorized Scooters ride 250kms coast-to-coast over the Southern Alps from Christchurch to Hokitika to support the work of the Cancer Society in our communities.

It's an awareness-raising and fundraising event and includes survivors, their whānau and friends and those just wanting to support and make a difference. Our team raised over $11,000 for the Cancer Society. The whole event raised over $370,000 which is an impressive effort from all involved!

The Forest Management team had an adventurous day filled will challenges, victories and good banter. If you want a good yarn just ask Corban how his scooter went up Porters Pass (or any of the following uphill sections…).

Well done all the riders involved; Glenn, Adrian, DC, Corban, Lou, Debbie, Iain, Evan and of course the amazing support crew who kept the fuel full and the wheels turning!

Here are some photos from the big day out. Roll on the 2024 event with an even bigger Forest Management crew!