The Invest in New Zealand Wood Processing prospectus is part of the Government’s initiative to boost investment in the forestry and wood processing sector, particularly in regions with fewer job opportunities.
Compiled by Trade and Enterprise and championed by Forestry Minister Shane Jones, the prospectus provides a resource for foreign investors outlining key forestry regions, timber volumes, processing capacity and Government help available.
Its release coincides with Jones’ log traders registration bill now before a select committee.
The bill aims to introduce compulsory registration for forestry advisers and log traders, lifting standards and providing greater certainty for investors in domestic processing plants that log supply will be guaranteed.
Bit Wood Processors and Manufacturers Association head Dr Jon Tanner said it will take more than either the bill or the prospectus to drive greater investment in domestic processing.
“The prospectus has everything you would need and is a great resource. However, it doesn’t tackle the elephant in the room for the domestic wood processing sector. That is the expensive log supply in NZ,” he said.
The premium paid by export markets, predominately China, means local processors must match it, pushing an additional $20-$30 a tonne into domestic raw material costs. One key reason for the premium is because domestic processing in export markets like China, accounting for almost two-thirds of logs traded, is subsidised.
Tanner commended NZTE for its effort on the prospectus.
“But forestry sectors overseas are basically government-owned and NZ has a fundamental problem. We have difficulty competing in that subsidised environment.”
And there is a risk of even more subsidies as countries use the covid epidemic as a reason to support local industry and protect jobs.
Export Trade Minister David Parker said nearly 80 World Trade Organisation members notified more than 100 new barriers or restrictions in March, a worrying direction of travel.
Tanner said there are no specific investment plans for plants he is aware of but if the ventures are profitable investors will invest regardless.
“Most of our members will tell you they are only making about 25% of what they should be on the investments they have.
“When you have a premium of $20-$30 a tonne for export logs, who would come here? We are caught by things beyond NZ’s control.”
Despite that, the industry has significant potential to reach Jones’s goal to support a transition to a low-carbon economy and grow opportunities in provinces.
“We have processors that are already powered 70% by their own fuel and there is plenty of work done on processing opportunities.”
NZTE investment general manager Dylan Lawrence said the agency has noticed an uptick in foreign interest in wood processing investment in recent months.
“When we have two-thirds of our exports going as whole logs, obviously the availability is there to do more.
“This is a tool for our investment managers offshore to go and have a discussion with potential investors.”
He appreciates NZ is competing in a subsidised global processing market.
“But there will still be some investors who can make it work and we don’t need everyone coming here. Only a few investors coming here will have a massive impact.”
The release of the prospectus coincides with an initiative for investment in wood processing in Gisborne.
The area has had rapid growth in forestry plantings but only two significant processing plants and some smaller mills.
As the second-largest plantation area in NZ it has the potential to increase its wood supply by 15% over the next 15 years to 3.5m cubic metres.
Limited rail access means focus has gone on port expansion to enable twin berthing at Gisborne’s port. The region has also had investment of almost $20m in a regional wood processing centre of excellence.
MORE: Read the prospectus at bit.ly/woodprospectus
