NZ INDUSTRY HAS BEEN GIVEN AN OPEN WINDOW.
WHAT’S OUTSIDE IS NOT PRETTY.
LOG STOCKS AT CHINESE PORTS HAVE BALLOONED TO MORE THAN 8M CUB M
Towing the line… workers wearing face masks help a container ship to its berth at Qingdao port in
IT is very rare for a country to get a free look into the consequences of possible future legislation.
However, thanks to Covid-19, this is exactly what the New Zealand forestry sector – and importantly the NZ government – have been handed on a plate.
When the current government was elected in late 2017, it had a policy to support wood processing, even at the cost to the forest-owning sector.
We were advised that some senior new ministers were all for restricting, or even banning, log exports, a policy which had the enthusiastic support of the wood processing sector.
What stopped new legislation was advice from officials that such moves would be in breach of World Trade Organisation rules.
Well, in 2020, the industry and government are getting a ‘free’ look through the window of what log export restrictions or a ban would look like.
Covid-19 has delayed the return to work of Chinese sawmills.
Last week, one source estimated that the Chinese sector was processing only 15-20,000 cub m of imported softwood logs a day, instead of a normal rate of around 70-80,000 cub m.
No, or very low usage, has continued for a month since Chinese sawmills were due to go back to work on February 10. Most still have not returned.
Build up… this truck is almost hidden among piles of NZ logs for China. Photo: NZ Herald
But log deliveries to China have continued apace. As until recently, Germany kept pouring logs in via containers, and several bulk log vessels from New Zealand have continued to be loaded and dispatched, even though almost no sawmills were using any logs.
The result is that log stocks on Chinese ports have ballooned to more than 8 million cub m, compared with a ‘healthy’ stock level of say 3-3.5 million cub m.
Almost all Chinese ports are now ‘overfull’. This means stocks exceed official maximum storage capacity. Logs are stored in carparks and on roadsides near ports. And still New Zealand ships are sailing towards China, with expected long delays in unloading.
The impacts on the New Zealand log harvest and transport sectors are now being seriously felt. Half of the country’s logs harvested are exported – most to China – so when a serious (China-side imposed) restriction occurs, the impact on the NZ industry is devastating for thousands of forestry contractors and workers.
What is the difference between a China- side demand downturn and a NZ- side politically driven log export restriction?
One is showing us the disastrous impact to a very important NZ commercial industry. The other would do the same.
This ‘free window’ is allowing New Zealand politicians to reflect on the impacts of any future log export restriction legislation before they inflict permanent damage.
Let us hope they take heed.
Meanwhile, the New Zealand Forest Industry Contractors Association says contractors are reaching breaking point in an ever-worsening situation.
Many of the logging crews are unable to work because of supply-chain disruption in China.
“Rapid impacts had been felt over the past month by the industry with the effects of the outbreak of the coronavirus, with many out of work and in serious financial crisis,” NZ Forest Contractors Association CEO Prue Younger said.
Ms Younger said people outside the industry were largely unaware of the seriousness of the crisis.
“We need to have politicians, government officials and the public outside of forestry fully understand just how dire our sector of the industry is for our contractors,” she said.
“Logging and forest roading contractors who employ the bulk of the people and carry the highest debt have been hit extremely hard. The planting crews are the least affected for now, but their work will inevitably be impacted if depressed log prices continue long enough.”Ms Younger said the contracting workforce was more vulnerable than ever before in any previous market crash.
“As a consequence of the mid-1990s planting boom, far more of the national cut is now in smaller forests.
“Smaller owners have a short window to harvest and are far more sensitive to price drops than larger corporate forests historically were.”
Lay-offs were a direct result, she said, with hundreds of workers already laid off and more to follow.
The crisis was also affecting the transport sector, with logging truck drivers facing lay-offs as the harvest volumes dropped.