By Don Carson, Communications Manager, Forest Owners Association
The Forest Industry Transformation Plan is the biggest game in town for the industry at the moment.
It’s one of the government-initiated plans, with another significant one for farmers being the Strong Wool Transformation Plan.
On the surface, both industries have been lagging for decades, neither appearing to make much progress to add value in New Zealand, but instead continuing to export raw wool bales or logs respectively for processing somewhere else.
Inside both industries huge efforts have been made. It’s not been for want of trying. But the obstacles of such barriers as tariffs overseas against added value products, and lack of confidence in investment here, have held back progress.
Behind all such ambitions as well, is the fundamental understanding that to add value can simply result in adding greater cost.
The core goal of the Forest Transformation Plan is to process more wood here in New Zealand. That extra production can go in two directions.
More consumption here in New Zealand is the first. Demand for timber has been stable for decades. There are occasional shortages but generally the demand is met.
More consumption can again go into two different immediate outcomes. The first of these is to use more wood in construction. Modern Engineered Timber has a huge and now being realised potential to be used in medium and high-rise office and factory construction. Every second new air terminal in New Zealand is now mostly made from timber.
The other unrealised immediate potential for wood use here in New Zealand is as an alternative to using petrochemicals for heating. The lead here has been our dairy processors, who, driven by overseas customers with environmental wish lists, want out of coal and into biofuels.
Drying the $11.5 billion of dairy powder products each year takes a huge amount of energy.
One irony is that the dairy companies may finish up competing with their own farmer suppliers, who want the very same supply of wood chip for stand-off pads.
The other output of extra processing here is obviously export. Nearly half the log harvest in New Zealand is processed here and most of that processed for export.
The US, for instance, is our major sawn timber market. Australia is our most important paper products market.
But with worldwide wood demand predicted by the Food and Agriculture Organisation to grow four-fold by 2050, other markets are obviously there.
India is an obvious example. It’s predicted to be the third most important economy in the world by 2030. New Zealand hardly exports anything into India – it’s not in our top ten primary product export destinations. High tariff walls is one reason, but that can’t last for too long into the future.
For New Zealand’s provincial centres the main interest will be in attracting investment into the processing required for these visions to become real. Some processing will be on a large scale and with different processing operations working together within the local district.
Others will be smaller and more niche. All will provide employment. All will benefit from local feedstocks of the raw material – wood.