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Replanting must be addressed

New Zealand log exports have nearly doubled in the past year but some in the industry are concerned a lack of replanting is threatening the industry’s future. Sources: Fairfax NZ News,

In 2013, New Zealand exported NZ$5 billion of forestry products, NZ$500 million more than the previous year, largely fuelled by insatiable demand from China’s ongoing construction boom.

Forestry continues to be the third-largest goods export after dairy and meat. But there are questions about who will buy into replanting New Zealand’s forests of the future as existing investors nearing retirement look to harvest trees and cash in on investments made in the early 90s.

Plantation company Ernslaw One’s environment manager Peter Weir said about 40% of New Zealand’s new harvest belonged to investment syndicates which would be looking to harvest leading up to 2020.

“They invested for their retirement and they have no strong incentive to replant that land,” he said.

He estimated about 40% of New Zealand’s new harvest was owned by such investors.

This would result in about half a million hectares of land becoming available on the market after these investors harvest.

New Zealand is in the top three log exporters in the world and becoming increasingly favourable as a supplier as more North American logs go towards its own construction growth and Russia struggles with aging infrastructure and new excise tax regulations.

Latest figures from Statistics New Zealand show that the value of New Zealand log exports went from NZ$1.6 billion in 2012 to NZ$2.4b in 2013, accounting for 42% of the forestry product exports by value, compared with just 3% in 1993.

This is largely due to an upsurge in log exports to China increasing in value from NZ$1b in 2012 to NZ$1.7b dollars in 2013.

In 2013, 11% New Zealand’s total exports came from forestry products and 5% came from logs alone.

China imports New Zealand logs because it’s much cheaper to cut into lumber at its own mills than in New Zealand.

The lumber is then used primarily for boxing during the concrete build phase of China’s infrastructure and high rise construction.

In terms of log volumes New Zealand exported a total of 16.6 million cubic metres of logs in 2013 – 2.8 million cubic metres more than in 2012.

In the early 1990s annual new forest planting in New Zealand peaked at nearly 100,000 hectares but in 2011 that figure was less than 20,000 hectares.

Forestry services company PF Olsen chief executive Peter Clark said that there was virtually no new planting currently taking place.

“The reality is that these blocks are not being replanted after harvest which suggests that they won’t be replanted in the future because you get weed regrowth.”

And that was a big concern for the industry, he said.

“If you’re an existing processor you do want the confidence that blocks that are harvested will be planted and that new land will be replanted.”

Forestry investors required a 7-8% return on investment after tax to make the investment worthwhile. But with the current high value of land, capital costs and log prices, current returns ranging from 4-6% were no longer as attractive, he said.