Ian Jackson, New Zealand Tree Grower August 2013.
‘If you do not work hard today, you will not have a job tomorrow’ was the slogan on the wall of a plywood factory which I visited on a recent trip to China. This epitomises the work ethic and approach to work and business by the Chinese people where the boom in the economy is evident at every corner. The acronyms of OSH and the RMA, along with the raft of controls and restrictions we are so bound by in New Zealand, are unknown in China. The speed at which things happen and the productivity are very evident.
In the middle of July I was privileged to be part of a five member delegation of New Zealand forestry personnel to visit China and see where our logs go, where they are used and the potential of the market. The one week trip, organised and led by Alan Laurie of Laurie Forestry Limited, was enthralling and fascinating.
We were guests of Superchain Logistics Development Co Ltd, a large importer and distributor of logs. Superchain is a division of the Xiangyu group, a logistics company with a turnover equivalent to around $5.5 billion. The reception we received, and the hospitality imparted, was nothing short of exceptional.
Business in China is very much based on relationships, with personal interaction being very important. We were hosted at banquet lunches and dinners every day. Respect, integrity, and trust are all very important aspects of business. Honouring your word is uppermost.
Almost 60 per cent of our annual forestry cut is now exported, with China taking 60 per cent of these logs. In short, China is now very important to our forest industry. Most of the low grade logs go there. The A grades, and some K grades are sawn, with the lesser grades rotary peeled for plywood.The plywood is used in construction for concrete boxing, while the sawn timber is used to hold it up.
Some sawn timber is used for runners in between cargos in ship holds. Logs from Eastern Europe, Russia and North America are used in the same way. At a number of ports we saw large piles of very small logs, around 12 to 20 cm small end diameter, coming from Ukraine, dubious quality Australian eucalypts, and very good quality spruce, pine and fir mixes from North America.
All logs in the market are priced in US dollars. New Zealand radiata pine has recently climbed to around the mid to high $140 a tonne, with better quality North American logs getting a premium of $15 a tonne. The market is very finely poised. There are usually two or three ships arriving every week from New Zealand. However the prospect of seven ships arriving when we were there had sent the market down closer to $140 a tonne.
This increased supply out of New Zealand has been in response to high prices being paid to growers here. The message was very plain. The Chinese market for logs is not insatiable. They are only used in construction which is a finite use, and very dependent on pricing. Chinese traders and buyers are very critical of the New Zealand fluctuating pricing as other countries offer three to six month pricing. When prices change rapidly these guys take a hit. The lack of a co-ordinated supply out of New Zealand in the Chinese market is a major threat to our integrity.
We are very dependent on the construction sector in China. While there are 30 to 40 storey apartment buildings going up in many places the question needs to be asked - how long can this continue? Can the Chinese economy maintain its incredible momentum, and what effect will a minimal population increase have. Currently new apartments are being built at an astounding rate to re-house people coming in from the country. Will China grow old before it grows wealthy? We need to be aware of all this with New Zealand’s impending wall of wood. As long as China can import high quality tropical hardwoods at $180 a tonne for high end uses, radiata pine will be consigned to use in boxing for construction.