Eucalyptus nitens, recovery and economics of processing 15 year old trees for solid timber

Report Date: May 2015

Author: Dean Satchell, Sustainable Forest Solutions, R.D. 1 Kerikeri, Northland 0294
+64 21 2357554

Appendix 1: Assumptions in Discounted Cash Flow Analysis
Appendix 2: Sawn timber price estimates
Appendix 3: Literature review - Value-based survey pricing methods
Appendix 4: Literature review - Estimating profitability of growing E. nitens for solid timber production
Appendix 5: Sawmilling method
Appendix 6: Flooring price survey instrument
Appendix 7: Survey results table
Appendix 8: Survey analysis
Appendix 9: Wood physical properties, test results
Appendix 10: Glossary of terms
Appendix 11: Case study stand plot
Appendix 12: Comparison between levels of internal and surface checking
Appendix 13: Air drying experiment
Appendix 14: Sensitivity analysis

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Appendix 1: Assumptions in Discounted Cash Flow Analysis

Discount and interest rate: 8.5%
Costs do not include GST

Grower Costs

Annual growing costs:

Rates $424 per hectare.
Insurance $10 per hectare.
Management $50 per hectare.
Land rental: $850 as annual interest on land value of $10,000 per hectare.

One-off growing costs:

Site preparation cost $200 per hectare, year 0.
Seedlings cost $1000 per hectare, year 0.
Planting cost $300 per hectare, year 0.
Releasing cost $200 per hectare, year 1.
Pruning costs $1500 per hectare, year 3.
Pruning costs $800 per hectare, year 4.
Pruning costs $200 per hectare, year 5.
Thinning cost $800 per hectare, year 8.

Logging and loading*:

• Base scenario: $28 per tonne (assumed "easy to flat" terrain).
• Easy Hill: $31 per tonne.
• Moderate steep: $38 per tonne.

Transport cost*:

• Base scenario: $16 per tonne (50 km).
• 100 km: $27 per tonne.
• 150 km: $39 per tonne.

*From Laurie Forestry website http://www.laurieforestry.co.nz/Pricing-Table

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Product price assumptions

Firewood price, wholesale: $50 per thrown cubic metre.
Firewood conversion factor: One cubic metre by volume = two thrown cubic metres.
Pulpwood price before logging, loading and transport: $50 per cubic metre (J. Fairweather, pers. comm. July 2014).
Pulpwood price, Southland stumpage $20 or better per tonne for chipwood feedstock. Landed at mill $75 per tonne (Graeme Manley, pers. comm. February 2015).
Sawdust price: $25 per cubic metre.
Sawdust conversion factor: 230 kg per cubic metre.
Flooring timber Reference Product (Victorian ash) wholesale price for 125 mm nominal width, select grade, lengths longer than 1.2 m: $4.09 per lineal metre.
“The current price NZ wholesalers pay for 108 x 19 Victorian Ash T&G flooring Select grade A$3.79/lm landed in NZ.” (Brett Bould, Pers. Comm. 20 May 2014). 1AUD=1.07812NZD @ 20 May 2014.

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Product residual values

Laminated benchtops:

Nominal 75 mm x 25 mm = 60 mm x 19 mm finished. 3 m long panel, 650 mm wide, 60 mm thick =0.117 m3
Nominal 50 mm x 25 mm = 40 mm x 19 mm finished. 3 m long panel, 650 mm wide, 40 mm thick =0.078 m3
19mm widths = 35 pieces for 650 mm wide benchtop panel.
Costs for graded and blanked product: Marking for layup and block stacking: 3 hours per cubic metre, secondary labour.
Transport both ways for laminating: $100 per nominal cubic metre.
Laminating cost $1200 per cubic metre of product.
Value per cubic metre is the same for 40 mm thick and 60 mm thick panels.

Non- buttjointed panel:

Feedstock profile: board length >1500 mm, graded and blanked.
Grades: FFT Panel Laminating Clear One Face, FFT Panel Laminating Clear Two Faces, FFT Clear Joinery.
Retail value of 6omm thick panel: 3 m long, 650 mm wide = $500+gst (J. Fairweather sales, October 2014).
Wholesale price less 30% = $4,487 per cubic metre of product.
Value per lineal metre 75 mm nominal: $5.12
Residual value per lineal metre 75 mm nominal board: $3.56
Value per lineal metre 50 mm nominal: $3.41
Residual value per lineal metre 50 mm nominal board: $2.38

Buttjointed panel:

Feedstock profile: board length 300 mm - 1500 mm, graded and blanked.
Grades: FFT Panel Laminating Clear One Face, FFT Panel Laminating Clear Two Faces, FFT Clear Joinery.
Retail value of 6omm thick panel: 3 m long, 650 mm wide = $350 (J. Fairweather sales, October 2014).
Wholesale price less 30% = $3,141 per cubic metre of product.
Value per lineal metre 75 mm nominal: $3.58
Residual value per lineal metre 75 mm nominal board: $2.03
Value per lineal metre 50 mm nominal: $2.39
Residual value per lineal metre 50 mm nominal board: $1.35

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Flooring timber residual value

Edge jointing: $300 per cube for jointing (100-150mm widths, 200-700mm lengths, blanked with two straight edges and two flat faces and squared ends). Preparation costs assumed to be $100 per cubic metre based on $16-$17 / hour, 4-5 hours for a cube of shooks. Jointed lengths usually 3.6, 4.2 or 6.3 (cladding). 700 max lengths because of feeding systems and possible crook.
End-matching: Cost $45/hour approximates to $170/nominal cubic metre (Robin Curtis, pers. comm. 26/9/14)
Plus markup of 30% = $221 per nominal cubic metre.
For comparison: Random block-cutting costs (300-600 mm blocks): 80 lineal metres per hour, $0.25 cents per lineal metre.

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Production costs

Management and overheads:

A processing, marketing and management overhead cost for the case study processing operation was calculated as 10% of sawn timber revenue.

Sawmill costs:

Log handling: 30 logs per hour.
Electricity: Cost per hour = $3.69
Ten units per hour of operation, Daily rate = $1.20, plus rate per unit = $0.22 (Prices from November 2013 account).
Petrol: Cost per hour = $4.02
Edger uses 20 litres of petrol in 560.5 minutes of operation. Price $1.88 excluding gst (January 2014, source http://www.aa.co.nz/cars/motoring-blog/petrolwatch/january-2014-petrol-and-diesel-prices/).
Diesel: Cost per hour = $2.80
Band sawmill uses 20 litres of diesel in 560.5 minutes of operation. Price $1.31 per litre excluding gst (January 2014, source http://www.aa.co.nz/cars/motoring-blog/petrolwatch/january-2014-petrol-and-diesel-prices/).
Lube oil, cost per hour $0.76
6 litres of lube oil are used in 560.5 minutes of operation. Price $1.18 per litre.

Bands:

Cost for band = $60
Band sharpened 5 times before replacement.
Two hours service between sharpening.
Sharpening cost $20 (i.e. $10 per hour).
One blade change was assumed to take place (4 minutes) every 2 hours for primary labour unit, while the secondary labour unit continues edging.
Edger blades: Sharpened every 1000 hours, one hour to sharpen (Primary labour).

Sawmill machinery:

Rental as interest on capital investment plus depreciation:
Interest rate: 8.5%
Woodmizer LT 40: $34,783, depreciation 13% straight line.
Woodmizer twin-blade edger: $8,700, depreciation 13% straight line.
Firewood cutter: $4347.83, depreciation 13% straight line.
Electricity setup costs $10,000, depreciation 5% straight line.
Belts, rollers: $1739.13, depreciation 13% straight line.
Extraction fans: $2608.70, depreciation 13% straight line.
Loader $5,000, depreciation 20% straight line.

Site rental:

Land value $20,000 per hectare, interest 8.5% per annum.
Rates $300 per hectare per annum.
Site = 1/4 hectare.

Labour:

Labour: Primary $30 per hour (gross, including holiday pay).
Labour: Secondary $20 per hour (gross, including holiday pay).
Sawmill annual operating hours: Assuming 229 work days per year, 4 weeks holiday, 52 Weeks times 5 days a week = 260 days.
Less 20 days annual leave = 240 days.
Less 11 days statutory holidays = 229 Days a Year. At 8 hours per day that is 1832 hours. Allowing for 95% sawmill work time the time the sawmill is operating was calculated as 104424 minutes per annum.

Repairs and maintenance:

Repairs and maintenance: $1260 per annum, or $0.69 per hour for 1832 operating hours per year. Repairs and maintenance labour was also allowed for as an additional hourly cost of 2% of total wages.

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Drying costs

1 stack = 1.0177 nominal sawn m3 timber.
Shifting stack from sawmill into drying position: 4 minutes primary labour, $1.97 per cubic metre.
Stack preparation (weighting and wrapping): 10 minutes primary labour to put weight on two stacks (i.e. 5 minutes per stack) and 10 minutes secondary labour to wrap one stack.
Drying shed (for shed air drying): $30,000, depreciation 3% straight line.
Capacity of 24 stacks of sawn timber.
Yard drying space (for yard air drying): $6600 for digger and $1000 for gravel
Capacity for 200 stacks. Depreciation 20% straight line. Assume 1 year drying average.
Cloth wrap: $1.30 per square metre. Each stack requires 16 square metres of microklima (wrapped twice) and the microklima can be used 3 times. http://www.easytek.co.nz/downloads/BirdNetting.pdf, includes gst for orders over 400 square metres.
Concrete weights: $200 each (these weight 2 stacks), depreciation 5% straight line.
Drying pallets: $40 each, depreciation 20% straight line, one pallet per stack.
Fillets: $0.39 each, 7 fillets per row, 17 rows per stack.

Solar kiln:

Solarola Mini-Pro 6m Sun Dry kiln: $29,058 cost, depreciation 5% straight line.
Annual capacity 36 m3.

Forklift:

Forklift cost and site rental cost were based on the solar kiln capacity.
Forklift: $3000, depreciation 20% straight line.
Steam reconditioning cost assumed to be $30 per nominal cubic metre.

Site rental:

Land value = $20,000 per hectare, interest 8.5%.
Rates = $300 per hectare.
Site = 1/2 hectare.

Repairs and maintenance:

5 minutes per nominal sawn cubic metre.

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Processing costs

Shifting stack from kiln into processing shed: 5 minutes, primary and secondary labour units.
Labour, blanking: 65 boards per hour (195 lineal metres), secondary labour.
Labour, profiling: 60 boards per hour (180 lineal metres), secondary labour.
Grading and docking: One board per minute, docked and graded, secondary labour.
Block stacking: 1000 boards per hour (secondary labour).
Despatch and preparation: 1000 boards per hour (secondary labour).
Knives: All 4  edge knives cost $25 to sharpen and all 4 face knives cost $30 to sharpen. These knives need sharpening every four m3 but each board passes through machine twice.
Electricity: 6.5 kw per hour (blanking or profiling) which includes extraction fan. Two passes per board at 60 boards 3m long per hour. Daily rate $1.20, plus rate per unit $0.22 (Prices from November 2013 account).
Boron treatment: $29.76 per nominal cubic metre. A$ 26/m3 from page 27 Forestry Tasmania technical report 08/213, August 2013 (1AUD=1.1448 NZD on 28 Aug 2013).
Processing shed rental: $52,000, depreciation 20% straight line per annum.
Logosol PH 260 four sider: $9,130, depreciation 20% straight line per annum.
Docking saw: $700, depreciation 13% straight line per annum.

For Comparison:

Profiling costs 45 cents per lineal metre and is charged out as $0.90 per lineal metre (Robin Curtis, pers. com 12/02/2015).
End-matching costs 45 cents per lineal metre and is charged out as $0.90 per lineal metre (Robin Curtis, pers. com 12/02/2015).

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