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 8: Flooring timber pricing survey 
Survey Analysis

Twenty-six respondents surveyed represented the population of suppliers of hardwood flooring timbers in New Zealand. The influence that each quality characteristic had on price is described below.

Flooring timber products - intangible values (page 4)

Some respondents felt that some of the intangible values (reputation, imported vs local, sustainably produced, plantation vs natural) might have interactions:

• "Certification holds a premium for imported timber, but not necessarily local timbers - certified locally grown timber doesn't carry a price premium from non-certified locally grown timber".
• "Should product from 'managed' natural growth, regardless of origin, be considered sustainable even without certification, and not be disadvantaged?"
• "There is a crossover between 'Buy local' and 'Plantation'".

Reputation

Many respondents suggested that selling a new timber species just requires "painting a picture" and, for example, telling a story about how stable and easy to dry it is.

• "An experienced salesperson can sell a timber even without a reputation, it's about trust"
• "A point of difference is likely to sell a timber, but not necessarily with a premium"
• "If the salesman were to push the new timber product, no discount would be necessary"
• "The relationship with the supplier is more important than the timbers reputation"
• "Confidence that this wood does the job, don't discount on (lack of) reputation"
• "Sell product on its merit rather than reputation"
• "Having a story behind it is most important"

Results:

Reputation	Average	Minimum	Maximum	Range
Discount for species/product new to market	9%	0%	25%	25%

Locally produced product compared with imported product

Some respondents considered local timbers such as rimu and matai to be premiere and hold very high value. However, the question was about whether "buy local" applies to local timber generally, not just specific species. Respondents noted there is overlap of "buy local" and "certified sustainable" premiums in New Zealand, which is further "muddied" by plantation vs natural forest green credentials. Consumers are faced with complicated decisions around their "green" spending choices and may not understand the issues well.

Respondents also reported that different customers have different requirements. For example insurance companies do not consider that where the timber comes from is of importance.

• "Architects can be very strongly driven to specify locally grown or certified as sustainably produced. The general public, however, are strongly price driven"
• "Customers do prefer to buy local, but not at a premium"
• "People come to us looking for NZ grown. We deal with customers and their requirements on a personal basis"
• "We'd support the New Zealand product, its a matter of getting it to market - consistent supply and consistent quality.

Results:

Local product	Average	Minimum	Maximum	Range
Premium for "Buy local"	7%	0%	50%	50%

Sustainably produced timber products

Many respondents who import timber felt that certification did hold a premium for their products. Because all timber from natural forests in New Zealand must be certified as sustainable by MPI, some respondents felt that certification holds no premium for N.Z. produced timber because we have a system that ensures little unsustainable or illegal logging. The perception is that this contrasts strongly with other countries from which we import hardwood. Some respondents suggested that uncertified locally produced material may hold similar value among consumers to certified imported timber.

Results:

Sustainable	Average	Minimum	Maximum	Range
Premium for certified sustainable	7%	0%	25%	25%

Plantation vs natural forest hardwood

The perception that 'farmed' trees should produce better quality could be seen by industry as an opportunity to raise the profile and value of plantation wood over time.

• "Customers do 'think green' and there is an opportunity to market plantation wood for a premium".
• "Uncertified locally grown plantation timber has the same premium as certified native timber"

Plantation/Natural forest	Average	Minimum	Maximum	Range
Premium for plantation timber	6%	0%	20%	20%

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Flooring timber species: Graded-pairs pricing of flooring timber species (Page 2 & page 3)

Many respondents felt that appearance is highly subjective and consumer choice doesn't necessarily have a strong relationship with price.

• "Selection of flooring timber is all customer demand driven".
• "Customers would pay more if that timber is what they want and you didn't tell them it was cheaper".
• "Appearance is about what the customer wants and selects, this is difficult to price".
• "Choice is often about fashion, but also availability - for example rimu is not just expensive because of its appearance, but also rarity".
• "Appearance is a very individual thing, for example 'distressed oak' - people either love it or hate it".
• "Preference is not necessarily reflected in price, its just human nature for different preferences".
• "People accept appearance or they don't and look for something else. A range of products need to be offered".
• "My personal view or the customers view?".
• "Colour and grain is a personal preference - its a matter of having a range available".
• "Our market likes pale coloured timber".
• "Our customers traditionally prefer a darker colour".

Graded-pairs pricing: appearance only

Price for E. nitens (compared with Victorian ash)	Average	Minimum	Maximum	Range
Eucalyptus nitens	102.2%	80%	150%	70%

Graded-pairs pricing: appearance, hardness and movement in service

Price for E. nitens (compared with Victorian ash)	Average	Minimum	Maximum	Range
Eucalyptus nitens	94.44%	60%	150%	90%

 

Flooring timber species properties: Part-worths for appearance, stability and hardness (page 5)

Respondents often stated that the flooring market is heading towards engineered timber floors in preference to solid timber. Some respondents were not sure if they should answer the questions from a personal point of view or represent their customers point of view. The customer tends to select timber based on appearance whereas the seller tends to consider good stability as of paramount importance. However the customer isn't usually aware that long term appearance depends on low movement in service.

• "Valuing timber is about the whole package rather than its parts"
• "Interactions between these properties confounds our answers"

Appearance and value

The three species that respondents were asked to evaluate in terms of appearance were Victorian ash, Eucalyptus nitens and American white oak. American white oak was often selected as the most desirable species in terms of appearance. Merchants considered this species to be popular because of good pricing and it stains and finishes well. French oak is considered to be superior and with a richer colour. Oak is currently "in fashion" but some respondents suggested the market is tiring of the species because it is becoming very common and is easy to replicate with imitation "plastic wood". "Customers are beginning to ask for something different". "Victorian ash is very similar to Tasmanian oak but can be more consistent in colour, whereas Tasmanian oak often has more contrast". One respondent suggested that if hard eucalypt such as E. pilularis were available as a consistent product and "on demand" like American oak, he'd sell it just as well as the oak.

• "For 20 floors we sell, 18 of these will be American oak, 17 will be prime-clear grade and most are 170mm or wider. For overlay 13mm, 112mm is the maximum width. For 19mm thickness 170 mm is the maximum width and 170mm width and up needs to be 21 mm thick."
• "American oak is cheap, readily available, good quality and fashionable".
• "We'd stain 6 out of 10 oak floors"
• "Dark timber is unpopular currently".

Results:

Appearance	Average	Minimum	Maximum	Range
Percent of total value due to appearance	41%	15%	80%	65%

 

Appearance	Victorian ash	Eucalyptus nitens	American white oak
Average rating for desirability	7.48	7.15	9.22

Hardness and value

Comments:

• "Very hard timber is easier to scratch than softer timber"
• "The polyurethane scratches rather than flexes when the timber is very hard".
• "The harder and denser the timber is, the lower the insulative value - it feels cold underfoot"
• "Very hard timber can feel too hard underfoot"
• "Ask the customer: Are they going to be jumping on the floor with stilettos?"
• "Rosewood and rimu are not hard yet they command high prices for flooring applications"
• "Rimu is soft yet expensive"
• "Different flooring applications require different levels of hardness, sometimes soft timber is fine"
• "Hard dense timber can't be laid as tight as soft timber - soft timber "gives" and can be compressed whereas dense timber won't compress, it just lifts if too tight"

Results:

Hardness	Average	Minimum	Maximum	Range
Percent of total value due to hardness	26%	10%	40%	30%

 

Hardness	Very hard	Hard	Medium hardness	Soft	Very soft
Average rating for desirability	9.00	9.04	7.04	3.89	2.81

Stability and value

Respondents who are involved with floor laying consider stability to be very important and only recommend timber with good stability. However, respondents considered stability to be the least important to the customer unless the issues around this are explained to them. End-users hate gaps but tend to blame the processor rather than the timber for this. Merchants and retailers have a reputation to uphold and stability is important to them.

Results:

Stability	Average	Minimum	Maximum	Range
Percentage of total value due to stability	33%	10%	60%	50%

 

Stability	Small levels of movement	Medium levels of movement	High levels of movement
Average rating for desirability	10	5.59	1.22

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Graded-pairs pricing of grades (page 6 & page 7)

Comments: Respondents suggested that select grade is not necessarily more popular with customers, but there was the expectation that it is more expensive.

• "Rustic oak sells for 12- 18% less than Prime oak".
• "Rustic is popular and customers are paying as much for rustic as clean grade timber".
• "Recycled timber has a 30-50% premium over new".
•  "Feature grade has become more in vogue"
• "Personally I like a bit of character but many people prefer low levels of feature"
• "More feature is in fashion, known as 'rustic'. However the market expects it to be cheaper, even though it is in demand!"
• "These different grades are equally desirable but for different markets".

Results: 

Grade	% Discount	Minimum	Maximum	Range
Standard grade, discount from Select grade	16%	-30%	+20%	50%
High Feature grade, discount from Select grade	30%	-50%	0%	50%

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Graded-pairs pricing of lengths - Parquet floor (page 8)

30 cm clear lengths of boards as parquet, compared in value as a finished floor with standard random-length T&G flooring of the same grade and width.

Comments: Some respondents suggested that very little parquet is laid while others felt there was a strong market for this, particularly directly over a concrete substrate which is problematic for fixing longer-length T&G.

Results:

Parquet	Average	Minimum	Maximum	Range
Premium for 30cm parquet from random-length T&G per square metre	2% premium	40% discount	30% premium	70%

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Graded-pairs pricing of lengths - Pre-jointed flooring boards (page 9)

Premium or discount for floor made from pre-jointed 30-60 cm random lengths, per lineal metre, compared with standard random longer length T&G floor: 

Comments: Many survey respondents, predominantly merchants that sell long length imported hardwood, were reticent towards stocking short-length flooring timber and were dubious about consumer acceptance of the appearance of floors made from shorts. These respondents also held the beleif that floors are more expensive to lay from short length timber than longer random lengths. One respondent suggested that 10% of customers requiring clearwood timber would accept short lengths.

Results:

Pre-jointed T&G	Average	Minimum	Maximum	Range
Pre-jointed T&G, discount from random-length T&G per lineal metre	21%	50%	0%	50%

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Graded-pairs pricing of board widths (page 10)

The three board widths considered were 100mm (4"), 125mm (5") and 150mm (6").

Comments:

• "It costs 10% more to lay narrow boards"
• "125 mm width is the best, it still looks 'wide' but is stable"
• "We ask 'Do you want cracks between the boards?' Wider means more cracks."
• "Favoured widths depend on species. Backsawn timber (e.g. American oak) is favoured as wider boards, which works against it because of cupping and stability issues"
• "There are less problems with narrower boards (e.g. less cupping) but some customers like the wide board look".

Results:

Board width	Average	Minimum	Maximum	Range
Discount for 125mm boards from 150 mm boards (per square metre)	6% discount	20% discount	10% premium	30%

 

Board width	Average	Minimum	Maximum	Range
Discount for 100 mm boards from 150 mm boards (per square metre)	10%	30%	20% premium	50%

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Product values within species: Part-worths for grade, width and length (page 11)

All three characteristics were considered to be important to many respondents, who felt that the whole package is difficult to break into parts, to then rate each part. "First I show them the grade, then available widths for that species in that grade". "Wider boards are not as desirable in short lengths when compared with narrower boards, its an appearance thing". "Where wider boards are laid in shorter lengths, particular attention is required to be paid colour matching these. American white oak with its busy grain and range of colours is not well suited to narrower or shorter lengths in a floor, whereas quartersawn eucalyptus is fine in narrower and shorter lengths with its consistent colour and grain".

Grade and value

Comments:

• "Rustic timbers are becoming more popular"
• "Only 20% of customers want high feature grade"

Grade	Average	Minimum	Maximum	Range
Percentage of value due to grade	50%	10%	90%	80%

 

Grade	Select grade	Standard grade	High feature grade
Average rating for desirability	9.63	8.04	5.85

Width and value

Comments:

• "Wider boards are more popular but the price per square metre is the same"
• "The price can be higher for narrower, its all about demand and requirements. For example narrower boards are required for sports flooring, but these need to be high quality"

Board width	Average	Minimum	Maximum	Range
Percentage of value due to width	22%	0%	60%	60%

 

Board width	150 mm	125 mm	100 mm
Average rating for desirability	9.85	8.63	6.93

Length and value

Comments:

• "Its the amount of shorts within the whole consignment that matters"

Board length	Average	Minimum	Maximum	Range
Percentage of total value due to length	28%	10%	90%	80%

 

Length	>1200 mm	600-1200 mm	< 600 mm
Average rating for desirability	9.93	5.07	2.3

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