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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

Special thanks and acknowledgement go to:

  • MPI Sustainable Farming Fund
  • Neil Barr Farm Forestry Foundation
  • John Fairweather Specialty Timbers
  • North Canterbury, South Canterbury, South Otago and Southland branches of NZFFA
  • NZFFA Eucalyptus Action Group
  • NZFFA Research committee
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



This case study aimed to estimate profitability of solid timber production from 15 year old E. nitens in Canterbury using small scale processing equipment. The residual value approach was used to predict log prices, estimated from revenues less costs of production.

Because a market is not established for E. nitens timber in New Zealand, price estimates for sawn board grades, widths and lengths were derived from a market survey. Sawn timber product volumes were estimated along with revenue for these. Log volumes per hectare were estimated from plot data from the case study stand.

Best practice processing methods were applied to minimise avoidable defect at optimal cost-efficiency. From a sample of 8 trees harvested and processed and two plots in the case study stand, estimated costs and yields showed that it is potentially profitable to grow and process fast grown 15 year old E. nitens into sawn timber products. The short rotation length and high productivity of E. nitens is appealing to growers and the results from this case study offer an incentive to apply the methods developed into further research to produce more generalised findings.

Product physical tests showed that fast-grown E. nitens timber is dimensionally stable and therefore suitable for appearance applications. The attractive appearance suggests E. nitens would likely be a very marketable timber, especially if levels of checking were minimised further. However, the relative softness of the timber could limit its value as a flooring product compared with harder species.

Even at a small scale it is likely to be profitable to grow, prune and thin E. nitens for solid timber production. The recoveries and costs presented in this study estimate net present values as a small scale baseline indicator of profitability. Sawmill and processing cost efficiency would likely improve with scale, as could grower returns. 


Core Results

Sawn timber recoveries and values

Predicted nominal sawn timber volume produced per hectare was 221 cubic metres and average price for sawn timber was $985 per nominal sawn cubic metre. This price compares with a wholesale price of $1309 at 10 June 2014 for 125 mm long length select Victorian ash flooring product. Processing costs totalled $722.43 per nominal sawn cubic metre.

Averaged between the two grading and two pricing scenarios, estimated sawn timber value per hectare was $217,610 ($985 per nominal sawn cubic metre) and total processing costs $159,658 ($722 per nominal sawn cubic metre). After accounting for costs of production, average residual value from sawn timber was $68,320. Other products added $24,484 to revenue, primarily firewood ($17,950) as a by-product of the sawmill operation. Pulp logs contributed only $993 per hectare from 24.1% of merchantable log volume.

Average sawlog price as stumpage was $131 per log cubic metre. Average sawn timber value per log cubic metre was $419.

Drivers of profitability

Depending on the scenario, it is potentially profitable to grow E. nitens on a 15-year rotation for production of solid timber products on this fertile Canterbury case study site using the case study processing equipment. However, profitability is highly dependent on the scenario. The base scenario assumed a discount rate of 8.5%, a land price of $10,000 per hectare, $44 per tonne logging, loading and transport costs and a processing and management overhead cost of 10% of sawn timber value. Under this scenario, assuming sawn timber was sold at year 16, average NPV estimate for the grower between the two pricing and two grading scenarios is -$260 per hectare. Therefore rate of return is estimated to be close to 8.5% per annum.

Product value was high per log cubic metre of input and per sawn cubic metre. Costs were also high but the resulting return on investment for the grower was adequate and indicates that it may be profitable to grow E. nitens for production of solid timber in Canterbury.

Drivers that most influenced profitability for the grower in this case study included sawmill profit, price for sawn timber, land price, transport distance and implementing steam reconditioning as a strategy for overcoming collapse defect. See the sensitivity analysis »

Price for sawn timber

Board width, levels of degrade, board length, board grade and physical properties are all factors that contribute to product price and therefore revenue from the log. These factors together with log diameter and position could emerge as significant predictors of log revenue and therefore price in the market for E. nitens logs. However, to verify and quantify the influence these factors have on log residual value would require a more comprehensive study.

Product recoveries

Pruned buttlogs yielded high sawn recoveries of clearwood but drying degrade reduced product recoveries. Thinning to less than 500 stems per hectare produced sufficiently large volumes of log diameters suitable for sawmilling, to harvest the stand at 15 years old. This regime was estimated to provide an adequate return on investment to the grower, but thinning regime could target diameters that hold optimum processing efficiency to potentially improve returns.

Log length and sawn timber green thickness were appropriate for mitigating most processing issues that could otherwise cause serious degrade. However, board thickness wasn’t adequate to avoid skip caused by collapse on some boards from buttlogs. Further work is justified to examine costs and benefits from increasing green board thickness in buttlogs if steam reconditioning were not practiced.

Minimising the delay between harvesting and sawmilling, along with applying sawcuts that released stress and excluded pith ensured that defect in dry boards caused by end splits was managed to levels that did not significantly impact on profitability.


In this case study E. nitens was harvested on a relatively short rotation (15 years) for solid timber, was highly productive (over 500 tonnes of sawlogs) and produced grade recoveries that resulted in log price estimates that indicated a profit for both grower and processor. These results, although preliminary, are very promising. The next step is to improve methods used for predicting E. nitens log residual value to provide growers with more definitive predictions of log values suitable for modeling profitability from stand data.


Disclaimer: The opinions and information provided in this report have been provided in good faith and on the basis that every endeavour has been made to be accurate and not misleading and to exercise reasonable care, skill and judgement in providing such opinions and information. The Author and NZFFA will not be responsible if information is inaccurate or not up to date, nor will we be responsible if you use or rely on the information in any way.


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