Tree Talk with Peter Harington Woodmetrics Regional Manager

As our industry goes into one of its downturns, I get that feeling of deja vu all over again, as Murray Mexted once so famously said.

All the signs are there again; a big slowdown in export log volume; logging contractors with no work; finance companies going around repossessing logging equipment; and despondency all over the industry.

All this after such a wonderful couple of years of steadily increasing prices reaching record highs last summer. On the plus side, it looks like the worst is over and there are signs that prices are climbing already and most analysts are picking a reasonable uplift after Christmas.

Now is the time we find ourselves asking whether our industry has to be the victim of peaks and troughs which cause so much disruption to people's lives and the general health of the whole industry?
One of the main problems is as an industry,we have become almost totally dependent on the export log trade. Until about 10 years ago, the domestic sawmill market absorbed the bulk of our log output and any surplus was exported.

Now this situation is flipped over and the export market is the dominant volume with the domestic sawmill only taking a small proportion of the national cut. This puts the whole health of our industry in the hands of the fickle export market.

So how did we get in this situation? First of all, the national cut has doubled in the last 20 years and the extra volume just could not be absorbed into the domestic market. Secondly, what domestic processing market we have got is in rapid decline. I was told recently by a timber preservative industry leader that 138 wood processing sites have shut down in New Zealand in recent years. This is largely the result of a decline in demand as the building boom of the early century faded away to a low level. The high exchange rate makes it very difficult to export timber competitively especially into the United States. There has also been a structural change in the industry as many smaller local sawmills could not compete with the larger operations enjoying economies of scale needed to be competitive.

New Zealand is also becoming a harder place to do business with ACC, health and safety, resource management and general bureaucracy, making the New Zealand mill at a disadvantage when competing with the Chinese mill.

These are issues which have to be addressed if New Zealand is going to have a strong domestic wood processing industry and the forest industry less reliant on the violent upheaval of the export markets. A pipedream maybe?