Bruce's Blog

The recently released draft Forestry and Wood Processing Industry Transformation Plan (ITP) is a consultative document that proposes a Vision and actions to transform our sector. (Consultation closed 30 September and a final Plan is due to be released late this year.)

The stated aim of this transformation is to maximise the value that the sector generates for New Zealand. Forests are New Zealand’s largest renewable resource and are therefore vital in our move toward a more circular, low emissions economy. The sector is already very important to the national economy and our society. In 2021 the industry contributed $6.7 billion in export earnings and employed some 40,000 people.

A major issue for NZ is that over the last decade the volume of logs harvested has doubled, while the capacity for processing timber in NZ has not increased. Therefore, the key aim for the ITP is for NZ to process more wood on-shore and to use the woody residues to grow the forest-based bio-economy. The ITP suggests that this will require us to upscale and modernise our wood processing capacity and it is envisaged that this can only happen through co-investment from industry and Government.

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Suggested goals for the industry transformation include:

• Wood processing to increase by 25% by 2030
• Export earnings from value-added wood products to grow by $600 million by 2040.

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To achieve these goals the ITP calls for specific outcomes, including:

• Growing investment to increase manufacturing of advanced wood-based products for building, biotech and fuels.
• Supporting sector co-location, collaboration and sustainability.
• Improving trading and transparency of markets for logs and woody biomass.
• Growing domestic demand for New Zealand’s wood products.
• Growing and diversifying export markets.
• Growing and attracting the future workforce.

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New technologies are changing what we can produce from woodfibre. Wood can be turned into engineered wood products to build tomorrow’s high-rise buildings (the so-called ‘mass timber’ market), replacing higher emission materials; biofuels can replace coal, it can fuel planes, ships and cars; and advanced biochemicals and bioplastics can produce low carbon materials and chemicals.

Forestry, timber manufacturing and the associated construction and bio-industries certainly seem to be heading towards their day in the sun … or is this just another dream that will fade into history and the humble “4x2” will continue to dominate our building industry?

There are currently any number of obstacles that could trip up this process before we have any chance of ‘transformation’. The suddenly slowing structural timber market over the last few months has brought many wood processors back to earth as demand has evaporated. Confidence has fallen dramatically. Finding staff to operate at our current levels of production is almost impossible, so where will the workforce of the future come from … especially when the timber industry is not generally seen as a ‘desirable occupation’, let alone a career?

Funding expansion is a real challenge for small-medium sized privately-owned wood manufacturing plants. Banks and other traditional lending institutions see the industry as very high risk and will generally make it very difficult to borrow to invest in meaningful or large-scale development. It is incredibly hard to justify borrowing several million dollars when interest rates are relatively high (because the bank costs in their perceived level of risk), the loan period is only three or four years even though the machinery has an expected lifespan of at least 10-15 years, and depreciation is low.

(Will the Government be offering low-or-no interest loans, for example, to encourage transformational change?

There is a lot of work to be done just to keep the current level of manufacturing operating before we consider what could only be termed an explosion of growth.

Only time and the combined efforts of Government and business will determine how successful this ‘Vision’ will be.

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