April/May 2020 - BAY OF PLENTY BUSINESS NEWS

10 BAY OF PLENTY BUSINESS NEWS April/May 2020
COVID-19
Logging has taken a big hit from Covid-19. Photo/Supplied.
Corona virus begins to bite in the Bay
The latest statistics on New Zealand’s trade data are stark evidence
of the immediate impact Covid-19 has had upon this country’s
trading position, even before the government’s lockdown.
(See our accompanying Special Focus on pages 11-14 for
guidance on approaches to help deal with the impact of Covid-19.)
By RICHARD RENNIE
The virus initially put the
brakes on Bay of Plenty
tourism, which has seen
major job losses, along with
the events and hospitality
industries.
Key Bay export forestry
was also an early casualty and
quickly felt the impact as logs
stockpiled and wharf space ran
short in Chinese ports. However,
the kiwifruit industry at
time of writing seemed likely
to be relatively unscathed.
Released in early March,
Statistics NZ data indicates
all New Zealand’s exports to
China for the January 27-February
23 period were down
eight percent compared to that
same period in 2019.
Logs and meat were the
biggest victims, with meat
free-falling to half last year’s
amounts, while forestry exports
mainly in the form of
logs fell to about 1.2 million
tonnes, compared to 1.3 million
in 2019.
Forestry products by value
plummeted by $70 million
from $250 million to $180
million.
The Bay of Plenty is the
crown in the national forest estate,
accounting for 400,000ha
or 29 percent of the iwi land
resource.
The impact of the extended
Chinese New Year as a result
of Covid-19 was felt relatively
quickly at the shore side end of
log exports.
Port signals lowered
profits
Port of Tauranga, the country’s
largest log export outlet,
had already reported a decline
of eight percent in log volumes
at the end of its first six
months to December 31, due to
the slump in log prices that hit
home in August.
The port has reduced its
full year profit guidance due
to Covid-19’s impact on log
volumes, with revised full year
profit now expected to be $94-
$99 million compared to the
previous $96-$110 million.
Prue Younger, chief executive
of the Forest Industry
Contractors Association has
welcomed the government’s
announcement of regional
support for forestry through a
relief package.
Some operators have been
shut down for weeks and more
were expected, she said.
“Wharf space has only got
tighter, and even if China got
back to business as usual now,
it will be three to four months
until ports have released
enough stock for operators to
feel confident about putting
logs on the water.”
Fortunately, the Rotorua
region is a key supplier for
higher grade domestic supply
for timber used in New Zealand
houses and for packing
processes.
In contrast the East Coast
region exports almost all its
harvested logs.
However, even in the Rotorua
district, in order to harvest
the higher quality content
of the tree, lower grade export
logs are the inevitable result.
Ross Davis, chairman of
the Forest Industry Contractors
Association says this makes it
complex to calculate the full
impact of the virus on local
logging operators’ incomes.
“You have to chop the tree
down in order to get the quality
timber, but that [also] generates
the poorer quality log. For
most operators it has meant
they are still working, but
sometimes on reduced hours,
and if you are not earning as
much, you are not spending as
much.”
Times are tightening
As a result he is already getting
reports of forestry supply businesses,
most which are based
in Rotorua, facing tighter
times.
Brent Whitby, chief executive
of Patchell Industries in
Rotorua, which manufactures
logging trailers and weigh
systems, said the effects were
starting to bite.
“We have clients all over
New Zealand, and it hit the
likes of Gisborne early on,
with operators losing work and
being laid off. We now have
customers we have completed
work for who can’t uplift it, or
with equipment ordered that
they have asked to have put on
hold.”
Port activity is down, but key overseas export markets are still open. Photo/Supplied.
New Zealand exporters have no-where
else to send the industrial grade logs they
harvest, but this is starting to change.”
– Peter Weir
“And on the other side we
are monitoring very closely the
delivery of all the supplies we
use from overseas, things like
tyres.”
Whitby said he was surprised
at the rapidity of Covid-
19’s impact and expected
things will get worse before
getting better as backlogs of
goods and demand for them
grew into April and May.
Scott Downs, director of
sales for Rotorua based forestry
company PF Olsen said
in his latest update that log inventories
on Chinese wharves
was rising at a rate of 35,000
cubic meters a day.
He expects that to continue
until China’s production gets
fully back on its feet.
Nowhere else to go
“Many Chinese sawmills are
yet to get back to work,” said
Peter Weir, president of the
Forest Owners Association.
“New Zealand exporters
have no-where else to send
the industrial grade logs they
harvest, but this is starting to
change. More domestic mills
are accepting reallocated export
logs of poorer quality.
“And there is still good demand
in the region from the
big players like Red Stag, and
Oji’s two mills at Kawerau and
Kinleith.”
Logging smaller farm
woodlots has ceased as association
members do what they
can to retain skilled labour by
sending better logs to domestic
sawmills to make up for the
shortfall.
Work hours are also being
maintained by continuing to
invest in silvicultural work
including pruning, thinning
and preparation of land for replanting
from winter through
to spring.
But Weir cautions that it
may be some months before
markets recover fully from
the sharp impact of Covid-19
virus.
He said members were
not looking for handouts, but
sought some equitable ways
for working with government
to assist various harvesting
crews.
“They are the ones who
need help.”