New Zealand Forest Industries Council
The New Zealand economy experienced real GDP growth 2.6 percent in 2000. This was principally driven by a strong export sector expansion. Primary production recovered from the effects of two years of drought and primary and forestry exporters from the impact of the Asian crisis. Manufacturing exports have also been posting solid growth while a recovery in visitor numbers from Asia has added impetus to tourism activity. The tourism sector is also feeling the benefits of enhanced competitiveness in traditional non-Asian markets.
Domestically, private consumption and residential investment have been weak with interest rates relatively high. Inflation, as measured by the consumer price index (CPI), was 4 percent in the year 2000. The labour market has tightened early in the cycle with the unemployment rate at 6.4 percent. Capacity utilization rates in the manufacturing and building industries have also risen.
Total value of forest products exported for the year ended 31 December 2000 was NZ$3.5 billion, representing 12.8 percent of New Zealand's total exports. This was an increase of 29.9 percent from 1999. (Note: New Zealand's domestic market for forest products is estimated at NZ$2 billion, including imports.)
Main export destinations were:
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December 2000
year |
% of |
December 1999 year |
%
of 100.0 |
Graph 1: Exports of forestry products by value for year 2000 (provisional)
Graph 2: Export destinations of forestry products by value for year 2000 (provisional)
The Norwegian paper company Norske Skog entered the New Zealand forest industry through its NZ$5 billion purchase of the New Zealand and international assets of Fletcher Challenge Paper. The development of three new LVL plants was announced during 2000 by Carter Holt Harvey, Nelson Pine Industries and Juken Nissho, representing total new investment of NZ$250 million.
Annual new plantation development in 2000 was 37 440 ha plus around 30 000 ha of replanting (Note: average new plantings over the past ten years are at 60 000 ha per annum.)
New Zealand's annual harvest is doubling to 36 million m3 by 2015 and doubling again by 2030. Note that all of this increased harvest is for international markets:
The election of a left/centre left Government in New Zealand in November 1999 has seen not only a significant change in economic policy but a dramatic change in environmental policy. The Labour/Alliance Coalition Government is a minority administration and relies on the Green Party, which holds seven seats, for legislative support. This is the first time the Green Party has won seats in Parliament on their own ticket, and has given the environmental movement in New Zealand a national level political voice and an ability, because they hold the balance of power, to significantly influence New Zealand's national and international stance on environmental issues.
Since election, the Labour/Alliance Government has undertaken the following policies and measures of significant to the New Zealand forest industry:
1. Intervention in industrial and regional development - has established a Wood Processing Strategy partnership with the New Zealand forest industry to significantly increase levels of investment in wood processing in New Zealand (aims to achieve NZ$3 billion in new investment by 2010) by improving New Zealand's transport infrastructure, skills and training levels, environmental regulatory framework and opening up new markets through targeted trade access negotiations and certification.
2. Genetic modification technology - imposed a moratorium on all consent application for research and field tests and established a Royal Commission of Inquiry to review "strategic" options for New Zealand viz. allowing genetically modified (GM) technology developments and appropriate regulatory mechanisms or, alternatively, making New Zealand GM free. Internationally, the Government has supported incorporation of the precautionary principle into the Biosafety Protocol to the Convention on Biodiversity. The Royal Commission is due to report in June 2001.
3. Indigenous commercial forestry - changed the corporate mission of its state-owned forestry company - Timberlands West Coast - and passed legislation to cease all commercial logging from state managed forests by June 2001. Until this change, Timberlands West Coast was New Zealand's largest indigenous forestry company with an annual harvest of around 100 000 m3. This harvest level was reducing, however, and was due to cease in 2006.
4. Climate change - in May 2000 the Government announced its intention to ratify the Kyoto Protocol by June 2002 and has an active policy development process under way to design domestic mechanisms to reduce New Zealand's greenhouse gas emissions (see further comment in climate change section).
At this stage there is no significant domestic demand in New Zealand for certified woods as most wood fibre consumed in New Zealand is sourced from its sustainable managed plantations. The one exception is tropical timber imports and an importers group has established an ecolabelling scheme covering imported furniture and components, but this is very limited and has certified less than 1 000 m3.
Several NGO groups have expressed interest in the New Zealand Government agencies adopting a procurement programme based on certified products and this is likely to find favour with the current Government. With the dramatic reduction in local sources of rimu (a hardwood) due to the Government ending indigenous logging, imports of tropical hardwood timber, components and finished products are increasing. Pressure from NGO groups on the sustainability of the sources of these products, could see domestic `demand' for certified forest products start to develop over the short-medium term.
Certification remains an expanding international market requirement and over the past 12-18 months demand from United States customers and Asian customers supplying finished products to the European Union and United States markets has increased significantly. The Forest Stewardship Council (FSC) certification remains the system of choice for the vast majority of these customers.
As a result, there are now 18 companies with - or actively seeking - FSC certification. In June 2000, Fletcher Challenge Forests, New Zealand's second largest forest products company, achieved FSC certification (forestry operations of 360 000 ha; annual harvest 4.5 million m3; sawntimber production 190 000 m3 per annum.)
The following table summarizes New Zealand's total forest area, harvest level and production volumes with ISO or FSC certification (note: details for companies seeking certification excluded):
ISO |
FSC |
Forestry operations - 317 000 ha Current harvest - 1 445 000 m3 per annum Tissue - 48 000 MT per annum Sawntimber - 190 000 m3 per annum Remanufactures - 20 000 m3 per annum |
Forestry operations - 376 446 ha Current harvest - 4 602 750 m3 per annum Sawntimber - 165 000 m3 per annum |
Based on these developments, industry consensus to establish a voluntary, national level performance standard for plantations forests emerged during 2000. Under the industry's Verification of Environment Performance (VEP) project, a multi-stakeholder working group has recently been established to develop a performance standard for plantation forestry during 2001.
The intention is the standard will form the basis for all forms of certification of New Zealand plantation forestry operations. Its development will be compatible with FSC stakeholder processes, criteria and indicators so that New Zealand companies that met the standard and want FSC certification, can achieve this.
Once the standard has been developed and approved, the multi-stakeholder group will focus on developing performance standards for processing to allow certification of forest products manufacturing operations.
The New Zealand Forest Industries Council (NZFIC) has worked actively on the development of a mutual recognition framework, which will allow compatible sustainable forest management (SFM) certification systems to develop mutual recognition arrangements, through its leadership of a working group of the International Forest Industry Roundtable. The industry's main objective is to ensure that national level approaches do not emerge as new barriers to trade based on its rapidly expanding harvest.
This is not a major industry issue in New Zealand due to the expanding supply of competitively priced wood.
The only industry where substitution has occurred, but at a relatively low level, is the New Zealand building industry by steel, masonry and plastic composite products. The New Zealand timber industry has developed User Guides and Design manuals to help designers and builders specify and use wooden building systems and products, including new niches such as multi-storey timber buildings.
Note, the New Zealand Building Code is performance-based and therefore does not prescribe materials use or pose entry barriers for new wooden systems or products. The New Zealand industry has an interest in the minimization of building codes and product testing standards as non-tariff barriers to wood product trade and use. In 1999, APEC carried out a study of non-tariff measures within the Asia-Pacific market that identified a number of markets where building codes prescribe non-wood products, particularly for structural applications. Mutual recognition of national building codes may be a practical way of reducing the impact on trade development of these barriers.
Many New Zealand exporters use the themes of environmental friendly, renewable and plantation grown in their international marketing efforts. This is particularly strong in Asia where New Zealand pine products are promoted (and accepted) as substitutes for non-sustainable sourced tropical timber. Certification will see sustainability claims increase as an important marketing strategy.
In May 2000, the New Zealand Government announced its intention to ratify the Kyoto Protocol by June 2002. As a result, policy development on domestic mechanisms that will allow New Zealand to meet its greenhouse gas emissions reduction target (stabilization at 1990 levels) is under way. Proposed mechanisms include:
- a low level carbon tax on fossil fuel;
- negotiated
agreements with major emitters to reduce fossil fuel dependence;
- emissions
trading - including carbon in Kyoto plantations;
- a national energy
efficiency strategy, including changes to building standards, machinery energy
requirements and car emissions; and
- improvement to public transport networks.
The New Zealand forest industry is working internationally with the International Forum of Forest and Paper Associations on communicating problems for the forest industry associated with the Kyoto Protocol. Joint action involves release of a report brochure and participation at CoP6.
Domestically it is working to encourage the New Zealand Government to adopt some logical preconditions and timetable for ratification, based on:
- certainty that key provisions of the Kyoto Protocol will not unfairly impact on New Zealand's forestry and forest products manufacturing industry and its international markets, as well as the private property rights of owners of Kyoto and non-Kyoto forests;
- prior ratification of the Kyoto Protocol by the United States, Japan and Australia - key trading partners for New Zealand and our industry; and
- international agreement on the equivalent involvement in the Kyoto Protocol of key industrializing developing countries, such as China, Indonesia, Thailand, Malaysia, India, Brazil and Chile.
The following is a fact sheet on the New Zealand forest industry and climate change.
What does it do?: The New Zealand forest industry grows wood fibre and manufactures a wide range of forest products. It also supplies a range of non-wood products and services (e.g. watershed, recreation) and associated activities in research, development and technology services.
Where does it operate?: Historically New Zealand's forest industry has been located in the Central North Island. Since the late 1960s plantation forests have been developed throughout New Zealand. As a result, harvest levels are increasing most significantly - by factors of 2-4 over the next five years - in Northland, East Coast, Hawkes Bay, Southern North Island, Nelson/Marlborough and Otago/Southland.
Employment statistics: The New Zealand forest industry employs around 25 000 people directly and 100 000 people indirectly.
Earnings: The New Zealand forest industry had outputs valued at NZ$5 billion in 1999, comprising 4 percent of GDP. Since 1985 export values have increased by 400 percent (with an annual average growth rate of 14 percent), making it New Zealand's third largest export sector with total exports of NZ$3.5 billion (2000 year), representing nearly 13 percent total export receipts.
Based on its international competitiveness, as well as its proximity and business links to the world's fastest growing forest products markets in Asia, the New Zealand forest industry is expanding rapidly. The following development targets by 2025 are achievable: total outputs of NZ$18 billion comprising 14 percent of GDP; promotion to the country's top export earner with NZ$14 billion of export receipts; employment of 60 000 people directly and 250 000 indirectly; and a ranking among the top five global suppliers.
Impact on regional development/economy: Since 1990 over NZ$2.6 billion has been invested in on-shore processing facilities. The industry's current annual harvest of 18 million m3 will double within the next 15 years, and reach an estimated 50-60 million m3 per annum by 2025/30. Assuming the industry retains its competitiveness, an estimated NZ$3-4 billion in new processing investment is possible, which could deliver very significant benefits at the national level (i.e. fivefold increase in export receipts) and regionally in terms of employment, infrastructure and wealth creation. The regions likely to benefit most directly from this new investment in processing are Northland, East Coast, Hawkes Bay, Southern North Island, Nelson/Marlborough and Otago/Southland.
Greenhouse gas emissions: At its present size, the industry's plantations remove around 5 million tonnes of carbon each year (net of harvesting). The New Zealand forest industry is currently responsible for emitting 280 000 tonnes of carbon per annum - though it is also responsible for managing forests that act as forest sinks. This puts the industry in a very strong carbon balance position, i.e. the industry's sinks absorb 18 times harvesting and processing emissions.
What has been done to reduce emissions?: Since 1990, the forest industry has managed to reduce emissions by 3 500 tonnes of carbon per annum despite a 67 percent increase in annual harvest and a 45 percent increase in production of processed products. The forest industry is on target to reduce this further by an estimated 4 000 tonnes of carbon per annum by 2008. Energy efficiency and greater use of biofuels and recycled wood fibre has been primarily responsible for these reductions.
The forest industry needs to be fully recognized as an important part of the climate change solution because it is based on sustainably managed forests that absorb carbon dioxide from the atmosphere and are therefore carbon sinks. According to the Ministry for the Environment, assuming new plantings of 50 000 ha per annum, the industry's forests will remove an estimated 180 million tonnes of carbon dioxide (or 50 million tonnes of carbon) from the atmosphere by 2009 (Note: this data excludes carbon contained in forests litter, roots and soil.) Furthermore, its processing sector makes extensive use of wood waste as `carbon neutral' biofuels for energy production thus reducing carbon emissions substituting for fossil fuel use. It increasingly recycles fibre for remanufacturing - thus avoiding methane emissions from landfills and reducing energy intensity in the processing phase.
All forest products store carbon and Forest Research has estimated that during the first commitment period (2008/12), total wood products produced by New Zealand could represent an additional sink of up to 10 million tonnes of carbon. Finally, in the construction materials area, the manufacture of wooden building products results in lower carbon emissions than for most non-wood substitute products. To illustrate, independent research by the University of Canterbury suggests that on an annual basis, a 17 percent increase in wood usage by New Zealand's building industry could result in a 20 percent reduction in carbon emissions from the manufacture of all building products, representing a 1.5 percent reduction of New Zealand's total emissions.
Competitors and impacts of the Kyoto Protocol: The New Zealand forest industry operates within the Asia Pacific market and mainly competes with forest industries in developing countries - such as Brazil, Chile, Republic of Korea, Indonesia Malaysia, Thailand and China - which are not parties to the Kyoto Protocol and are therefore not incurring any costs associated with reducing greenhouse gas emissions.
Impact of the Kyoto Protocol on the industry: The New Zealand forest industry is concerned that the Protocol currently does not fully recognize the role the industry performs in reducing greenhouse gas concentrations. The impact of key Protocol articles, combined with the fact that developing countries have yet to accept any emission reduction obligations or accession and ratification timetable, could fundamentally change the international economics of forestry for forest products manufacturing. These factors will almost certainly impact negatively on the ongoing growth and development of forestry and forest products manufacturing in New Zealand.
Meanwhile, there are unresolved questions concerning the potential impacts of Kyoto Protocol mechanisms, including the role of forests and forest products as carbon sinks for emissions trading and the treatment of carbon in internationally traded forest products, on future:
- wood fibre values, prices and flows from
New Zealand's pre- and post-1990 plantation forests;
- energy
availability and energy costs to process New Zealand's expanding forest
harvest;
- the price of forest products to New Zealand and international
customers; and
- further investment in on-shore processing and reforestation and afforestation in New Zealand.