Are we ready for the ‘wall of wood’?
Gavin Evans takes a detailed look at the wave of port, rail and road investment needed to cope with log exports which have tripled over the last decade, let alone an even bigger one planned under the Government's 'Billion Trees' programme
All over the North Island, ports and KiwiRail are scrambling to deal with a 'wall of wood' that has tripled since 2008. They say they will need to invest heavily again if they are to cope with another potential doubling of the harvest in the five years to 2021. High log prices because of Chinese demand could easily trigger another surge in the 'wall'.
The ports of New Plymouth, Gisborne, Napier and Wellington are straining to keep up with the demand to move logs from forests to ports, and will have to work hand-in-hand with a capital constrained KiwiRail to avoid regional roads and highways being pounded into potholes by fleets of logging trucks.
For example, Port Taranaki is hoping a planned rail service from Whanganui will help it capture a bigger share of the wall of wood coming out of the lower North Island.
The company has been working with KiwiRail and foresters and says it is close to settling a new service that could deliver between 80,000 and 120,000 tonnes of logs to the port annually starting early next year.
Chief executive Guy Roper says the details of the cost and the share of the investment are still being worked through. But he says an improved supply chain would be more efficient and improve the return to forest owners.
“This is about growth – additional logs coming to Port Taranaki from the Whanganui area,” he says.
“Logs within a closer radius of the port are still likely to come on trucks. But logs will no longer be exclusively on trucks, which will help congestion, help reduce the amount of maintenance and upgrades required, and reduce carbon emissions.”
Taranaki handled 692,000 tonnes of logs in the year through June, 42 percent more than a year earlier. But it is not alone trying to cater for the forestry boom. Many of the country’s ports have experienced 20 percent-plus annual volume growth in recent years as trees have reached harvest age and strong demand from China has delivered record prices.
Many ports have, or are, extending log yards and rationalising wharf space to cope. Others are planning dredging to cater for bigger vessels or paving yards and buying bigger loaders and higher book-ends – the massive steel frames logs are stacked within – to improve their use of space.
But some, such as Napier and Eastland at Gisborne, are also facing a step-change in investment to increase capacity and reduce congestion. The major berth expansions planned in coming years will cater not just for the expected logs growth, but also increasing cruise ship visits and growth in other export freight.
And the planning and commitment that entails should be on peoples’ radar if the country is to more double or almost triple its forest estate by 2050 – as recommended by the Productivity Commission – to help meet its climate change targets.
That extra 1.3 million to 2.8 million hectares of trees will most likely be planted in more marginal – and hard to get to - dry stock land in eastern Taranaki, Wanganui, Manawatu, southern Hawke’s Bay, Wairarapa and down the east coast of the South Island. And that will have big implications for the road and rail links in those areas – if they exist – to get those logs to port.
As Forestry Minister Shane Jones told MPs in June, careful planning will be needed to ensure any exotics planted as part of the billion trees programme don’t become “stranded assets”.
And then there are the capital requirements. Hawke’s Bay Regional Council, which owns Napier Port, has already signalled it doesn’t have the funds to meet both its environmental plans and fund the $250 million to $300 million of spending the port says it will need in the next decade to meet its growing log, cruise ship and export apple trade.
The council will go to ratepayers later this year on options that could include selling part of the business or leasing the port out long-term to an operator prepared to make that investment.
Northport has also begun consulting on a much longer-term concept plan for extending its wharves east and west to cater for more log and container traffic.
Better times for KiwiRail
In the meantime, KiwiRail has benefited from the rising harvest volumes and has expanded its fleet of log wagons 40 percent since 2011.
It converted about 130 container wagons to carry logs last year. It will accommodate the new Taranaki service within the 200 wagon conversions it plans in the current financial year, Alan Piper, the firm’s sales and commercial general manager, says.
The viability of a rail service to a forester depends on a range of variables, including train size and the distance of a forest from the rail head.
But, as a general rule, he says distances of 85 kilometres or more from port provide the biggest advantage over trucking. And the truck trips avoided reduce road wear and cut emissions by about two-thirds.
Earlier this year KiwiRail was delivering 60 log trains a week to Tauranga from yards at Kawerau, Murupara and Kinleith. It estimates those loads avoided 340 truck movements a day.
Centreport in Wellington has also benefited from its rail links to Wairarapa, the main trunk line north and west to Wanganui to deliver its increasing log volumes. It handled 653,000 tonnes of logs in the six months through December, five percent more than a year earlier.
But nationally, the sheer volume is the challenge, and it’s not all coming from regions well-served by rail.
Exports have tripled, and may double again
New Zealand has about 1.7 million hectares of plantation forest and the harvest reached a record 33.1 cubic metres in 2017 – a 50 percent increase since 2008, according to Westpac. Log exports reached 19.4 million cubic metres, 11 percent more than a year earlier and almost triple that in 2008.
And depending on markets and the industry finding enough contractors and trucks and wharf space, that could reach 43 million cubic metres by 2021, according to age-based projections of wood availability.
A more measured scenario, in which hundreds of small forest owners adopt the more sustainable harvest policy of the large-scale operators, could see volumes sustained at more than 35 million cubic metres for a decade from about 2024, according to forecasts prepared for the Ministry of Primary Industries in 2014.
Regardless of when the peak supply arrives “there is a whole big wall of wood coming during the next seven years,” Westpac industry economist Peter Clark says.
But knowing when that volume will peak, and how best to move it, is the challenge for ports and transport firms. And while rail may be the more efficient, low-emissions way to move logs, it isn’t available everywhere and may only soak up the growth in volume rather than reduce the number of trucks already on the country’s roads.
Clark says the long-term outlook for New Zealand forestry is very good, given ongoing urbanisation and construction demand in places like China and India. The increasing use of New Zealand pine as structural timber in more markets is also positive.
But he says nearer term risks to the demand outlook are real. There has already been a slowdown in China – New Zealand’s biggest log buyer - and looming trade wars may also have an impact.
The central North Island dominates the country’s radiata pine crop and Port of Tauranga takes the lion’s share. The country’s biggest port moved 3.3 million tonnes of logs across its wharves in the six months ended December – 12 percent more than a year earlier.
Napier Port, the country’s fourth-largest, handled a record two million tonnes of logs in the year through May. The 1.6 million tonnes shifted in the September year was 35 percent more than the year before.
Log trucks arrive every few minutes at the port which also receives a daily log train from Whanganui. Rail delivered about 202,000 tonnes of the logs the port loaded onto 118 ships last year.
The company is now seeking consent for a $125 million wharf expansion to help cater for extra log ships and cruise liners.
It is expecting an almost nine percent lift in log carrier visits by 2019 and a 49 percent increase in all export volumes by 2026. And a big part of that is down to the reopening of the Napier-Wairoa freight line expected by the end of this year. KiwiRail estimates that could take as many as 5500 log trucks off the roads a year.
Expansion plans in Gisborne
Eastland, the country’s second-largest log exporter, moved close to three million tonnes in the March year just ended – another record and about 20 percent more than the year before.
The community-owned firm, which has upgraded its log yards and started a satellite yard at Matawhero west of the city in 2011, believes those volumes could reach four to five million tonnes in the next six to eight years.
Eastland has invested more than $90 million in capital projects for the port in the past decade. Last year it indicated its Twin Berth project – to enable it to handle two 200-metre Handymax carriers at a time - would account for most of the $70 million of capital work planned during the following five years.
The work includes dredging, extending an existing wharf and strengthening the existing breakwater. Its final cost will depend on the extent and pace of reclamation – anything from 1.5 hectares to about four.
Like any infrastructure operator, Eastland wants to make sure it has the capacity in place to meet exporters’ needs. But it also needs to do that at least possible cost if the region’s foresters are to benefit.
Ports infrastructure manager Martin Bayley told foresters earlier this month he is keen to hold off “pouring more concrete” if some of that expected increase in volumes can be met with more efficient use of the existing assets.
“It’s easier to build cost than it is to build value,” he said during a presentation at the New Zealand Institute of Forestry conference in Nelson on July 10.
Eastland’s catchment stretches from the Wairoa River, 100 kilometres south of Gisborne, to Hicks Bay, 180 kilometres north at the top of East Cape.
And the region’s fragile soils mean its “trash” roads are hard to maintain, Minister Jones told the same conference. That’s why he’s pushing investigations of a wharf at Hicks Bay that logs could be barged from.
Eastland is working with iwi interests to test the feasibility of the plan.
Its early days. Bayley says building a wharf is one thing, but the economics of shifting logs is a function of both distance and the number of times the logs need to be handled. A port, he notes, also relies on a small industry of supporting operations to function.
Virtually all the country’s ports are investing in new loaders or paving to improve the efficiency of their log operations.
Port Marlborough’s Shakespeare Bay facility is handling about 700,000 tonnes of export logs, up from 507,000 five years ago. The company believes it can lift that to about a million tonnes in coming years through judicious investment in new plant and higher stackers.
Southport at Bluff is investing about $2.2 million adding a hectare of log space this year; Lyttelton recently resealed 15,000 square metres and improved storm water treatment for its all-weather log yard.
Port of Nelson embarked on a string of projects three years ago buying land, demolishing buildings and rationalising space. It expects to complete the work mid-2019.
A recent small reclamation will increase its storage space by more than 13 percent to at least 85,000 Japanese agriculture standard cubic metres.
The firm handled 1.13 million cubic metres of logs in the June year, 26 percent more than a year earlier. Annual shipments averaged 650,000 in the decade ended 2016.
“There has certainly been significant growth over the last two years,” acting chief executive Matt McDonald says. “Looking at the figures for the past six months or so, the volume going through the port has been more in the 1.2-1.3 million JAS range.”
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