Forest industry adviser DANA Ltd has conducted regional analysis of future harvest levels in New Zealand and concluded that wood production may increase by about three million m3 per year over the next decade – far less than official projections indicated.
DANA said that a series of events have shaken the confidence of some parts of the industry and the outlook is uncertain. A major challenge has been the fast rising exchange rate against the US and Australian dollars which, along with shipping costs and low prices, has severely affected export log returns.
Buoyant housing activity in New Zealand and Australia has helped the structural lumber and wood panels sectors – but this is set to slow.
New LVL projects in Australasia have saturated the market and the existing New Zealand MDF players have increased capacity by buying existing Australian mills rather than investing in new plants in New Zealand. Several domestic sawmillers are also looking to build overseas.
Public companies have become used to tree farm investment returns of 3-5%, much lower than the 8-10% suggested by tree farm promoters, and some are looking to shed their forest assets.
However, said DANA, New Zealand remains an attractive place to invest compared to other countries.
Copies of the review are available by calling +64 7 349 2764.
