Diversity the key for Kiwi forestry to keep growing

Diversity the key for Kiwi forestry to keep growing
With the spectre of increasing global competition for our forest products, the industry is focusing on forming strategies. Mark Reynolds reports.

The statistics are sobering. By 2010 there will be another 19 million cubic metres of wood available in New Zealand for industry to export - either in log form or to further process. If this upcoming surplus of wood is to be further processed, up to $6.5 billion must be invested in new wood processing facilities, according to forecasts by Forest Research, the Government-owned industry research group.

In the past nine years, wood processors have announced their intention to invest more than $2 billion in upgrading existing wood processing facilities and creating new manufacturing plants.

According to Nick Roberts, manager of Weyerhauser New Zealand and president of the New Zealand Forest Owners Association, the forestry industry is focused on the need to pick up its manufacturing expertise and initiatives.

Mr Roberts said diversity is the key to the New Zealand forestry industry moving ahead from its current position as the nation's largest exporter.

"While we have the opportunity to delay the harvest [of radiata pine] in the short term, more processing and the application of technology will be key components in creating new products for new markets," he said.

Mr Roberts said the key to finding the technology for the forestry to move ahead in the manufacturing industry will be its ability to make use of intellectual and technical resources that have made the New Zealand wood growing industry arguably the most technically competent in the world.

That view is shared by Dr Wink Sutton, a long-time strategist for Fletcher Challenge Forests and now an independent consultant.

"To be successful wood exporters, New Zealand plantation investors must have an international competitive advantage," Dr Sutton said.

Traditionally, that advantage has been to be a low-cost wood producer, with New Zealand plantations having high-yielding crops on short rotations, with the national advantage of low-cost land, labour and capital.

Now, other countries like Australia, Argentina and Brazil are rapidly catching up, so now we need competitive manufacturing technologies to move up the value chain, Dr Sutton said.

But the economies of doing that are high, so besides a few big players like Carter Holt and Fletcher Challenge building large manufacturing plants, the rest of the industry needs to club together to develop a wood manufacturing industry.

To some extent that is beginning to happen. In the middle of last year, logging research group Liro Ltd joined forces with Forest Research to form an integrated research industry covering the entire forestry value chain.

Forestry research chief executive Bryce Heard said the new organisation can bring together the harvesting and logistics research experience of Liro with the bigger science engine and processing research skills of Forest Research.

"What we have tried to create for our clients is a one-stop shop providing research and development solutions from the forest to manufacturing and the market."

This industry-wide approach has enabled improved access to Government funding for research and development.
Mr Roberts said that while industry initiatives are important, each forest company or owner must sit down and work out their own manufacturing strategy.

In 1998, the value of New Zealand forest product exports to the United States rose by nearly a quarter to almost $200 million. Sawn timber - which itself is a manufacturing process - accounted for a significant portion of that growth, but there were encouraging signs that further processed forestry product sales are also picking up.

Fletcher Challenge Forests said it is expanding its sale of processed goods into the United States through directly supplying retailers in the United States. It formed a North American Consumer Solutions group as part of a restructuring process that has seen it look at all of its manufacturing facilities in New Zealand and link their production with end users.

Tony Johnston, the Maryland-based general manager of the consumer solutions group, said the company worked from the customer back; by establishing a demand for a product, setting up a distribution business and then putting in place a manufacturing plant to produce the products.

It is a strategy that has led to Fletcher's joint venture distribution business in the United States doubling sales over two years and increasing market share. It has meant Fletcher's Taupo wood mouldings plant has had to move to producing 24-hours a day, seven days a week to keep up with demand.