Pruning investment starts to pay off

Steve Wilton

WAIRARAPA foresters are now reaping the benefits of years of pruning, according to an industry insider.

Steve Wilton of Forest Enterprises says forestry investors can "breathe a sigh of relief at the investment made in pruning", as margins on pruned logs are finally big enough to make a difference.

Fully pruned logs are currently paying twice the rate of the next lowest grade - a far cry from a season that wood giant Carters briefly advocated for "millennium forests" with no or little pruning, because margins for the pruned product were so small.

"Everybody's been waiting for it for 25 years," Mr Wilton said.

Forestry prices, which as a commodity industry work in a "boom and bust" cycle, have increased steadily for four or five months", Mr Wilton said, "although they're now at a point people realise they're too high and are due for a correction".

Forest owners are also benefiting from cheaper transport with lower fuel costs and a drop in demand for cargo space, Mr Wilton said - partly caused by a drop-off in Australian mineral exports to China.

Forestry demand is driven by China, India, Korea, Japan, Mr Wilton said, with demand in India particularly improving.

On the downside a drop-off in China's economy is "quite worrying", Mr Wilton said, and the low New Zealand dollar reduces returns to New Zealand.

Mr Wilton also welcomed the expansion of the rail forestry hub south of Masterton, increasing its capacity from 3500 tonnes to 12,000 tonnes.

"That represents an awful lot of truck movements that won't happen."

The rail hub could also help ease the "bottleneck" for logs at the Wellington port itself, Mr Wilton said, especially over the peak period of the summer.