Timber trading goes electronic

By ADAM GIFFORD

Lignus Exchange, a New Zealand-designed internet trading service for the global timber industry, is set to open for business at 1 pm today.

The site was developed by brothers John and Rodney McVicar, who have a forestry and sawmilling background, in partnership with Christchurch's Aoraki Corporation using the Jade software technology.

John McVicar said the project had cost more than $1 million so far, and the brothers had been talking to potential investors.

"It needs serious investment to make this work."

Lignus Exchange will take a 1 per cent commission from sellers, compared with the industry norm of between 3 and 5 per cent.

The site was supposed to go live in May, but John McVicar said developing something which met the needs of the industry had been a more complicated task than envisaged.

"Wood's an extraordinarily complex commodity. It's not like steel or paper, where there are a relatively limited number of products and suppliers.

"There are tens of thousands of timber companies around the world, with thousands of products," he said.

There are also differences between the way wood is described and measured in different countries, and the same wood may be known by different names in different countries or regions."

John McVicar said wood was traded globally by all types of organisations. In North America, the price could fluctuate by the hour.

He isn't concerned about a rival, Woodnet being built for Wairarapa timber industry executive Stuart Orme by KPMG Consulting with Microsoft software.

"He [Mr Orme] has been talking about it for most of the year as being an information portal, and he seems to have just decided he is to be a trading exchange. It's not a threat," John McVicar said.

Woodnet's site promises a launch date of December for "the preferred electronic trading platform for information, products and services (including logistics) across the value chain from wood resource to customer, for international and domestic customers."

Lignus Exchange is hosted by Jade Direct at its Christchurch data centre and runs over the internet with the Jade Smart Thin Client, which allows users to run complex applications securely over a simple dial-up line.

The Lignus screen is configured so users can enter all the details they need to make an offer.

This can involve dozens of choices from drop down menus regarding species, size, quality and terms, as well as dealing in multiple currencies.

Preferences are set so the buyer and seller are communicating in terms they understand - for example, an offer by a New Zealand merchant of 4x2s will be read by a potential US buyer as 2x4s, the more familiar term there.

"There's no way this could be done in a normal web browser. You would have to keep switching between dozens of screens to fill in the information," John McVicar said.

The system keeps track of negotiations, which can go on for some time with offers and counter offers. When a deal is done, the application prints out a pro forma invoice with all the relevant details.

Lignus allows multiple negotiations to be conducted simultaneously in a private, neutral environment.

The system is designed so administration is done by members, so companies can specify who can use the system, who they can trade with and what their preferences are for trades.

This means companies can choose to trade only with certain firms or in limited geographical areas, or they can open themselves to offers from anywhere.

Lignus requires users to pass stringent credit checks, so other users can be confident any trades will be honoured.

It is working closely with the New Zealand Timber Industry Federation and the Australian Forest Products Association, and has applications for membership from companies in the United States, Australia, Japan, China, Indonesia, Malaysia and Korea.

New Zealand members include Placemakers, Mitre 10, Fletcher Challenge Forests, Woodlink and McAlpines, the largest private processor.

Carter Holt also is going through the registration process.

John McVicar said he was not expecting an immediate rush, but like all networks the value of the system to users would increase exponentially as more companies joined.

"Most customers can see the benefits of electronic trading, but it's still a new thing," he said.

With New Zealand's $6 billion forest products industry set to double over the next five years, John McVicar said Lignus would help firms here open new markets.

"I'm thrilled we have got here."

"It's easy to make an announcement ... but delivering something people can use is quite an achievement."

Lignus Exchange


Woodnet