New Zealand’s forestry sector might have a low profile, but it attracts some big international investors.
Near the top of the table is Canadian multinational insurance and financial services giant, Manulife.
Manulife, which has about C$1.3 trillion ($1.6t) in funds under management, is one of the world’s biggest fund managers.
The firm manages 208,500 hectares of plantation forests on behalf of three clients, with forests in Northland, Auckland, Waikato, Bay of Plenty, Horizons (Manawatu-Wanganui), and Hawke’s Bay regions. It also owns estates in its own right.
The NZ Forest Owners Association (NZFOA) has 84 members across a broad spectrum, including the big multinationals.
More than half the association’s membership have 1300 hectares or less in forestry, but it also represents Māori tribal interests such as Ngāi Tahu, the Crown, family trusts and farm foresters.
“We look after a pretty broad church, plus a diversity of management and ownership types,” association chief executive Elizabeth Heeg says.
Considering the role the sector plays in the export trade - exports for the June year totalled $5.75 billion - she agrees forestry has a low profile, except when things go wrong.
“New Zealand has some amazing points for forestry but we also have some challenges,” she says.
“The good points are that we are known for our sustainability, so it’s our ability to manage forests effectively, and with good environmental outcomes.”
A big part of that is the exotic plantation model, adopted over 100 years ago to help protect what was left of the indigenous forest estate.
Heeg says the industry has advantages over other countries, many of which are under pressure to preserve their native estates.
“We have also got the quality of the timber and know how quickly we can grow it.
“The big part of the drawcard as far as pension funds go is its sustainability,” she says.
“The fact that it is not associated with deforestation is a big plus for foreign investors.”
Why is it that forestry does not seem to get the same traction as, say, farming?
Heeg says it’s cultural.
“New Zealand identifies itself as a farming country and, to be fair for over 100 years we were clearing the bush to make way for farms, so it’s a cultural shift to identify ourselves as bush people, so to speak.
“I do think that that connection to farming could work well alongside forestry, but I don’t think forestry right now is included in the same sphere, necessarily, despite the fact that we have so many farm foresters out there who are growing a hectare or more of forests on their farm.
“If you go to a place like Rotorua, I think people understand pretty clearly what the value proposition is for forestry, but at the national level we don’t get the same kind of profile.”
From time to time, forestry attracts the wrong kind of publicity.
In October, meat processor Alliance Group shut its Smithfield plant in Timaru because of land-use change.
For “land-use change” read “forestry”, as it’s the expansion of trees that has pitched the forestry and pastoral sectors against each other.
“Unfortunately, we must face the reality of declining sheep processing numbers as a result of land-use change,” Alliance said at the time.
NZ Beef and Lamb has long lamented the loss of farmland to forestry, particularly for carbon farming.
The farmer-funded organisation commissioned Orme & Associates to update the number of farms sold with the intention to plant forestry since their last report in August 2023, which covered the period 2017 to the end of 2022.
They found that a further 51,291 hectares identified for afforestation had been sold since the end of 2022.
Heeg strongly refutes the idea that forestry is responsible for meat plant closures.
“I definitely do not think that forestry is responsible for that, and we can demonstrably prove that it’s not responsible for the closure of meat works.
“I don’t think that anybody disputes that there are real headwinds in the rural community right now.
“Our log prices are down and we have an exodus to Australia of some of our talented people, so a lot of the challenges that farmers are experiencing are the same challenges being faced by forestry.”
Heeg says her sector is still not experiencing the same level of afforestation seen in the 1990s but she concedes that land-use change is happening in rural communities.
“But I think it’s those farmers’ right to change their land use to something that is right economically.”
Forestry found itself in the gun for the damage done to communities from “slash” - stumps and unwanted wood that wiped out East Coast bridges after Cyclone Gabrielle in 2023.
“The important thing that we as a forestry sector are trying to work with communities on is how we make sure that we have good practices, but also how we are going to deal with these increasingly intense storm events that are the result of climate change,” she says.
The sector also gets some flak from critics of carbon forestry - where growers plant pines purely for the purpose of carbon sequestration and carbon credits - nothing else.
Heeg says carbon forestry done well is an important tool in the kit for addressing the climate crisis.
She says that as a sector, one of the biggest problems facing forestry is price volatility.
As it stands, log prices can vary wildly depending on demand in its biggest market - China - which is struggling through a property slump.
Heeg says more domestic processing done onshore would go a long way towards taking price volatility out of the mix.
“With the decline in China, more of our industrial grade timber is going into energy production – pellets – and some firms are looking into creating an energy log.
“You want the timber to attract the highest value use that it can go for, so timber that used to go into making concrete boxing in China and used only once can now be used here for energy to decarbonise New Zealand businesses, then that’s probably a more efficient use.
“That’s the kind of conversation that we want to be having, because if you process the timber here in New Zealand you can also process all the residues that can be used for other things as well.”
“The big driver for New Zealand is that we are the world’s biggest exporter of softwood logs.
“These [weather] events can help the industry take a look at itself and see if we are doing everything we can and doing things the right way and [whether there] can be room for improvement.”
The log market is more challenged these days because of a more subdued economy in China.
“I don’t expect things to rocket back to those record highs that we saw a few years ago, but those were abnormal times.
“That’s where having a domestic market as well is helpful, although they are having their own challenges, particularly from a costs perspective.”
Scott Downs, PF Olsen’s general manager sales and marketing, says forestry does not seem to get the airtime that pastoral farming does.
“I think it’s because it’s so diversified - there are so many different voices.
“There is the NZFOA but we certainly don’t have the political clout that the farming industry has.”
PF Olsen has 130 staff, plus thousands of contractors at various times of the year.
The experience overseas showed that multiple land uses worked best for the environment.
Downs says sawmills are struggling at the moment.
“The market is oversupplied with structural lumber so 40% of the structural sawmill capacity is not being used, so the sawmills are slowing down.”
And logs are trading at around $120 per JAS cubic metre at the wharf gate for A grade logs - satisfactory but well down from their peak.
For export logs the two-year rolling average has been trending down since 2021.
Future demand from China is the big issue, and it’s looking unlikely that prices will return to their recent highs of $140 plus per JAS metre.
Downs says that’s a good reason to get biofuel up and running.
About 40% of New Zealand logs are consumed domestically and 60% are exported.
Of the logs for domestic processing, the majority of this is used for construction purposes. Of the 60% exported, China takes the lion’s share to use mainly for construction and form work.
The New Zealand Super Fund’s largest investment is Kaingaroa Timberlands, in which it has a 42% stake. Covering around 178,000 hectares of planted forest, Kaingaroa is recognised as one of the world’s premier softwood plantations and is a major supplier of logs to the domestic and export markets. NZ Super’s investment partners in Kaingaroa include PSP Investments - one of Canada’s largest pension investment managers - and Kakano Investments, a collective of iwi groups which are also part-owners of the underlying land. The forest is managed by Timberlands, the ownership of which is broadly similar to the estate’s.
Manulife Investment Management Forest Management MFM (NZ) — formerly Hancock Forest Management New Zealand - is part of the large Canadian multinational insurance and financial services company, Manulife. MFM NZ has holdings in its own right, and manages forests for others. If its owned and managed forests were taken together, Manulife would rival Timberlands in size, being responsible for about 220,000 ha. It has investments in Taumata Plantations which has 121,000ha in productive forest, and Tiaki Plantations, which has 13,000ha. Manulife also manages about 42,000ha for the Ontario Teachers Pension Plan - OTPP New Zealand Forest Investments - and Waonui Forest Investments. Manulife operates in more than 20 countries, with significant businesses in Canada, the U.S., Japan, China, and Hong Kong. In its latest annual report. Manulife says it is the world’s largest institutional manager of “natural” capital, consisting of nature-based assets such as timber and agriculture, with C$1 trillion ($1.2t) in assets under management.
New York Stock Exchange-listed Rayonier Inc established itself in New Zealand more than 25 years ago. Rayonier Matariki Forests is managed by Rayonier New Zealand, a subsidiary of Rayonier Inc, and is the third largest forestry company in New Zealand with approximately 120,000 ha of plantations on 166,000ha landbase. Rayonier established itself in New Zealand in 1988, after the Government announced the privatisation of the Forest Service, initially as a log export operation. It purchased its first forest in 1991. The parent company is a leading timberland real estate investment trust (REIT). The company says it has become the second-largest timber REIT with estates in the US and New Zealand totalling just over a million hectares. Rayonier was founded in 1926 in Shelton, Washington and today is headquartered in Wildlight, Florida.
PF Olsen does not own forests but manages 160,000ha for a wide range of different clients. In 2022, Quayside Holdings - the investment vehicle for the Bay of Plenty Regional Council - bought 44% of PF Olsen from private equity firm Direct Capital, which had been a shareholder for 11 years. PF Olsen has been around for more than 50 years. The company also has a large operation in Australia, managing 212,000 ha. PF Olsen plants about 40% of all new forestry in New Zealand. The company manages the largest harvesting portfolio in New Zealand and Australia - 2.4m tonnes and 2.7m tonnes, respectively - a year.
Taumata Plantations encompasses the former Carter Holt Harvey’s forest estates in the central North Island and Northland. About half its logs are absorbed by the domestic market. Taumata is 42% owned by Manulife. Australian (28%), United Kingdom (15%) US investors own the the rest. Taumata’s forests are all in the North Island - the largest being the Kinleith Forest in the Central North Island. Taumata Plantations is chaired by Murray Taggart, the former chair of Alliance Group - New Zealand’s biggest sheepmeat exporter.
Ernslaw One is a vertically integrated softwood plantation company, growing and managing over 95,000ha of trees. The company says it has the largest and most diverse asset base and is the biggest grower of Douglas-fir in New Zealand. Ernslaw One is part of the Oregon Group, which is owned by the Malaysia-based Tiong family, along with its subsidiary company and processing arm, Winstone Pulp International, which closed two mills in the Ruapehu District in October. The mills were involved in lumber and pulp manufacturing.
NZ Carbon Farming owns 65,000 ha of forest land in NZ designated as a permanent carbon forest activity and actively manages a further 45,000 ha on behalf of lease holders. NZ Carbon Farming, which has been going for over a decade, is the country’s biggest carbon farmer. The company - set up by Matt Walsh and Bruce Miller - plants trees for carbon credits. They are never harvested. The company says its ultimate goal is to allow the land to revert back into indigenous forest.
The company is a trans-Tasman operation - formed in 2012 following the acquisition of a 105-year lease of 80,000 hectares of plantation assets from the South Australian Government. The name OneFortyOne comes from the 141st meridian east line running between the South Australian and Victorian border. In 2018, OneFortyOne acquired Nelson Forests Limited and Kaituna Mill in New Zealand, with approval from the New Zealand Overseas Investment Office. The Nelson forest, first planted in 1927, is in its fourth rotation.
Ngai Tahu Forestry manages 54,000 ha of forests across North Canterbury, Otago and the West Coast. Ngāi Tahu Forestry was established in 2000 when Ngāi Tahu Holdings Corporation purchased land subject to Crown Forestry licences. The company harvests and supplies logs to various domestic and export markets. It is also involved in carbon forestry and Proseed NZ, which produces improved selective seeds to the forestry industry and nurseries throughout New Zealand and Australia.
Summit Forests, owned by Japan’s Sumitomo Corp, started its New Zealand operations in 2013. The estate is spread throughout Northland, the Coromandel, Whanganui, and the Gisborne and East Coast regions. In 2013, Summit purchased the former Juken New Zealand Ltd Forest estate (36,000 ha) in Northland.
Juken NZ has been involved in the New Zealand forestry and wood processing industries for the last 25 years. It makes wood products from selectively planted, managed and harvested radiata pine for local and export markets. Juken is a subsidiary of Japan’s WoodOne Ltd, an international housing materials and componentry company. Juken NZ has three processing mills in New Zealand along with 40,000 hectares of forest estates located in the North Island. The company intensively prunes our forests in order to grow a high value clearwood resource for processing.
Port Blakely Ltd., NZ Forestry, a division of American timber company Port Blakely, owns and manages forestland on the South and North Islands. The company grows, harvests, and continually replants radiata pine and Douglas fir. Both woods are sold domestically in New Zealand and in log markets throughout Asia.
Roger Dickie NZ manages over $1 billion worth of New Zealand forestry assets and more than 38,000 hectares, for both global and local investors. The company has been going for over 50 years. The company offers syndicated ownership and shole asset ownership for private and institutional Investors.
Tasman Pine Forests, a Sumitomo Forestry subsidiary, has 36,200 ha of exotic plantations in the top of the South Island. The majority (97%) of the planted forest area is established in radiata pine with the balance in Douglas fir and some small areas of other exotic species including eucalyptus. Tasman manages the plantation estate to produce wood, which is utilised in both domestic and international markets for a range of end-uses including sawn timber, laminated veneer lumber (LVL), medium density fibreboard (MDF), posts and poles.
Pan Pac is the largest forestry grower in Hawke’s Bay. Most of the forests are next to the ranges, so they often border on Department of Conservation land. These are ex-state forests, and from north to south are: Mohaka, Esk, Kaweka and Gwavas. Tangoio, the other substantial forest, is coastal and located around the Pan Pac mill and Waipatiki. Pan Pac is owned by Japan’s Oji Group, a global paper, pulp, packaging and forestry enterprise, with operations throughout Asia, North and South America, Europe and Oceania. Last year, Oji said it planned to permanently shut the Kinleith PM6 paper machine. In September, Oji said it would close its paper recycling mill at Penrose.
Aratu is a forestry estate and asset management business based in the Gisborne District. Aratu manages 35,000 hectares of forestry plantation land across Te Tairāwhiti. In July 2019, Hikurangi Forest Farms was purchased by New Forests, an Australian-based, international and sustainable forestry investment manager, on behalf of its institutional investment clients. The company was renamed Aratu Forests.
Forest Management (NZ) is a family-owned and operated company. Established in 1974, the company manages more than 120 forests with a cumulative net stocked area of 35,000 hectares. The species it manages are predominantly Pinus radiata however there is an increasing area of alternative species such as Douglas fir, Cypress, Redwood, Eucalyptus, Japanese Cedar and native trees being established.
Crown Forestry is part of the Ministry for Primary Industries (MPI). It has a commercial focus, managing a portfolio of the Crown’s forestry assets to achieve the best return from the forests and meet the Crown’s legal and contractual obligations. Crown Forestry is a direct participant in the New Zealand forest industry. It has a separate role to the policy, regulation, and service delivery roles carried out by MPI. Crown-owned forests and afforestation leases. The forest estate consists of 55 forests with a total planted area of around 30,000 hectares. The forests are located throughout the North Island and in Otago and Westland. In the case of Crown-owned land, the land (and sometimes trees) are transferred to successful claimant groups as part of Te Tiriti/Treaty of Waitangi settlements.
Wenita is the largest producer of forest products in Otago supplying local and international markets. It has three main forests in Otago - Mt Allan, Berwick, and Otago Coast. Wenita was formed in 1990 to buy forest cutting rights from the Government. Wenita is 100% owned by Taieri Forests Limited, which is owned by three shareholders: New Forests (ANZFF2), Stichting Pensioenfonds ABP (APG) and Pension Protection Fund (PPF) Investment Holdings 1 Limited.
Masterton-based Forest Enterprises manages forestry investments for 6,500 mostly New Zealand investors, operating as a limited partnership. Forest Enterprises is New Zealand’s leading full service forest management and investment services company. Since 1972, it has been helping people grow their wealth through affordable direct investments in some of New Zealand’s most exceptional radiata pine plantation forests. It manages the forests from establishment to harvest.
(Compiled from publicly available information).
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
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