Forest Products Industry

Australia’s first National Environmental Protection Agency was launched this week with stop-work-style powers, expanded audit powers and penalties of up to $16.5 million for serious corporate breaches. Native forestry is shielded for now, but that protection falls away in 12 months. Source: Timberbiz According to the Federal Government the National EPA, the first in Australia’s history, underpins the Albanese Government’s landmark environmental law reforms, which were passed in December last year. It is a key plank in the reforms’ promise to strengthen environmental protections and speed up the approval of critical housing, energy and minerals projects. The government says that the National EPA will be a modern and effective regulator that helps people understand Australia’s environmental laws and makes sure those laws are followed. These include the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) and laws regulating sea dumping, ozone protection and synthetic greenhouse gas management, hazardous waste, product emissions standards, recycling and waste reduction and underwater cultural heritage. The role of the National EPA will include issuing permits and licences, environmental assessments and approvals, compliance and enforcement activities and the assurance, monitoring and auditing of the operation of accreditations, bilateral agreements and bioregional plans under the EPBC Act. Forest and Wood Communities Australia says the forestry sector now has just 12 months to prepare for the most significant expansion of federal environmental enforcement in a generation, after the National Environmental Protection Agency commenced on 1 July. “From 1 July, the clock started ticking for every native forestry business still operating under the Regional Forest Agreement framework,” said Steve Dobbyns BSc (Forestry), Chairman of Forest and Wood Communities Australia. “The sector has been told it has 12 months, but 12 months is not long when you are talking about federal approvals, accreditation, legal risk, wood supply contracts, contractors, mills and regional jobs. “Australian native forestry is not an environmental free-for-all. It is already managed through state forest practice systems, detailed environmental prescriptions, regeneration obligations, threatened species protections, audits and decades of scientific assessment under the RFAs. The danger is that Canberra builds a duplicate approval system that treats one of the most heavily regulated industries in the country as if none of that regulation exists.” Launched by Environment Minister Murray Watt and led by inaugural chief executive John Bradley PSM, the agency can now issue urgent environment protection orders where serious environmental harm is alleged, expand compliance audits and pursue breaches through the courts. The most serious penalties can reach $16.5 million per company and may be linked to the benefit gained from breaking the law. Native forestry conducted under a Regional Forest Agreement remains outside the full reach of these new arrangements until 1 July 2027. Operations outside an agreement have already required federal approval since December 2025, and current agreements allow approved harvesting to continue only until 30 June 2027, after which the exemption falls away. National Environmental Standards are now being developed and consulted on. Those standards will determine how forestry operations are judged under Commonwealth law and whether existing state systems are properly recognised or overridden by another layer of federal control. The five remaining Regional Forest Agreements across New South Wales, Tasmania and Western Australia have underpinned native forest management for a quarter of a century. They were built on regional scientific assessments, conservation reserves, sustainable yield modelling and state-based forest practice systems. When the exemption ends, thousands of regional workers and the communities built around them will face a federal regulator armed with stop-work powers for the first time. “This is the point where government must decide whether these reforms are about genuine environmental outcomes or whether they become another political weapon against Australian forestry,” Mr Dobbyns said. “You do not protect forests, jobs or the climate by strangling Australian production with duplicate green tape and then importing more timber from countries with weaker environmental standards. That is not conservation. That is environmental outsourcing.” Conservation groups are already pressing the new regulator to use its powers harder, including on land clearing and activities they claim threaten species such as the koala. It leaves the timber sector caught between a countdown clock and mounting political pressure to bring the full force of the new laws to bear the moment the exemption lifts. Forest and Wood Communities Australia says the federal government must guarantee that the new standards recognise the world-leading regulation Australian forestry already operates under, rather than treating sustainable domestic timber production as the problem. “The Commonwealth must not use these reforms to pretend that native forestry is unregulated, unscientific or unmanaged,” Mr Dobbyns said. “Our industry grows and regenerates forests, supplies renewable building materials, supports regional families and operates under rules that many imported products would never meet. “If the new system rewards activist pressure over evidence, the losers will be regional workers, local mills, Australian builders, housing affordability and the global environment.” The Australian Forest Products Association has warned that losing the RFA framework would bury native forestry in green tape and drive greater reliance on imported timber, including products from jurisdictions with weaker environmental oversight than Australia. Forest and Wood Communities Australia is calling on the federal government to work directly with forest scientists, state regulators, workers, contractors, processors and regional communities before the 1 July 2027 deadline. “Regional communities cannot be treated as collateral damage in another Canberra deal,” Mr Dobbyns said. “If the government is serious about timber security, housing supply and better environmental outcomes, it must back sustainable Australian forestry, not regulate it into uncertainty.”

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My prediction of impending drops in export log prices has regrettably come to pass.  Wharf gate sales dropped NZ$6-10 per m3 in June across NZ ports.  This was due to the combination of weaker selling prices and higher shipping costs combining into an imperfect storm. The better news is China market fundamentals remain ok with major further price drops unlikely to be in the mix. The price drop in June has seen a rapid slow-down in deliveries to NZ ports and that is what is needed to see any sort of recovery in July. I had a respondent to my last report suggest we need to “stop China playing with us”.  I want to put this one to bed as I have also often heard conspiracy theorists commenting negatively about the supposed China grand domination plan. I have been directly involved in the China export log market for 30+ years.  Let me assure you, there is no grand plan. The important point here is NZ is, by a significant margin, the largest supplier of softwood logs to China, currently hovering around 70% – 80% of all supplies. A sales price tempering impact is what China traders get for NZ logs sold into the China domestic market. They currently pay NZ exporters US$124 per m3 A grade shorts basis. The domestic wholesale price is US$120 per m3, slightly closer negative margin than I reported in May. In May/June another impact was a large NZ exporter trying to push prices above US$130 per m3 until vessels were sailing with some volume not contracted or LC’s issued against. This very silly history repeating tactic created nervousness amongst buyers who then folded their arms until the prices landed lower.  This is a “stupid is as stupid does” NZ plan, not a China plan! The domestic wholesale price in China is driven by manufacturing and sales – significantly furniture and moulding components to the US.  Current manufacturing stats across the Eastern seaboard suggest mild but not concerning weakness. If there is a grand plan it will be more about what pops up in Donald Trump’s head when he wakes up each morning. We see ample evidence of that being a pretty scary place.  The imposition of tariffs and propensity for war and the wide-ranging consequences obvious to all except Donald Trump, is what is controlling our collective destinies at present. There is no grand plan in China to gear prices for NZ logs. If we should shorten supply, prices will lift, but only in so much as China domestic pricing will allow. The China market is vast with multiple players operating in a highly dynamic market driven by domestic and export sales and the RMB/US$ exchange rate.  And like in NZ, each player is trying to play their own game whilst protecting their own profits, mostly without regard for others. The softwood log inventory across the Eastern seaboard is sitting around 2.54 million m3 round numbers, down 60,000 m3 in April which regarded as unchanged by the market. A reason for likely good recovery is daily consumption which continues to sit around 60,000, a pretty good utilisation for mid-summer conditions.  There is potential for July inventory to slip below 2mil m3.  That will also promulgate recovery. Exporters continue to turn eyes toward India with solid demand and elevated deliveries not appearing to scare the market in to price drops.  NZ Radiata pines logs are favoured by India sawmillers, being much better quality than other supply sources. There is no question the impending NZ/India Free Trade Agreement is elevating interest with shipments expected to increase as a consequence.  But this market is not large so it will not take much for NZ exporters to destroy their own price if too many want a slice of the action. Current CFR prices are in the late US$160’s per m3 compared to US$124 for the same grade in China.  But shipping costs to India are much higher at around US$70 compared to mid US$40’s for China fixtures.  This then nets back to a better price point currently for India trade. It is also great to see the NZ domestic sawmilling sector going gang buster – or at least a mild form thereof.   Long may that continue! Allan Laurie, Managing Director, Laurie Forestry.           

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