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The Pentarch Group has grown by becoming a significant stakeholder in prefabricated house component construction business Green Timber Technology (GTT). Source: Timberbiz GTT was established three years ago as part of a revolution in house construction by fabricating walls, roofs and floors in a specialised factory to be delivered to home sites for assembly. This new concept in housing construction reduces material waste, time lost through weather events and labour costs when compared to onsite construction. “Modular and prefab construction is a growing sector which the NSW Government has identified as a solution to ease the shortage of affordable housing by providing a steady supply of cost-effective housing components,” said Pentarch Executive Director Steve Dadd. Mr Dadd will become Chair of the GTT board as part of the investment and said Pentarch’s existing infrastructure and manufacturing capability is aligned with GTT’s vision for the future. “With our understanding of major capital projects and factory efficiency in softwood construction, Pentarch is positioned to take GTT to the forefront of the prefabrication market,” he said. “We already have in place supply capability with our Oberon softwood facility close to the GTT location in Orange, NSW, and a network of stakeholders in the housing construction industry. “It’s an exciting time in housing construction technology which meets an immediate challenge with our housing shortage crisis and Pentarch is proud to be a part of the solution.” Prefabricated timber kits can be constructed with all the components, such as windows, insulation, electrical wiring and plumbing conduits, installed and flat-packed to be transported to new home sites. Specialised machinery is incorporated to maximise the use of the plantation softwood and other materials which combine to create attractive and durable housing components.  

In early April I spoke to the New Zealand Farm Forestry Conference in Napier about farm forestry options as I saw them.  Most of the farmers I was talking to have had many years of experience in farm forestry, so I was certainly not going to tell them how to grow trees. Rather, I explored how to find a pathway through some of the challenging and at times imponderable issues that farm foresters currently face. Many of my forestry presentations have focused on flaws in the Emission Trading Scheme (ETS). This presentation was different. I simply took the rules as they are and looked at how farm foresters could best respond in their own interests, be they economic interests or broader issues coming from the heart. My starting point was to briefly look at the journey New Zealand’s production forestry has taken in recent decades. I used three graphs published in November 2023 in a USDA GAIM Report, where GAIN stands for Global Agricultural Information Network. GAIN reports are a great source of current and historical facts with not political messaging. The first graph below demonstrates two key points. The lower dark-coloured area shows how New Zealand production forests were sold off in the 1990s from public to private ownership. The upper light blue area demonstrates the big uptake in forest planting in the 1990s. The second graph demonstrates that processed-wood volumes have bounced around but there has been no overall growth in recent years. In contrast, the log trade has grown from almost nothing thirty years ago, reaching a maximum in 2023. What the graph does not show is that export volumes are declining this year.  This is not because there is less timber to be harvested, but because decreasing returns and increasing costs mean that the economics of harvesting no longer stack up on land that is steep or distant from ports. The third graph demonstrates the wall of wood aged 26 to 30 years waiting to be harvested from the big plantings in the 1990s. if it were not for economic issues that threaten harvest operations, the next five years would see more exports than ever before. I then observed to my audience that timber is where we are more dependent on China than for any other export product, with almost 90 percent of log exports going there. I also observed that China now has less need for our timber than in the past. This is in part because China’s big infrastructure years are now behind us. Our logs are largely used for concrete formwork rather than products with higher value-add. New Zealand is now the only country that exports significant volumes of softwood logs to China. Countries like Russia now only export lumber, not logs. Also, China is becoming increasingly self-sufficient in timber, with big eucalyptus plantings in the south of China. However, China’s timber markets are obscure and it is hard to confidently take an overall positive or negative stance about the future. I then looked at the economics of sheep and beef farming relative to various farm-forestry options. There is no doubt that most sheep and beef farmers are doing it tough right now. Profits in the last ten years have typically been in the range of one to two percent return on capital and slipping below that in the last three years. Right now, many farmers are cash-flow negative, with land values also dropping precipitously. This also means that many farmers lack cash right now to convert some of the rougher country to trees. When preparing the talk to farm foresters, I ran lots of spreadsheet models of net present values and internal rates of return for various production forestry scenarios.  The big message was that using prices and costs from two to five years ago told a story of nice returns for radiata pine. But that story now belongs to history.  Looking forward, the big message relating to production returns is lots of uncertainty and high economic risk. This aligns with the current attitude of the big forestry companies.  Whereas until about 18 months ago there was a mad dash to buy land for its potential timber value, that interest has disappeared.  Almost no-one is interested in buying land for production timber by itself. I then looked at what happens if land is developed out of pasture for new radiata pine production based on harvesting at 25-30 years and at the same time earning carbon credits through to 16 years under the Emission Trading Scheme (ETS)) averaging regime. I used a conservative price of $60 per tonne of carbon (NZU) whereas the minimum prices for which the Government currently auctions carbon is $64 this year, with this price having been officially set to rise in each of the coming years. In doing these calculations, I used the official look-up tables for radiata pine growth in different parts of New Zealand. These tables are used for assessing carbon credits for all forests of less than 100 ha and are generally considered to be conservative. Forests of more than 100 hectares are measured on actual growth. The big message here was that carbon credits are the business to be in if converting pasture to trees. They can rapidly turn a likely unprofitable timber-production business into a profitable dual business.  It did not matter what scenario I looked at, as long I used a carbon price of $60 then the internal return was acceptable, and in many cases much more than acceptable. In a typical example, it raised the IRR from around 2% to about 9% even with these low carbon prices and an inbuilt land value. It also brought the payback period including land value as a cost back to around ten years or slightly less. These projected returns raise questions as to why the big investment companies are not doing this right now. The most important reason is that confidence has been knocked around so much over the last two years, with Governments […]

The Victorian state government’s decision to ban native forestry has been felt across the timber and manufacturing industry. Hundreds of timber workers lost their jobs and many Victorian mills have shut. As the effect flows through the supply chain, building material manufacturers are being forced to find alternatives. Source: Timberbiz Door manufacturer Specialty Doors has moved away from Australian hardwoods to a range of imported species. Managing Director Marcus Bastiaan laments the impact on his businesses ability to support the local timber industry. “We were buying 10 packs of Australian hardwood a month, and one or two packs of imported timber. Today that is the opposite,” he said. For the building industry the loss of Eucalyptus regnas and Eucalyptus delegatensis, commonly known as Victorian Ash has driven up the price of building supplies. The timber species was most used by manufactures of doors, windows, flooring, furniture and staircases, and was well regarded due to its density and suitable for exterior uses in the Australian climate. Due to the industries inability to use the timber manufacturers like Specialty Doors has begun offering several imported species as replacements, including American oak, European beech and Eucalyptus grandis. “American Oak is beautiful, but the price point is 50% higher than Ash. Beech is great on price, but it’s no good for external use. For now, our closest substitute on price, appearance and utility is grandis,” Mr Bastiaan said. Eucalyptus grandis is a common species on the north coast of NSW and southern Queensland. However, the species is currently being imported from plantations in Uruguay. Mr Bastiaan is frustrated that Australian manufacturers are forced to rely on imported timber. “Grandis is an Australian species being grown overseas and sold back to Australians. We should have been developing plantations thirty years ago. Instead, we are rewarding everyone else who has,” he said. He believes the Victorian forestry industry should not have been shut down. He pointed to a similar series of events happening in NSW and Tasmania. With both states logging industries fighting activists in court. Mr Bastiaan believes policy needs to change to ensure the survival of a local timber industry. “The union, forestry industry and government need a better approach on timber. We should be planting, milling and selling our own,” he said. As the timber industry navigates a changing environment mills and manufacturers must look toward alternatives to continue the supply of hardwood to the domestic construction industry. Mr Bastiaan sees the uncertainty as a major detractor long term for the industry. “Short term and inconsistent timber policy has driven up the price to manufacturer and blown out lead times. The industry is losing skilled workers and struggling to attract apprentices. Ultimately all of this increases the cost of construction,” he said.