NZ spinoffs in China pine deal

A Wellington company's joint venture deal to process pine timber in China will funnel extra investment back into New Zealand sawmills, a director says.

Forest industry company Forme Consulting Group signed a memorandum of understanding with Chinese manufacturer Tianjin Sunwin Group this week to build a factory for processing softwood logs for sale in the European and Chinese building industries.

With a target of processing 50,000 cubic metres a year from about 100,000 cubic metres of pruned logs, Forme co-owner Jon Dey forecast gross annual revenue from the factory of 100 million (NZ$179.5m).

He said the project would need "significant investment" in upgrading sawmills or building a new sawmill in New Zealand.

"It will have backward benefits into New Zealand in terms of new investment or expanding current wood processing capacity. It's a win-win in that sense."

The finished products turned out by the 190 million Chinese yuan (NZ$41.5m) plant near the port city of Tianjin, close to Beijing, would be exterior elements such as window frames, cladding and decking.

The factory is intended to be operating by late 2012, but the next step is for the joint venture parties to seek consent to build on about 80 hectares in the Dongjiang Tianjin port.

Tawa-based Forme is owned by Jon Dey and John Schrider, who also own Resin Forest Engineering Research. Mr Dey said their plan was to modify pine timber using "eco-friendly processes" to alter the wood's properties so it could compete with threatened African hardwood species.

"The forest industry in New Zealand gets criticised a lot for just being totally production-driven. Let's chop down a whole lot of trees and see where we can sell the wood, or let's cut them all through a sawmill and see where we can sell that wood.

"I've never been a supporter of that approach and I think we need to look more strategically at a market-driven approach."

Tianjin was the location of the joint venture partner, but was also attractive because of the availability of land and the local government's aggressive pursuit of investment, Mr Dey said.

Primary processing – sawing and kiln-drying the logs – would take place in New Zealand before the pine was shipped to China.

"Some people have asked why wouldn't we build one of these plants in New Zealand. The simple answer is it would take too long, it's too difficult, it's too hard to get investors in New Zealand to do it."

However, it was possible more processing plants could be built in New Zealand in future.

Mr Dey would not disclose the shareholding arrangements in the joint venture or details of the processing technology they would be using. But he said no other investors were involved or being sought.

The announcement of the memorandum of understanding came as Mr Dey was participating in a delegation to China led by Wellington Mayor Kerry Prendergast.

- Patrick Crewdson travelled to China courtesy of NZTE.