The sharp drop in global log prices has affected operations in the region, and some forestry workers are facing the difficulties of Christmas until prices rise again and full production is expected to resume.
Hard times: The cost of log exports to China has tripled, China’s economy has slowed, many Chinese ports have been closed due to the new crown virus, and unloading delays have created a "crisis" situation for the forestry in the region. Many contractors are expected to face difficult times And workers until the beginning of the new year. Eastland Wood Council (EWC) chief executive Philip Hope said that global economic factors could have a significant impact on forestry, while a well-known contractor said the industry is facing a “very dismal year-end”.
"The forestry industry is currently responding to the impact of the log export crisis, which has caused prices to plummet," said Mr. Hope. "Since January, the cost of shipping wood to China has almost tripled-this is the result of the new coronavirus, rising fuel prices, etc.
"China's economic slowdown extends to the construction industry. "As we speak, 10% of the global fleet is sitting in the waters near China waiting for unloading, and demurrage is incurred every day," Mr. Hope said. (Demurrage is The cost of the charterer’s failure to load or unload the ship within the agreed time.) “Due to Covid, many ports have been closed and holiday delays have further increased. "These factors have led to a significant increase in inventory costs and a decline in timber demand."
Mr. Hope stated that experts expect the market to recover in the first quarter of 2022. "However, this is no comfort for the forestry industry, including everyone in the supply chain. Everyone is facing very difficult times."
EWC has been in regular contact with member forestry companies and contacted many contractors and industry stakeholders in Tairāwhiti to help them understand the challenges they face so that EWC can provide solutions.
"Although member forest companies are doing their best to retain contractors, logging is currently uneconomical, especially for smaller forest lands.
"We know that some contractors have received notices to complete the harvesting operations, other contractors have reduced their harvests, and other contractors have received notices to extend their breaks during Christmas."
In one example, a forestry contracting company with six crew members in Tairāwhiti has surpassed what most people do in these difficult times.
"Two staff members will be suspended on December 3rd, and the other two staff members have been notified that they will stop work on December 3rd, but may continue until December 17th, and two other staff members will continue to work , But their normal output will reach 80%-they will stop work from December 17th to January 17th."
The business manager of one of the largest forestry contractors in the region told Mr. Hope that they were facing port storage problems even before prices dropped.
"We are still facing the problem of lack of storage again at Eastland Port," the manager said.
"You will find that a lot of workers have a lot of inventory, and this is exactly the money the contractor needs.
"After the August blockade, the port cleared the storage and we had a few weeks of unimpeded traffic. Then the log grading restriction started again, and the lack of transportation didn't help.
"Now, coupled with falling prices, we are facing a very bleak year-end. We are worried for our employees."
Mr. Hope stated that EWC members, forestry contractors and industry stakeholders have faced many challenges, especially in the past six months.
"The resilience of Terra Weiti Forestry depends on the continuous operation of the supply chain."
The contract manager said that they are doing everything possible to get everyone hired and get through this downturn.
"But we need the help of Eastland Wood Council, local and national governments, and industry leaders to help ease financial pressure.
"In the final analysis, forestry contractors don't want to lose employees, so if we can get financial help to pay wages during the shutdown, that would be a huge help."
Mr. Hope said that the current pressure points faced by many people in the industry include releasing cash flow to continue paying wages, paying creditors and preserving these key relationships; must explain the situation to bankers and financial companies; seek support through measures to fill gaps; And the uncertainty faced by more than 1,000 laborers in supporting their families.
"The safety and well-being of our employees and their families is our top priority.
"For this reason, the EWC has contacted councillors Kiri Allan and Tairāwhiti's regional leaders to inform them of the crisis and the need for the support package."
Mr. Hope said that, as a rough estimate, the number of contractors in Tairāwhiti affected to varying degrees may be about 70.
"These contractors employ a large number of workers and also own machinery, whether it is porters, excavators, trucks, etc.
"If we can get a package of support for our industry, it will definitely help prevent people from walking on the wall," he said.
"Collaboration throughout the supply chain and regional leadership will help us rebuild resilience and enable the collective industry to respond."
Prue Younger, chief executive officer of the Forestry Contractors Association, said that the trend of export log prices has always been cyclical, "but the next peak is abnormal."
"We have never been to the Chinese market, shipping and Covid where international pressure is coming."