The world went small car crazy yesterday as the Government’s incentives to get the country into cleaner cars appeared to be welcomed with more enthusiasm than I thought.
But while all that was going down, our third biggest export was hitting a bump in the road.
Forestry contributes $5.2 billion a year to our economy. We have big forests and in Shane Jones, a minister obsessed with them.
But the tree trade has toppled. New Zealand logs are piling up on Chinese wharves as cheap, sawn timber makes its way by train into the People's Republic from Russia and Scandinavia. Five million tonnes of logs, mostly from New Zealand are sitting on wharves in China unsold.
When I heard that fact I was pretty blown away. Five million tonnes of logs is a lot of logs and apparently more boats from New Zealand are on their way. But to give you an idea of the scale of the operation normally one million tonnes of logs sit on wharves.
NZ Forest Owners Association president Peter Weir says it’s time to put the forestry business on hold for about 6 months and wait and see. He says the whole thing needs a major reset. Jobs are going to be lost and forests will not be harvested
There’s a lot of reasons for the crash, but here’s two I want to highlight. The timber that’s undercutting us is coming from Europe on trains that take 15 days to get there rather than 45 on a boat. The trains are part of China’s belt and road initiative.
Thousands of fully loaded trains leave China each day and come back half empty so there’s cheap freight prices for European timber to China. We're not really part of the belt and road. Their eyes are set across land and towards the populations of the West.
China is always changing to suit China and you need to keep an eye on them because when they cough we catch the flu.
The second thing that caught my eye was that our logs are being undercut by sawn timber out of Europe. In our economy of primary industries how often have you heard that we need to learn to add value to our produce. Why buy a log you have to cut when a four-by-two from Europe is there and ready to go
And finally the price of logs. It used to be $140 a tonne now it’s fallen to $110 a tonne. A tonne of logs for 110 bucks. Wow - dirt cheap. It’s not that cheap when you buy trailer load of firewood for the winter. Logs really are a very basic export.
So forestry, the great saviour of Shane Jones nephs. Or is it?
Our product is too simple, too slow and the world’s beating us to the biggest market. It’s time for a sharpening of pencils all round, I reckon. And another warning about having all our eggs in China's basket.