Wood Industry Forum: Driving Change

E aku rangatira, tēnā koutou katoa. Ka nui te honore ki te mihi ki a koutou.

Good afternoon everyone and thanks for the warm welcome.

It is great to be back here in Rotorua, my second visit in as many months.

I attended the WoodEXPO 2013 meeting in September - and recognise some familiar faces from that informative day!

Putting together conferences takes time and energy and I want to start off by acknowledging three key individuals who made today’s forum possible.

First, Tom Boon of Taranakipine and president of the Pine Manufacturers Association (PMA).

Tom just happens to be chairing this session.

I also want to mention both Brian Stanley of Carter Holt Harvey and Chair of the Wood Processors Association (WPA); and Robert Grimmer of Placemakers and Chair of the Frame and Truss Manufacturers Association (FTMA).

Thanks to each of you - and the industry bodies you lead – for joining forces to host this important and timely meeting.

This kind of practical collaboration is a great way to join up a very diverse sector that can at times seem to be pulling in different directions.

I note the message about the need for greater collaboration was strongly reinforced in some of this morning’s sessions.

Collaboration, as mentioned before, is also important to the Government I am part of.

Collaboration allows us to identify and grasp the opportunities and challenges to drive future prosperity for all New Zealanders.

A partnership approach also helps when difficult economic circumstances arise, as they have especially in recent times.

I have been asked to present on “A government’s view of our industry”, and I have reflected on that.

That feels like an outsider looking in.

Whilst the government is not a forestry company, we are certainly do have a stake in the industry, and are closely linked in many respects.

For example, Crown Forestry administers the Crown's interest in forestry leases on Māori land, residual Crown forest and other forestry assets.

Crown Forestry is expected to deliver some $116 million in revenue during 2013/14.

We provide funding for SCION and PGP projects.

The Ministry of Business, Innovation and Employment (MBIE) is also involved in health and safety work and support for ITO training for the sector.

So you can see what I mean when I say we the government may not be forestry company in the traditional sense – but that we are deeply invested in this area.

Before I get going I would like to acknowledge the tough conditions in parts of the wood processing industry.

It is deeply saddening to hear that the Tachikawa sawmill recently went into receivership.

But I’m not going to get into their specific circumstances.

The plant began operations here in Rotorua in 1989, and has been a big part of the local industry since then.

Governments, however, cannot intervene or influence overseas pricing.

What they can do – and what we are determined to do as a government – is support an industry like yours to explore opportunities for new markets and products.

Today I want to explore in some detail how we are actively working to make this happen.

The forest industry continues to be an important contributor to the export economy, as it has been for over 100 years.

The sector is a key player in the primary industries.

 As our third largest exporter, forestry provides $4.3 billion in annual exports.

Making up three percent of GDP, the sector directly provides 18,000 valuable jobs, particularly in rural and provincial areas.

Despite what has happened at the Tachikawa sawmill, we believe that number could - and should - continue to grow.

Many of you will be aware of our goal of lifting the value of exports to 40 percent of GDP by 2025.

This ambitious goal is an important part of current activity to build a more productive and competitive economy. 

The Business Growth Agenda supports kiwi businesses and the broader community by focusing on practical initiatives that enable growth and create jobs.

We are working with business to create improvements over six growth areas – export markets, innovation, skilled and safe workplaces, infrastructure, natural resources, and capital.

We expect much of the required future growth in the forest industry will be derived through the first two areas - innovation and export markets.

Capital is also important – for the wood processing industry to grow, significant additional capital is needed.

The theme of today’s forum is ‘Driving Change’ – and a key ingredient to any programme of change is the adoption of new ideas. Research and innovation are building blocks of this activity.  But to get the most from it, commercialisation is needed.

Government has made a significant contribution to funding forestry and primary sector research and development over a long period of time.

More recently, government has been driving innovation activity through the flagship Primary Growth Partnership, or PGP, programme.

PGP activity is about harnessing innovation to lift both productivity and profitability across the primary sector, including forestry and wood products.

Programmes depend on commercial partners coming forward with workable ideas.

This year, a sum of $6.75 million was approved for ‘Stump to Pump’, a PGP programme to investigate producing biofuels from forestry waste.

Partners Norske Skog and Z Energy will match funding of $6.75 million, bringing the project’s total funding to $13.5 million.
The programme has the potential to make an important economic and environmental contribution to New Zealand.

If the technology can be proven and commercialised, the economic benefit for New Zealand over the next 20–25 years could boost GDP by as much as $1 billion a year.

The Stump to Pump programme could also create as many as 1,200 regional jobs.

The sustainability and environmental benefits of the scheme are obvious.

In short, local production of biofuels from forestry waste could be a game-changer for Rotorua, and New Zealand.

I am delighted to see your sector starting to match its primary industries counterparts in investing more in PGP activity and attracting government support.

To date forestry has had a relatively small proportion of funding due to a relatively small number of bids, mostly for small scale activity.

I encourage the sector to put forward applications - and I make the point that Ministry of Primary Industries is there to provide assistance in preparing bids. Our door is always open to good ideas.

As I said a moment ago, the Business Growth Agenda maintains a special focus on export markets.

Doubling our export value will require significant changes in the way sectors like forestry operate.

They will mean, for example, that your industry will increasingly be challenged to increase the value of exports.

Increasing emphasis on wood processing is likely to be a vital factor here.

High-value products will also be important.

The Woodco strategic action plan identifies a range of opportunities available to the sector in the area of wood processing.

It explicitly acknowledges that a 166 per cent increase is needed to make forestry a $12 billion export sector, and it offers a range of useful and practical pathways for ensuring the sector reaches its 2022 goal.
It’s worth nothing that this action plane stresses this can only come about by increased local processing and a higher proportion of value-add products.

Although it looks out over the decade ahead, work needs to start now.

The Woodco strategic action plan focus on four areas:

• Expanding high-value wood processing and manufacturing.
• Developing new products and creating new markets.
• Connecting with the needs of consumers.
• And, commercialising research.

The Woodco plan also stresses the role of collaboration.  It argues that success will only be achieved if the industry pulls together, right across the value chain. 

Growers, processors, and manufacturers are not the only key players.

The end-users of products are also part of the equation.

Working across the value chain may also mean stepping outside the industry as you know it. 

This may be uncomfortable, but true change tends to be.

The industry is urged to engage with outside partners - to get new ideas flowing and to bring in new perspectives.

The Woodco plan also highlights pre-fabrication as a priority area, one that needs to involve the entire value chain. 

Here the chain extends from the raw materials, to processors, to manufacturers, to fabricators.

It runs on to designers, right through to the builders who will put the final products together.

I encourage the industry to pay close attention to this thoughtful and practical document.

An increase in exports of the scale envisaged by the various targets mentioned today will require significant injections of capital.

To seize these opportunities, investing businesses, whether locally-based or offshore, are going to have to take some calculated risks.

During a recent visit to Nelson, I saw first-hand some inspiring examples of Kiwi business people shouldering big financial risks to grow wood processing exports.

These brave folk understand the scale of the potential rewards on offer.

They also appreciate that if you don’t take a risk, you will never succeed.

Capital investment brings new skills, knowledge, technology and management practices increasing the productivity of businesses.

In short, it will be of particular benefit in improving our capacity for high-value wood processing.

Many of you will be aware that as part of helping ensure an export-led future, Woodco looked at the opportunities and challenges of processing additional logs.

The most recent piece of work to support this was the Woodscape analysis, carried out by Crown Research Institute Scion and jointly funded by the industry and government.

This work was an economic study of the most promising technologies for the local forest industry, aimed at gaining maximum value from the wood resource.

This analysis also looked at the impacts of scale, input costs and exchange rates.

By using WoodScape, the industry is gaining a clearer understanding of the opportunities and investment risks associated with each of these technologies.

I am aware of activity being generated within the industry to pursue the opportunities identified through Woodscape.

Among the creative ideas is the Industrial Symbiosis business initiative underway at Kawerau.

There, there is the opportunity to combine wood products and geothermal energy in innovative and environmentally friendly ways. 

As I said, expanding high-value wood processing and manufacturing and creating new products are important pillars of the Woodco plan.

Engineered timber products like laminated veneer lumber and cross-laminated timber have potential to add enormous value to our forest resource.

The WoodScape analysis showed some of that potential to add value – for example engineered timber products had solid returns on investment of over 10 per cent.  

Engineered timber products have a lot to offer!

Environmental sustainability, uniform strength, light weight, and the ability to perform well in seismically-active areas are among them. 

One of my long term goals as Associate Minister for Primary Industries is to encourage the use of engineered timber in multi-storey commercial and residential buildings.

To make this happen, we need to start thinking smart about how best to create market demand, while at the same time ensuring security of supply.

New Zealand has the potential to be the Asia-Pacific centre of excellence in engineered timber design and manufacture. 

Our geographical position means we can capitalise on the emerging demand for medium-density, quality housing in mid-sized cities in Asia.

We can be in a position where we are exporting high-value products like pre-fabricated panels for floors and walls, or even flat-pack houses.

And it’s not just products we could be exporting to the world. 

If we became the centre of excellence in the Asia-Pacific in engineered timber design and manufacture, we could also be exporting our know-how. 

In other words, our systems of timber design and manufacture.

Before we embark on a big export push, however, I believe it is important to build up a critical mass at home.

There are a number of great examples of local buildings constructed from engineered timber products.

Take the Nelson-Marlborough Institute of Technology building.

What we have here is a world-beating example of the use of seismically-resilient construction technology.

There are also a number of buildings in Christchurch that make extensive use of engineered timber. 

These include the Merritt, Trimble and Tait buildings, and St Elmo’s Courts.

So why aren’t more buildings like these being built?

There are a number of reasons, and most of you will be familiar with these.

The industry faces four major challenges here in the areas of information, capability, lifting profile, and supply chain.

More energy needs to be channelled into getting information out to designers, architects and engineers and others wanting to use engineered timber.

Some good communication efforts are underway.

Events like the Wood Smart Construction seminar series have shown how we can get the wood processing story across.

More also needs to be done to raise the capability of designers to use engineered timber products.
This activity may involve running workshops, creating more professional development opportunities, and encouraging more students to study timber engineering.

Raising the profile of engineered timber is another way to enhance perceptions of timber as a building product. 

The Nelson-Marlborough Institute of Technology building gained worldwide attention.

In Melbourne early this year the world’s tallest cross laminated timber apartment building was completed.

It is ten storeys, looks great, and took 30 per cent of the time to build as a conventional build.

High-profile buildings like these show that timber can be used in multi-storey construction.

In the long-run, however, there has to be certainty in the supply chain. 

This means capital investment to enable the scale necessary to take full advantage of export opportunities.

I touched on this at the start of my address.

The Government’s role here is to create an attractive business environment; this is about getting our tax and regulatory structure right.

We want to make it easier for businesses to grow and innovate.

Unless the forestry sector invests to add value to products and forests, there is a real risk that your competitiveness relative to other land uses will decline.

International competition in value-added forest and wood products also means a risk that New Zealand gets left behind as others take over and seize opportunities.

In short, the processing industry needs to work better together across the value chain.

Gatherings like this are a great opportunity to take stock of what we’ve achieved over the last year, and to plan what we’re going to achieve next.

There are some hard questions to ponder.

What is the achievable mix of commodity and value-add?

Where in New Zealand can supply allow value-add activities to flourish?

And how many eggs will need to be broken to make this omelette?

Collaboration allows us to identify and grasp the economic opportunities and underpinning science required to drive future market success.

Change is not easy, but it is vital if we’re going to build a stronger, more prosperous forest sector, and achieve $12 billion in forest exports by 2022.

Thank you.
Nō reira, tēnā koutou, tēnā koutou, tēnā koutou katoa.