China baby boom a blessing for NZ forest growers

WELLINGTON -- China's auspicious Year of the Dragon has proved particularly fortuitous for New Zealand's forestry industry as a Chinese baby boom fuels demand for high quality knot-free wood, according to an industry leader.

And it's teaching New Zealand businesses a valuable lesson in why they need to better understand the Asian giant, New Zealand Forest Owners Association chief executive David Rhodes said Monday.

Pruned pine logs - those that have had the branches trimmed from the main trunk during cultivation to prevent knots - are in huge demand as Chinese parents prefer their dragon babies to sleep in cots made from knot-less wood, Rhodes told Xinhua.

"They want to see nice, clean, unknotted wood and the light pine colors seem to be a preference as well - I'm pretty sure we're going to continue to see a premium paid for these logs," Rhodes said in a phone interview.

The Year of the Dragon, from January 24 this year to February 9 next year, is believed to be a very auspicious time for the birth of a baby.

The "fortuitous" and unforeseen surge in demand had come at a time when the forestry industry had been moving away from pruning trees because of the low return on the effort put into them over the 20-30 years before harvesting, he said.

Although pruned logs made up only about 20 percent of pine log exports, they were earning about 50 percent more than unpruned logs, which went for about $150 per cubic meter loaded on the ship.

Rhodes said the industry appeared to have hit "a bit of a sweet spot" at a time when competition in unpruned logs had seen prices fall about 15 percent from their peak in 2010.

Because the decision on pruning was made 20 years before harvest, "it's the sort of thing you can look back on with hindsight and think, 'Well, that makes sense'."

"There was an element of fortuitousness to this, but if you have an experience like this and you have a niche market, then surely you want to look ahead and make the most of it," said Rhodes.

It proved the need for New Zealand exporters to gain better insight into China and other emerging and developing markets, he said.

"China is still a developing market, but it's here to stay now. We do need to understand these markets," he said.

"You can't do enough work with customers there it's all about building relationships and getting to know them."

China had been driving demand on the world market, taking raw logs and processing them into products for onward sale.

However, as energy and environmental constraints changed China's manufacturing base, New Zealand producers might take over more of the processing, he said.

"There may come a situation where it makes more sense in China to take a coarsely processed product rather than the raw material and that's something our industry here would be keen to take advantage of."

New Zealand's total forestry exports, excluding newsprint, were valued at NZ$4.3 billion ($3.42 billion) in the year to the end of March, according to the Ministry for Primary Industries.

Log export volumes in the year to the end of June were estimated to rise by 0.4 percentage point on the previous year.

Seven countries - Australia, China, Japan, the Republic of Korea, the US, Indonesia and India - accounted for around 86 percent of the export value, and exports to China and India are expected to continue to rise in line with their economic growth.