New Zealand

The Country

New Zealand is one of the economic tigers of forestry development and wood products for the world market. It is a small country of 66 million acres (26.7 million hectares), slightly larger than the United Kingdom, 4.3 million people, and is perhaps best known for its 55 million sheep. Pastoral agriculture still dominates the economy, but by the year 2005 forest products - all from non-native species plantations - are projected to overtake agricultural products as the number one export earner.

A stable, democratic, market oriented country. The size of timber industry relative to size of the country makes the industry important to nearly all citizens, and growing in importance. The government is actively involved in encouraging and developing markets for wood and wood products.

The New Zealand government has attempted to encourage investment by ensuring a competitive and stable business environment, and a clear and simple regulatory regime applying to foreign investment.

Particularly impressive is the commitment to the private marketplace and free enterprise. The country was heavily socialized until about 20 years ago. Realizing that they were bankrupting themselves, it undertook a program to privatize. It has dropped nearly all industry subsidies and sold government enterprises. This led to a period of hard times through much of the 1980's but the results are beginning to show off.

There is strong evidence of an efficient and competitive market well suited to compete in the international marketplace for a wide range of products and services, wood products among them.

The transition to a forest economy began many year ago. When European settlement began in earnest in the early 1800's, an estimated two-thrid's of the country was covered with a native forest cover of unique podocarps and beech. Clearing was carried out to open the lands for farming, and for raw materials. Concerns over the sustain ability of the timber resource developed by the second half of the 19th century. Because of the slow growing nature of the native trees, experimentation with the planting of exotic species from around the world began by the government.

The Resource

Radiata pine (a.k.a. Pinus radiata, a.k.a. Monterey pine) from the California coast soon became the preferred tree as a result of its ease of establishment and excellent growth. Significant genetic improvement has been done, and tree stock development is now into its 31st generation, showing dramatic improvements in tree growth, form and wood quality.

There are now some 3.5 million acres (1.5 million hectares) of forest plantations, 90 % of which is radiata pine, 5% in other exotics such as macrocarpa (Monterey cypress), redwood, European larch and various species of eucalyptus. Radiata pine remains the dominant species, making up roughly 94% of planted area, however the portion planted to Douglas-fir has expanded faster than any other species, and is the second most planted species.

Prior to 1984, well over 50% of all forest plantations were owned by the national government. Much of this land was sold during the late 1980's, often to foreign companies, leaving forest land ownership largely in private hands. Government forest plantations now account for only 14% of planted area, and managed for profit. Private non-industrial owners make up 24% of ownership, but are currently responsible for nearly 90% of the new plantations. Industry holdings make up the balance, including investments by American companies Rayoneer, International Paper Co. and Port Blakesley Tree Farms of Washington State, and companies from Japan, Hong Kong, China, Singapore and Liberia.

Land Conditions and Costs

Current land use in New Zealand finds natural forests covering 24% of the country, most of this now being protected; 52%, or some 35 million acres (14 million hectares), as pasture and other farming activities; 2.5 million acres (1.4 million ha.) in forest plantations, and 12 million acres (4.9 million ha.) in other uses. It has been estimated that on the North Island alone, 7.5 to 10 million acres (3 to 4 million ha.) of land now in pasture is better suited and more economically valuable in forestry.

New forest planting on grass covered, pasture lands has been expanding at 200,000 to 250,000 acres/year (80,000 to 100,000 ha.) for the last few years, and that trend is expected to continue. Farms suitable for forestry plantation are available for $285 to $850/acre ($700 to $2,100/ha.). These prices have risen sharply from prices of only 3 years ago.

Properties are readily available in sizes of 400 ha. and larger. This is the size of most farm operations. It is very difficult to find parcels below 200 ha. at affordable prices.

Despite the long history of forest plantation, most of the forests are still quite young with nearly 70% of planted area younger than 20 years old. Current harvest is about 3 billion board feet/year (15 million cubic meters), expected to expand to over 5 billion board feet/year (25 million cubic meters) in the next 10 years.

Plantation Management and Investment

New Zealand has some of the best intensively managed forests on a wide scale I have seen anywhere in the world. Because of the large resource coming on line, substantial investment is underway to expand all wood processing capabilities to take advantage of some of the wood fiber that is now being exported. New Plantation growth has been slow in recent years, but with the establishment of a carbon trading program and cap-and-trade provisions that allow for forestland owners to sell carbon, there is renewed interest in purchasing younger plantations and in new plantation establishment. For the last several years, exotic plantation area has stayed at just under 1.8 million hectares, including recently harvested areas expected to be replanted.

Costs/Income of a typical management regime/plantable hectare:

Why the interest in radiata pine plantations?

• Growth of radiata pine ranges from 18 to 30 cubic meters/hectare/year (1,200 to 2,000 board feet acre/year) over a 25 to 30 year rotation. This yields net harvest volumes of 30,0000 to 55,000 board feet/acre (450 to 900 cubic meters/ha.) in that time. An average site will find tree height growth of 92 feet in 20 years.
• Intensive silvicultural treatments, which include pruning of the first log, usually to 20', but now sometimes to 26', produces large amounts of clear wood lumber over short rotations at times when clear wood from old growth stands is becoming increasingly difficult to come by. The pruned butt logs represent less than 30% of the volume and 66% of the value of the tree.
• Real internal rates of return from plantation forests of 9 to 12%, using conservative estimates of future timber values.
• Ready availability of land suitable for forest plantation.
• Good existing infrastructure of roads, rail, ports, and mills.
• Excellent research and development facilities with results readily available to all those in the industry.
• Production of a wood species gaining in market acceptance world wide. With rapidly expanding plantation areas, and expansion of volume reaching merchantable size, radiata pine will be available to the world marketplace in the years to come, not only from New Zealand, but from up and coming plantations in Chile, Australia, South Africa, and the Iberian Peninsula (Portugal and Spain) as well.

To discuss your interest in New Zealand Plantations contact us.