Arbor Resources Blog Updates
We published a Coranavirus update to let you know we had stood down the crews in our forests from the 4th of February.
As the Chinese New Year is now officially over there has been some increased activity on the Chinese ports and we have, for now, resumed the crews on a reduced production level (around 60%). We have been in discussions with most of the New Zealand Forestry owners right through from the 189,000ha Kaingaroa Timber forest owners, Earnslaw, Forest Enterprises, China Forestry Group and several other forest owners. At this stage they are all in a similar position to us where the immediate objective is to minimise harvesting but maintain a small amount of work to retain the harvest infrastructure. Ongoing harvest decisions are being considered and made daily.
It is still too early to determine what level the Chinese activity will reach - this will guide our decisions.
Our priority as always is to maximise returns for investors and it is a fine balancing act between protecting the crew infrastructure that we have built up over the years and maximising investor returns.
We are monitoring the situation on a daily basis and if we find there is no improvement in China, and the expectation is that the situation will take a long time to rectify, we will at some point make the decision to completely stand down our crews. This is not a decision to be taken lightly as we expect some harvest crews will go out of business and once the China situation improves, we anticipate long delays in attracting harvest crews again – they just won’t be around. We have already had some crews go out of business during the previous imposed reduced production periods.
The exporters are still negotiating the February log prices but we expect the average A grade log price could be around the $100-$105 range. This is a drop from last month’s average price of $122 This negotiation is longer than usual as the banks in China have only come back to work in a reduced capacity this week. The banks are required for LCs (Letters of Credit). Affecting the price is the larger port inventories in China. Inventories are currently sitting around 6 million tonnes, a comfortable level for this time of the year is around 4.5 million tonnes. As well, the beetle damaged wood continues to supply the Chinese market from Europe.
We will update you again when we have more information.
Attached is an update from the Forest Owners Association explaining the current situation.
11th February 2020
FOA, FICA and Te Uru Rakau have been working collaboratively to monitor the situation and provide as much up to date information as we can on a very fluid situation. The summary messages below follow the briefing provided at the end of last week.
Coronavirus and the forestry sector situation as at 11 February, 2020.