Australian, Chinese-backed company targets small NZ forest owners
By Paul McBeth
Aug. 21 (BusinessDesk) - United Forestry Group, backed by Australian timber marketer Pentarch and China's Xiangyu Group, is targeting small forest owners in New Zealand in a bid to cash in on a looming 'wall of wood' it estimates will generate $30 billion over the next two decades.
The Wellington-based company wants to consolidate the country's 14,000 small forests, which account for just over a third of New Zealand's plantations, and use its forestry management skills and supply chain to achieve a more efficient network and boost returns for the owners, it said in a statement.
United Forestry, which counts Pentarch and Xiangyu joint venture Superpen as cornerstone investors, is offering to buy small forests outright, or buy a combination of land and trees. It will also offer advice on harvesting and marketing mature forests.
"We are taking a whole new approach to this emerging problem, and are committing major resources to be in a position to buy forests outright, control shipping services and consolidate forest output through the country to give the participating small forest owners a strong hand to play with," acting managing director Malcolm McComb said. "We will have the financial strength, expertise and presence in the local and Asia markets to offer them a much more comprehensive range of options."
New Zealand sold $4.04 billion of logs, wood and wood articles to overseas markets in the year ended July 31, up 20 percent from a year earlier, making it the country's third-biggest export commodity. Global log prices have come off the boil in recent months after surging through 2013 on strong demand from China.
United Forestry's move comes as a spike in plantation activity between 1992 and 1998 nears maturity, which will ramp up supply in a bid to meet demand coming from increasingly wealthy Asian nations.
McComb said that small forest owners face higher costs, and "there is a real risk that export earnings from forestry and the return to investors will be very disappointing."