How will it increase the wealth of the East Cape community?
There was significant planting of trees in the late 1970’s to 1990’s. This is often referred to as the “the wall of wood” and the East Coast has significant amounts. However this resource is of little use to the local region if it cannot be commercially harvested and replanted. Currently there is a real issue as to whether the trees can be cut down and replanted economically. This is due to three issues, the steep topography of the region, the distance to port and the costs at the existing port.
With the current situation there is little like hood of any economic return to the MLO’s or local people. For some it feels like the local people are waiting for whatever crumbs fall from the table of the bosses or Crown. There is a real feeling that whatever treaty settlements or projects are talked about they will never see the benefit in their lifetime. This project wishes to help address that by putting real options forward NOW for the local people. It is up to local residents whether they wish to be involved. At least they will now have options which were not available to them previously. Of course priority will be given to local residents for jobs or businesses the project requires.
Benefits to them would be in one of seven ways;
1. Jobs at the wharf facility – around 10 full time are estimated.
2. Jobs in supporting businesses - logging trucks, harvesting crews, associated forestry support businesses
3. New business supporting the wharf facility – logging truck owner /operators, forestry harvesting crews or machinery, construction business for wharf and roads, accommodation for drivers or wharf visitors. The Wharf facility owners will arrange finance facilities and underwrite long terms contracts for local people who wish to supply services the project needs. Of course it will be up to the local person to prove to the lenders that have the drive and skill to operate the business. The project will assist by arranging meetings, helping with paperwork and offering a long-term contract to support the revenue stream of the business.
4. Land use and better returns from Hapu trusts that own land being able to pay share owners dividends due to increased stumpage returns.
Terrafermah has already advised forest owners one of the conditions of using the port is to see a share of improved margins paid back to local forest land owners.
5. Academic and sporting scholarships to local children (minimum of one annually from wharf owners)
6. Money to pay for septic tanks or repairs to local Marae.
7. New built social housing for elderly around Marae or Te Araroa (as negotiated)
Why is forestry currently not giving much benefit to the East Cape community, land and forest owners?
The cost per tonne of the current distribution model, from when a log is cut and loaded on a logging truck, to being placed on a ship in the East Coast, is on average $48.50 per tonne or 35% of the wharf gate price. It is apparent that due to the distance to ports, steep land terrain, log handling costs and limited port size and room result in costs being comparatively higher in the East Cape, compared to many other parts of NZ.
It is clear that these extra costs are being deducted from stumpage paid to the East Cape forest owners. We estimate these East Cape forest owners are losing approx. $40 m in stumpage receipts annually, due to many of the factors noted previously. Terrafermah (the project managers) strategy and modelling has produced results that a more efficient log handling facility, placed in close proximity to forests, which vertically integrates and controls the distribution from forest to ship, show that the above cost structure could be reduced from the current $48.50 per tonne, down to as low as $15 per tonne for some East Cape forests.
How will it increase the wealth of the East Cape community?
Terrafermah estimates that approx. twelve full time positions will be directly generated at the log facility, with up to a further one hundred indirect jobs created for contractors and downstream businesses. Terrafermah estimates conservatively this would mean a further $227m to land /forest owners in increased stumpage returns over 27 year lifespan of a forest. Or around $10 million per annum back into the local region. Further Terrafermah estimates a further immediate $91m in asset appreciation of land as a productive return is enabled by the project.
Forestry consultant Margaret Willis stated recently; "Our modelling shows that, with traditional pine plantations, once the distance to market reaches 100 kilometres, returns are poor and once it exceeds 250km, the internal rate of return became break even or negative.”The new wharf will sit equidistant between Port of Taurnaga and The Eastland Port at Gisborne ,aprox 250 km from each one , meaning logs now only have around 100km maximum distance to an export port. Currently it is considered uneconomical to harvest certain East Cape forestry blocks and in the event they are harvested, the return to land or forest owners is nil after replanting costs.
Road access to facility
Terrafermah feedback from the local community has noted that logging truck traffic past schools and houses is a major concern. To address this Terrafermah wishes to use an alternative unused access route to the facility ensuring all logging trucks do not go past any houses around the school and houses in Wharf Rd. From SH 35 to the Wharekahika Bridge Terrafermah proposes to use the old Wharekahika Rd. that runs between Opotiki and Hicks Bay to the coast coming out around the old freezing works. From here it is proposed with the participation of the Transport Agency to upgrade and realign the access road to the log facility. This entails a new approach section to climb to the top of the Matakaoa plateau. The Wharekahika Bridge was upgraded in 2010 in anticipation of redeveloping the existing Hicks Bay Wharf, however we will be bypassing this bridge. The option of using the old wharf for log ships is not feasible as draughts of the larger log ships exceed 12m when fully loaded.
How many logging trucks are there?
The potential renewable cutting cycle is 27 years at a rate of 60,000 tonnes per month, or 1,890 thirty tonne truck trips per month
To haul this harvest to Tauranga or Gisborne requires 70,000 kilometres on Transit network roads per day. (66 loads between both ports) One fully laden 30 tonne truck has the equivalent wear to the road surface as 18,000 cars travelling the same distance. Most haulage to the new port will be off road forestry travel (50 Kilometre radius). As a regional development, Terrafermah believes that this project will pay dividends in reducing the projected maintenance to the wider regional network by removing thousands of logging truck rolls and improving road safety for all users in the regions that log harvesting is being pursued. The estimated saving over the next 25 years on costs by removing logging trucks from travelling to either Tauranga or Gisborne ports is estimated to be around $300 million.
Back Ground: Resource, Region, Export Priority
While New Zealand is a small player in the international forestry industry, (1.1% of the world's total supply of industrial wood and 1.3% of the world's trade in forest products), forestry is a significant industry in New Zealand. It contributes an annual gross income of around $5 billion, 3% of New Zealand's GDP, and directly employs around 20,000 people. Wood products are New Zealand's third largest export earner – behind dairy and meat.
The industry is based around sustainably managed exotic plantation forests, covering 1.751 million hectares, about 7%, of New Zealand's land area. Radiata pine (Pinusradiata) makes up 90% of the exotic plantation area, with Douglas-fir (Pseudotsugamenziesii) accounting for 6%, and the rest made up of eucalyptus and other species.
The sector is entering an exciting new phase, as forests planted in recent decades reach maturity, increasing production volumes. Forests are also at the centre of New Zealand's climate change response efforts, and there is increasing realization of the environmental and social benefits delivered by forests.
Are there enough forests over the next decades to keep the business going?
The East Cape region has 156,000 hectare of harvest-able forests (Radiata Pine) with an average age of 17.5 yrs.
Opotiki region has 15,713 hectares with an average age of 20 years.
There is a total catchment area of 172,000 hectares (hct) around the HB Port. (Within 220km):
ready to harvest now 33,000 hct (16.5 m tonne =4.125m PA)
2016 to 2020 31,397 hct (16.5 m tonne = 4.125 m PA)
2021 to 2025 45,265 hct (15.5 m tone = 3.870 m PA)
2026 to 2031 26,029 hct (13m tonne = 3.250 m PA)
2031 to 2035 9,125 hct (4.5 m tonne = 1.125m PA)
2035 to 2039 9,125 hct (4.5 m tonne = 1.125m PA)
2040 to 2044 33,000 hct if “ready now” above replanted = 4.125m PA
2044 on, follows above pattern with no new forest plantings
(only replanting current forests harvested- which they have to, to stop erosion)