"Logs in Boxes" Boosts Returns for Forest Owners

In a down market, it's always welcome to find new opportunities to improve log returns for the forest owner. PF Olsen has been working with log exporting companies to ship logs to Asian ports in containers. Due to New Zealand's trade balance, 70 to 80% of shipping containers are returned empty to offshore destinations.

This is a costly exercise and container operators are welcoming the opportunity to backload logs rather than "fresh-air". Utilising containers to carry logs is particularly competitive at the moment because of the extremely high bulk shipping costs. "With bulk shipping of logs costing around $60-70/JAS m³, containers are proving much more competitive in this environment", says Peter Weblin, PF Olsen's Marketing Manager. "The other big benefit is that small lots of just a few hundred cubic meters can be delivered and we aren't restricted to the main ports. This opens up the market to niche buyers serviced by more ports."

Hub and Spoke System

Container shipping works on a Hub and Spoke system. Large container ships ply the waters between big, designated, servicing ports (the Hubs). Then, depending on the final destination of the consignment, the container may move to a satellite or feeder ship for the final leg of the journey (the Spoke). Whilst a container may travel a greater distance and be handled more often with this method, the total logistics solution is optimised. When coupled with discounted rates for back loading containers, we can see a good lift in forest gate returns.

Most of the log export is done in 20 foot containers with 5.1m and 5.4m log lengths providing the best stowage efficiency. "Depending on the grade and log length, between 14 and 18 JAS m³ can be fitted into each container", says Weblin. "Fumigation, which is required for export to India and China, is either done in the container or by tent-fumigation (under tarpaulins on the port)".

Currently PF Olsen is exporting logs out of Ports of Tauranga, Napier, and Lyttleton with plans to commence supply logs to operations out of Ports of Nelson and Auckland.

Impact on Forest Gate Returns

The impact on forest gate returns can vary depending on which port is utilised. Evaluation at one of the ports PF Olsen use shows improvements of up to $10/JAS m³ compared to break bulk operations. This is a welcome benefit to PF Olsen clients who have been subject to downward pressure on returns this year with a weak timber market in combination with increasing costs driven by high fuel prices.