Eucalyptus nitens, recovery and economics of processing 15 year old trees for solid timber

Report Date: May 2015

Author: Dean Satchell, Sustainable Forest Solutions, R.D. 1 Kerikeri, Northland 0294
+64 21 2357554

Appendix 1: Assumptions in Discounted Cash Flow Analysis
Appendix 2: Sawn timber price estimates
Appendix 3: Literature review - Value-based survey pricing methods
Appendix 4: Literature review - Estimating profitability of growing E. nitens for solid timber production
Appendix 5: Sawmilling method
Appendix 6: Flooring price survey instrument
Appendix 7: Survey results table
Appendix 8: Survey analysis
Appendix 9: Wood physical properties, test results
Appendix 10: Glossary of terms
Appendix 11: Case study stand plot
Appendix 12: Comparison between levels of internal and surface checking
Appendix 13: Air drying experiment
Appendix 14: Sensitivity analysis

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Appendix 1: Assumptions in Discounted Cash Flow Analysis

Discount and interest rate: 8.5%
Costs do not include GST

Grower Costs

Annual growing costs:

Rates $424 per hectare.
Insurance $10 per hectare.
Management $50 per hectare.
Land rental: $850 as annual interest on land value of $10,000 per hectare.

One-off growing costs:

Site preparation cost $200 per hectare, year 0.
Seedlings cost $1000 per hectare, year 0.
Planting cost $300 per hectare, year 0.
Releasing cost $200 per hectare, year 1.
Pruning costs $1500 per hectare, year 3.
Pruning costs $800 per hectare, year 4.
Pruning costs $200 per hectare, year 5.
Thinning cost $800 per hectare, year 8.

Logging and loading*:

• Base scenario: $28 per tonne (assumed "easy to flat" terrain).
• Easy Hill: $31 per tonne.
• Moderate steep: $38 per tonne.

Transport cost*:

• Base scenario: $16 per tonne (50 km).
• 100 km: $27 per tonne.
• 150 km: $39 per tonne.

*From Laurie Forestry website http://www.laurieforestry.co.nz/Pricing-Table

Product price assumptions

Firewood price, wholesale: $50 per thrown cubic metre.
Firewood conversion factor: One cubic metre by volume = two thrown cubic metres.
Pulpwood price before logging, loading and transport: $50 per cubic metre (J. Fairweather, pers. comm. July 2014).
Pulpwood price, Southland stumpage $20 or better per tonne for chipwood feedstock. Landed at mill $75 per tonne (Graeme Manley, pers. comm. February 2015).
Sawdust price: $25 per cubic metre.
Sawdust conversion factor: 230 kg per cubic metre.
Flooring timber Reference Product (Victorian ash) wholesale price for 125 mm nominal width, select grade, lengths longer than 1.2 m: $4.09 per lineal metre.
“The current price NZ wholesalers pay for 108 x 19 Victorian Ash T&G flooring Select grade A$3.79/lm landed in NZ.” (Brett Bould, Pers. Comm. 20 May 2014). 1AUD=1.07812NZD @ 20 May 2014.

Product residual values

Laminated benchtops:

Nominal 75 mm x 25 mm = 60 mm x 19 mm finished. 3 m long panel, 650 mm wide, 60 mm thick =0.117 m3
Nominal 50 mm x 25 mm = 40 mm x 19 mm finished. 3 m long panel, 650 mm wide, 40 mm thick =0.078 m3
19mm widths = 35 pieces for 650 mm wide benchtop panel.
Costs for graded and blanked product: Marking for layup and block stacking: 3 hours per cubic metre, secondary labour.
Transport both ways for laminating: $100 per nominal cubic metre.
Laminating cost $1200 per cubic metre of product.
Value per cubic metre is the same for 40 mm thick and 60 mm thick panels.

Non- buttjointed panel:

Feedstock profile: board length >1500 mm, graded and blanked.
Grades: FFT Panel Laminating Clear One Face, FFT Panel Laminating Clear Two Faces, FFT Clear Joinery.
Retail value of 6omm thick panel: 3 m long, 650 mm wide = $500+gst (J. Fairweather sales, October 2014).
Wholesale price less 30% = $4,487 per cubic metre of product.
Value per lineal metre 75 mm nominal: $5.12
Residual value per lineal metre 75 mm nominal board: $3.56
Value per lineal metre 50 mm nominal: $3.41
Residual value per lineal metre 50 mm nominal board: $2.38

Buttjointed panel:

Feedstock profile: board length 300 mm - 1500 mm, graded and blanked.
Grades: FFT Panel Laminating Clear One Face, FFT Panel Laminating Clear Two Faces, FFT Clear Joinery.
Retail value of 6omm thick panel: 3 m long, 650 mm wide = $350 (J. Fairweather sales, October 2014).
Wholesale price less 30% = $3,141 per cubic metre of product.
Value per lineal metre 75 mm nominal: $3.58
Residual value per lineal metre 75 mm nominal board: $2.03
Value per lineal metre 50 mm nominal: $2.39
Residual value per lineal metre 50 mm nominal board: $1.35

Flooring timber residual value

Edge jointing: $300 per cube for jointing (100-150mm widths, 200-700mm lengths, blanked with two straight edges and two flat faces and squared ends). Preparation costs assumed to be $100 per cubic metre based on $16-$17 / hour, 4-5 hours for a cube of shooks. Jointed lengths usually 3.6, 4.2 or 6.3 (cladding). 700 max lengths because of feeding systems and possible crook.
End-matching: Cost $45/hour approximates to $170/nominal cubic metre (Robin Curtis, pers. comm. 26/9/14)
Plus markup of 30% = $221 per nominal cubic metre.
For comparison: Random block-cutting costs (300-600 mm blocks): 80 lineal metres per hour, $0.25 cents per lineal metre.

Production costs

Management and overheads:

A processing, marketing and management overhead cost for the case study processing operation was calculated as 10% of sawn timber revenue.

Sawmill costs:

Log handling: 30 logs per hour.
Electricity: Cost per hour = $3.69
Ten units per hour of operation, Daily rate = $1.20, plus rate per unit = $0.22 (Prices from November 2013 account).
Petrol: Cost per hour = $4.02
Edger uses 20 litres of petrol in 560.5 minutes of operation. Price $1.88 excluding gst (January 2014, source http://www.aa.co.nz/cars/motoring-blog/petrolwatch/january-2014-petrol-and-diesel-prices/).
Diesel: Cost per hour = $2.80
Band sawmill uses 20 litres of diesel in 560.5 minutes of operation. Price $1.31 per litre excluding gst (January 2014, source http://www.aa.co.nz/cars/motoring-blog/petrolwatch/january-2014-petrol-and-diesel-prices/).
Lube oil, cost per hour $0.76
6 litres of lube oil are used in 560.5 minutes of operation. Price $1.18 per litre.

Bands:

Cost for band = $60
Band sharpened 5 times before replacement.
Two hours service between sharpening.
Sharpening cost $20 (i.e. $10 per hour).
One blade change was assumed to take place (4 minutes) every 2 hours for primary labour unit, while the secondary labour unit continues edging.
Edger blades: Sharpened every 1000 hours, one hour to sharpen (Primary labour).

Sawmill machinery:

Rental as interest on capital investment plus depreciation:
Interest rate: 8.5%
Woodmizer LT 40: $34,783, depreciation 13% straight line.
Woodmizer twin-blade edger: $8,700, depreciation 13% straight line.
Firewood cutter: $4347.83, depreciation 13% straight line.
Electricity setup costs $10,000, depreciation 5% straight line.
Belts, rollers: $1739.13, depreciation 13% straight line.
Extraction fans: $2608.70, depreciation 13% straight line.
Loader $5,000, depreciation 20% straight line.

Site rental:

Land value $20,000 per hectare, interest 8.5% per annum.
Rates $300 per hectare per annum.
Site = 1/4 hectare.

Labour:

Labour: Primary $30 per hour (gross, including holiday pay).
Labour: Secondary $20 per hour (gross, including holiday pay).
Sawmill annual operating hours: Assuming 229 work days per year, 4 weeks holiday, 52 Weeks times 5 days a week = 260 days.
Less 20 days annual leave = 240 days.
Less 11 days statutory holidays = 229 Days a Year. At 8 hours per day that is 1832 hours. Allowing for 95% sawmill work time the time the sawmill is operating was calculated as 104424 minutes per annum.

Repairs and maintenance:

Repairs and maintenance: $1260 per annum, or $0.69 per hour for 1832 operating hours per year. Repairs and maintenance labour was also allowed for as an additional hourly cost of 2% of total wages.

Drying costs

1 stack = 1.0177 nominal sawn m3 timber.
Shifting stack from sawmill into drying position: 4 minutes primary labour, $1.97 per cubic metre.
Stack preparation (weighting and wrapping): 10 minutes primary labour to put weight on two stacks (i.e. 5 minutes per stack) and 10 minutes secondary labour to wrap one stack.
Drying shed (for shed air drying): $30,000, depreciation 3% straight line.
Capacity of 24 stacks of sawn timber.
Yard drying space (for yard air drying): $6600 for digger and $1000 for gravel
Capacity for 200 stacks. Depreciation 20% straight line. Assume 1 year drying average.
Cloth wrap: $1.30 per square metre. Each stack requires 16 square metres of microklima (wrapped twice) and the microklima can be used 3 times. http://www.easytek.co.nz/downloads/BirdNetting.pdf, includes gst for orders over 400 square metres.
Concrete weights: $200 each (these weight 2 stacks), depreciation 5% straight line.
Drying pallets: $40 each, depreciation 20% straight line, one pallet per stack.
Fillets: $0.39 each, 7 fillets per row, 17 rows per stack.

Solar kiln:

Solarola Mini-Pro 6m Sun Dry kiln: $29,058 cost, depreciation 5% straight line.
Annual capacity 36 m3.

Forklift:

Forklift cost and site rental cost were based on the solar kiln capacity.
Forklift: $3000, depreciation 20% straight line.
Steam reconditioning cost assumed to be $30 per nominal cubic metre.

Site rental:

Land value = $20,000 per hectare, interest 8.5%.
Rates = $300 per hectare.
Site = 1/2 hectare.

Repairs and maintenance:

5 minutes per nominal sawn cubic metre.

Processing costs

Shifting stack from kiln into processing shed: 5 minutes, primary and secondary labour units.
Labour, blanking: 65 boards per hour (195 lineal metres), secondary labour.
Labour, profiling: 60 boards per hour (180 lineal metres), secondary labour.
Grading and docking: One board per minute, docked and graded, secondary labour.
Block stacking: 1000 boards per hour (secondary labour).
Despatch and preparation: 1000 boards per hour (secondary labour).
Knives: All 4  edge knives cost $25 to sharpen and all 4 face knives cost $30 to sharpen. These knives need sharpening every four m3 but each board passes through machine twice.
Electricity: 6.5 kw per hour (blanking or profiling) which includes extraction fan. Two passes per board at 60 boards 3m long per hour. Daily rate $1.20, plus rate per unit $0.22 (Prices from November 2013 account).
Boron treatment: $29.76 per nominal cubic metre. A$ 26/m3 from page 27 Forestry Tasmania technical report 08/213, August 2013 (1AUD=1.1448 NZD on 28 Aug 2013).
Processing shed rental: $52,000, depreciation 20% straight line per annum.
Logosol PH 260 four sider: $9,130, depreciation 20% straight line per annum.
Docking saw: $700, depreciation 13% straight line per annum.

For Comparison:

Profiling costs 45 cents per lineal metre and is charged out as $0.90 per lineal metre (Robin Curtis, pers. com 12/02/2015).
End-matching costs 45 cents per lineal metre and is charged out as $0.90 per lineal metre (Robin Curtis, pers. com 12/02/2015).

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Disclaimer: The opinions and information provided in this report have been provided in good faith and on the basis that every endeavour has been made to be accurate and not misleading and to exercise reasonable care, skill and judgement in providing such opinions and information. The Author and NZFFA will not be responsible if information is inaccurate or not up to date, nor will we be responsible if you use or rely on the information in any way.