WQI Ltd – Wood Quality Initiative

Keith MackieCEO – WQI Ltd

Why am I here today?

Olle Hagman!

WQI Ltd – The CompanyOperating for 4yearsAnnual Turnover: $15 m SEK1 ½ permanent staff members!4 “Objective Leaders” (Industry facing)16 shareholders + other partiesGovernment funding (1:1 cash)

WQI purpose: ‘Tools’ and technologies for WQ segregation; standing trees near harvest, logs, lumber, remanufacturing

Our Shareholders

Tenon Ltd Kaingaroa Timber Management Company Ltd CSIRO Division of Forestry & Forest Products (Australia) Forest Research Ltd Canterprise Ltd (University of Canterbury) Norske Skog Tasman Ltd Selwyn Plantation Board Ltd Wenita Forest Products Ltd

Olsen and Company Ltd Ernslaw One Ltd Radiata Pine Breeding Company Ltd City Forests Ltd Weyerhaeuser NZ Inc. Timberlands West Coast Rayonier Asia Pacific Hancocks Forest Management (NZ) Ltd

45% growing area and 30% of processing capacity

Why is WQI (consortium) different?Criteria for consortiaLeverage new industry $Industry direction of R&DIndustry uptake

How WQI worksEnd users ‘own’ company & outcomesOperated by industry facing personnelFocus on value, value for money, delivery

Outcome: Successful initiative from stakeholders Outcome: Successful initiative from stakeholders perspectiveperspective

WQI’s R&D Programme

Integrated

Resource

25%

Structural

21% Appearance

24%

Stability

30%

Balance of research investments into research categories

$ GOVERNMENT INDUSTRY

Basic targeted ToolsApplied Apps development

Balance of research investment into research categories

Basic Targeted

Applied

Applications Development

Final Product Development

57%

12%6%

25%

40 M SEK in total (research)

What are the main challenges NZ faces?

NZ’s Pine Resource

0

10

20

30

40

50

60

70

1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040

Potential Annual Harvest

NZ Industrial Wood Use

Year ending 31 March

Rec

over

able

Volu

me

(mill

ion

m3 )

60% of trees valueSignificant cost & effort in silvicultureResource being severely over stated in all estate and stand modelling in terms of quality & valueIncreasing quality issuesVERY little current research effort of relevance

Pruned butt log importance

Parity with Ponderosa – a high level goal

US is the major market for our pruned resource – Why is the Radiata M&B lumber price not par with that of Ponderosa Pine?

Radiata vs PonderosaUS M&B prices ex Crows

900

1100

1300

1500

1700

May-04

Jun-04

Jul-04

Aug-04

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Pric

e , U

SD/m

bf

Ponderosa Radiata

The global ‘environment’There is no shortage of plantation wood!

Radiata pine has no ‘special’ qualities

NZ is a long way from counties where there is demand for wood products

NZ dollar is high (our view!)

The Technical Challenge

Segregation!

Useable on the current crop now!

Focus on wood performance features which effect markets-stability and resin (rather than strength)

Must be cost effective!

Wood property variation in the butt log

Sample direction

NW & SESample direction

NE & SW

Disc orientation: Compression wood South East side

Results:Average MoE

Hei

ght (

m)

Results:Tree MoE

Large variation within and between treesMoE lower in cw

Results:Average MoE

Log Grading by resin end features

Validation trials of resin bleeding assessments

0

10

20

30

40

50

60

Low Moderate Severe

Perc

enta

ge D

ecre

ase

Northland Bay of Plenty Hawkes Bay Peelers Nelson Canterbury Average

Key technical achievements(High Level)

Detailed resource characterisation-outcomes integrated into forest growth modelling softwareSubstantial shift in understanding ‘science’ and segregation of resinous defects in radiata pine.Unravelling the causes of dimensional (in)stability in radiata pine.

Long

itudin

al Shri

nkag

e

MFA

Juve

nile W

ood

EW/LW

Cellulo

seLignin

Hemicellulose

Density

Spiral Grain

Grain Variation

Tangential Shrinkage

Compression wood

HW/SW

What controls warp in softwood lumber??

Grain variation and longitudinal shrinkage patterns

Has WQI been a success?

The WQI initiative has delivered

Around $15-20m of value to shareholders from an investment of $8m.(NZD)A successful re-engagement between R&D providers and the ‘wood quality’ sector in Australasia. Focus!!!!A model for other forestry sector R&D initiatives in Australasia

What did we do differently?Formed key strategic relationships for research

delivery:

Australasia research capacity was limited and focused on less important areas!

We needed to ‘direct’ R&D. We knew what we wanted.

Industry directs and reviews the research-not the research providers.

Target: To provide tools and technology for stakeholders to produce a X% increase in recovery p.a.of saleable in-spec product

Right log to mill;Log selection and segregation based on potential product out-turn

Green sawmill conversionSawing technology appropriate to radiata

Modelling tools for determining green lumber out-turn from radiata

Segregation technology (scanning etc) based on quality parameters

Remanufacture conversionProcessing technology appropriate to radiata*

Modelling tools for determining reman out-turn from radiata

Segregation technology (scanning etc) based on quality parameters

Recombination options for increased product recovery

Drying technology

*machining,,X-Cutting,profiling,finger-jointing,adhesives

Adding value to residual materialsRecombination technologies

Utilisation of juvenile core

Waste utilisation

Green sawmill conversionSawing technology appropriate to radiata

Modelling tools for determining green lumber out-turn from radiata

Segregation technology (scanning etc) based on quality parameters

Overlap with existing WQI research

Right log to mill;Log selection and segregation based on potential product out-turn

Remanufacture conversionProcessing technology appropriate to radiata*

Modelling tools for determining reman out-turn from radiata

Segregation technology (scanning etc) based on quality parameters

Recombination options for increased product recovery

Drying technology

*machining,X-Cutting, profiling,finger-jointing, adhesives

Adding value to residual materialsRecombination technologies

Utilisation of juvenile core

Waste utilisation

=high degree of overlap =some degree of overlap = new to WQI

Why am I REALLY here?

Consider joint projects

Share experience of how industry-science can operate

Science is very expensive, there is much to be done, NZ / Sweden do not ‘compete’, fast grown plantations magnify the issues to be dealt with.