Not a babe in the woods

Wednesday 1st May 2002

Meet an Indian-born New Zealander who wants to carry New Zealand's rich pine resources to the vast markets in India and the Middle East, but can't find enough trees

In the last week of January, when Aucklanders were leaning over their maps choosing the right spot for a long weekend, Jacob Mani Mannothra was on his way to New Plymouth to look for some pine trees. It was, for him, just another business trip. Same thing a week later on Waitangi Day. Off to Wellington, treespotting.

No, he's not a green tree-hugger. Mannothra's business is finding pine trees for harvesting. Last October he set up Fortimber, whose main business is exporting New Zealand pine to India and Dubai. Unlike the big forestry companies that have supply but don't always have customers, Mannothra has customers, but is desperately seeking stumpage (cutting rights). Hence three days each week you will see him setting off in his Nissan Primera (air travel is too costly) to participate in bids for pine forests offered for lease. Till now, things have gone pretty well. Fifty-six buyers in India have made formal agreements to take 250,000 cubic metres of wood, and buyers in Dubai want 150,000 cubic metres over the next 12 months. If the deals come off, they should be worth around $25 million. (In the global market, the present price for pine varies between $US60 and $US75 per cubic metre.)

On the supply side, Green Tree Harvesters, a Fortimber group company, has acquired about 2000ha of stumpage. Its target is 20,000ha in the next couple of years. Yield per hectare of pine plantation varies between 250 cubic metres and 450 cubic metres. But there's a short-term supply problem. Fortimber's first shipment of 25,000 cubic metres is scheduled to leave Wellington next month, but by mid-February, Mannothra had procured only 10,000 cubic metres. "I have to get the balance volume fast to honour my supply contract," says Mannothra, sounding a bit concerned. "I have markets ready in India and Dubai. But how do I service them unless I get enough pine from the growers here?"

Mannothra was born in India, did an MSc in agronomy, and was one of the key scientists involved in the development of "rubber wood", a project supported by the International Trade Centre (part of the Geneva-based World Trade Organisation) in the 1980s. Having spent several years marketing rubber wood in the US, Europe and Asia, he came to New Zealand in 1996 and quickly saw the possibilities in the wood trade. "I had contacts in the right places which I had deve-loped in my days of rubber wood promotion. Why not use them now?"

For an entrepreneur like Mannothra, the odds look formidable. He is small in an industry dominated by big players; he is not known locally. New Zealand's half-dozen big corporates in the forestry business, including Carter Holt Harvey, Fletcher Challenge Forests and Rayonier New Zealand, control nearly 70% of the industry's production with its 1.7 million hectares of plantation forests. Most of the corporates have their own forests and also procure heavily from the market. This keeps most growers tied to their supply chain network. "There is hardly any way for a small exporter to match their clout and money power," says one industry observer.

But Mannothra isn't exactly a babe in the woods. One big thing in his favour is that he has Gerald Hunt, a visionary in New Zealand's forestry sector, as his partner and the company's chairman. The 79-year-old Hunt, ex-chief executive of Wood New Zealand and an MBE recipient, remains as keen as ever to promote our forestry exports. He sees great opportunities in the Indian market. "Our timber production will nearly double very soon, to 30 million cubic metres from the present 17 million cubic metres, and we need to locate new markets to sell it to." Hunt believes that India, which consumes 40 million cubic metres of timber each year, can take a great deal more from New Zealand.

New Zealand's timber exports to India have been tiny so far - just 1% of the country's total exports of five million cubic metres. But Hunt believes India could become one of the best markets for cheap, quality forestry products, which have only limited markets elsewhere. At present, India uses pine only for making packing cases and for shuttering and boxing in the construction industry, Mannothra says. The Indian government's new policy on housing construction for the country's vast 1.03 billion population should boost the demand for pine well above 1.5 million cubic metres a year.

Mannothra's second problem comes from finding enough port space to ship his timber. The big guys in the business book port space in advance. Tauranga, largely used for timber exports, is brimful, as are many other timber-handling ports. Mannothra is presently exporting through Wellington but doesn't know what will happen once his business grows. "There has to be 30% to 40% additional port facilities [to cope with New Zealand's increasing timber export]", one expert estimates.

In this business, perhaps more than in some others, the key factor is to remain competitive on price. It takes nearly 30 days for a ship to go to India with New Zealand timber. This means high freight costs, which can make New Zealand pine costlier. And then there is the slew of taxes. But New Zealand wood is very price-competitive. "We are highly productive. Our plantation forests come to the point of harvesting in only 25 years, against the world average of 50 years," says Hunt. According to him, New Zealand's forest industry supplies 1.1 % of world and 8.8% of Asia-Pacific's forest products trade, all from just 0.0005% of the world's forest resources.

Kaveri Mittra
kaveri4@hotmail.com

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