Increasing our onshore manufacturing is critical

Scion welcomes the establishment of the Advanced Technology Institute (ATI) and is pleased that ‘wood and fibre products’ are identified as one of the focus areas. A lot of water has yet to go under the bridge in defining ATI’s business model and modus operandi but that will not slow our work in strengthening the competitiveness of existing manufacturing firms and fostering new sectors in the forest industry.

The Government’s aim is to increase export earnings from 30% (low by OECD standards) to 40% by 2025. Increased onshore manufacturing is critical to achieving this. It aligns directly with the forest industry’s aspiration to grow export earnings from the current $4.8 billion to $12 billion by 2022.

A vibrant manufacturing sector generates higher paying jobs (on average) and local economy multiplier effects (for example, often four to six additional jobs for every job in wood fibre processing). These benefits can be very significant when firms, like many in the forest industry, are located in regional cities and towns. 

Increasing onshore manufacturing of logs and other forest materials such as post-harvest residues and stumps is going to be a tough, but ‘doable’ challenge. It will require gains across the value chain from design to the application of lean principles, logistics and critically new science discoveries. The latter generates uniqueness and barriers to competitors through intellectual property.

Scion, through its ‘Biomaterial Futures’ strategy, initiated in the early 2000s, is very well placed  to contribute strongly to this initiative. Our work in wood plastics, wood derived ‘green’ chemicals, polymers and adhesives from stump resins, carbon fibres and renewable energy from cellulose are all examples of a global transformation that is well underway in the forest industry.

With shortages of energy, water and other natural resources coming into sharp focus in many Asian countries, our customers are telling us that interest in these technologies is building and changes to address these issues is rapid. Our customers are also experiencing a sharp increase in demand for verified environmental and chain of custody performance from the forest to the final consumer. These can all add to New Zealand’s competitive advantage and brand in forest products and services.

The macroeconomic settings for New Zealand exporters, as in most countries at present, are difficult. A high and volatile exchange rate, relatively high cost of capital, low direct foreign investment; diminution of the Emission Trading Scheme for forest owners and difficulties in attracting and keeping top talent are some of the factors that have to be overcome in building a stronger manufacturing base. Therefore we have to do things differently to countries that have scale, market proximity, greater R&D spend and brand advantages. That is why Scion’s science and innovation strategy has a strong emphasis on three dimensions: how to build new products and value into brownfield manufacturing sites; the establishment of new sectors and firms (such as in biomaterials and composites); and technology translation. The latter is critical because it is the dynamic interplay, sharing of ideas and experiences and co-creation of products and processes that will help to speed up the establishment of a larger and more competitive manufacturing base in New Zealand.

Your feedback and comments on the any of the articles in this edition of Scion Connections are most welcome. 

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Warren Parker
Chief Executive