Timber industry future probed at inquiry

PM Scott Morrison announcing funding in Eden-Monaro for three industries that are large employers in the Snowy Valleys, including timber, back in June.

The short- and long-term effects of the bushfires on Australia’s timber industry were discussed during a committee hearing last month.

A public hearing of the House Standing Committee on Agriculture and Water Resources inquiry into timber supply chain constraints in the Australian plantation sector took place on October 23.

Chair of the Committee, Rick Wilson MP, said that the evidence they’ve heard so far is that accessing product is getting harder and harder.

“Obviously here particularly, in Tumut, we’ve got an issue with the fires, which has created a very dire short-term prospect,” he acknowledged. 

“But, longer term, it is about trying to attract capital into the plantation sector and accessing suitable country within reasonable transport distance of existing mills, and I guess the existing mills are getting fewer and fewer as the capital requirement gets bigger.”

CEO of AKD Softwoods Shane Vicary said he is looking at the situation as ‘today’s trees versus tomorrow’s trees’, and said there is definitely a shortage with today’s trees.

“There will be 70 to 80 jobs lost sometime between now and probably June or July next year, when the harvest level reduces. That’s an outcome from the bushfires,” he said. 

“There are areas around Australia where there are effectively shortages of fibre to sustain activities. There’s an element of commercial reality that’s kicked in as well. Sawmills have had to get larger to scale up to reduce their processing costs and be able to compete with export pricing.”

AKD is the largest softwood sawmilling company in Australia, producing around 20 to 25 per cent of the softwood timber consumed in the country annually.

Mr Vicary said that, especially post-bushfires, forest owners seem to be a lot more focused on supply rather than export.

“I think ensuring that the trees are offered to the domestic market and that the domestic market is able to compete on an equitable basis is what is important,” he said. 

“That’s what I would like to see—some form of mechanism that enables free market to work but ensures that we look after Australia’s domestic supply chain first and foremost, but that it doesn’t impinge on the rights of the commercial owner of the plantation.”

Mr Vicary also made some observations about what he calls ‘tomorrow’s trees’.

“There has been a lot of talk about how you get more trees in the ground,” he said.

“AKD purchased 500 hectares this year and 700 hectares last year to add to our land. We’ve been pretty much growing our estate at five to 10 per cent, which is tiny compared to what our ambitions are of 400,000 to 500,000 but we feel like we’re doing our part.”

He said one of the biggest issues they have is cash flow.

“Everybody will talk about rate of return and it’s pretty hard to actually work out a discounted cash flow over 30 years,” Mr Vicary said. 

“Most discounted cash flows don’t really work after seven years—once you start putting in discount rates. The way to make this work, as land costs are high, is enabling cash flow at the start. That’s really important.”

He proposed a collaborative working approach that could enable farmers and forestry to utilise land together.

“I think you could look at the New Zealand example, where farm forestry is massive. And, whilst they’ve had some problems in the last 18 months on the billion trees and politics, I think the opportunity is around how you can utilise land that’s not perfect or ideal for food but is fine for fibre,” Mr Vicary said.

Mr Wilson, Chair of the Committee, said he is a farmer himself and there tends to be tension between the farming and plantation sectors in terms of land access.

Mr Vicary responded that in his personal experience, “it’s actually about recognising that the farmer can either lease his land to a forest owner and secure a stable return from that lease, or he can participate through some form of lease and forestry right.” 

“It’s actually moving the farmer to consider what part of the farm is ideal for the activities that they do and what part of the farm is ideal for trees,” Mr Vicary continued.

“From a farm point of view, if you’re able to lease part of your farm to a forest owner who is able to provide you with a secure, steady income, there’s the potential benefit of that. 

“The other experience in New Zealand is that plantations have usually been used as a generational change tool, in the sense that the farmers planted and you reap that after 25 or 30 years, and that usually enables a generational change.”

CEO of the Australian Forest Products Association (AFPA) Mr Ross Hampton also appeared before the Committee, and said it is important for the government to look at specific issues affecting the industry, such as local manufacturing.

He said that getting more trees in the ground will change the dynamic for everyone in the industry.

“The scarcity, and the growing scarcity, of the resource is exacerbating the problem that we’re trying to address here,” Mr Hampton said. 

“We had a goal in the nineties to grow to three million hectares of plantations. As I think you’ll recall, we didn’t get anywhere near it through the policies that were implemented; we only got to two and a bit million, and we’re going backwards at a rate of knots.”

He said that the South West Slopes area has been recognised as a growth area, and now what’s needed is policies to put trees in the ground for future domestic processing.

Previous articleRaising awareness of domestic violence
Next articleDemerger public hearings underway