A response to: The death of Forestry Tasmania?, HERE
Sometimes it gets a bit confusing trying to work out the economics of logging in publicly owned native forests. I will have a go based on my experience in the Otways, Victoria. (See www.oren.org.au)
Forestry Tasmania (FT) has two major logging costs. The first is associated with finding the money to pay logging contractors to actually log the forests and the second is the building and maintaining roads to cart the trees (logs) to either a sawmill or woodchipping facility.
These costs are generally fixed and ultimately paid by those who receive the logs (via Forest Tasmania or direct payment from the mill owners).
Logging contractors are paid piece rates; the money they receive to cut down a tree for woodchips is the same they get for a sawlog. So, for example, if 70% of trees cut down go to the woodchip mill, then 70% of the logging contractors income comes from woodchipping industry.
Similarly if 70% of loaded trucks leaving the forests go to a woodchip mill then the woodchipping industry pays 70% of the roading costs.
The mill owners also need to cover the cost of cartage. This is a variable cost that increases the greater the distance between forest and mill.
Now FT is selling trees that the community own, so FT charges an actual sale price for each tree. Lets call it a royalty, not sure what it is called in Tasmania. This royalty is a separate charge to the above payments and represents a return to the whole community for each tree sold. Generally sawlogs trees are charged at a much higher royalty price than woodchip trees. The royalty also covers forest administration costs (and all the other things FT do) as well as return a profit to the State Government.
Logging contractors and roading costs are generally fixed, but the return to the community for each tree sold (royalty) and the cartage costs are not.
For example:
The further away from the mill, the higher the cartage costs. So Forestry Tasmania will cut back the royalty charge to mill owners, (generally for woodchip trees) so mill owners can pay more to the haulage contractors to compensate for the extra distance cartage costs. That way the cartage stays profitable and the total cost for the mill owners stay about the same. After all, no one wants to cart or buy logs from the forests when they cannot make money out of it. FT may argue this arrangement is justified to meet sawlog license commitments.
However if the price of woodchips drops, then many forest areas a long distance for a woodchip mill or that have low sawlog yields, become uneconomic to log. Hence a drop in the woodchip price means Forestry Tasmania can run up big losses trying to meet contractual arrangements to supply logs to all its customers.
Of course if I have got this logic wrong, FT can always enlighten us to what the current cost and payment systems actually are. After all the pubic owns these forests; be nice to know what is actually going on.
This brings us to the current economic debate over the future of the native forest logging industry in Tasmania.
From the industries point of view, the current drop in woodchip price is forcing a restructure to make the native forest logging industry profitable.
From TWS and ACF’s view, the drop in the woodchip price represents a prophecy they have held since 1991, that all native forest logging would be one day be uneconomic and the industry will die a natural death.
We shall see.
Simon Birrell is … is a Mechanical Engineer and spokesperson for the Otways Ranges Environment Network (OREN), a community group that drove a successful campaign bewteen 1995 -2002 that has stopped clearfell logging of bio-diverse native forest in the Otways (forests along the Great Ocean Road in Victoria). The focus of the campaign was on non timber forest values such as water supply catchments for Geelong, nature base tourism and high conservation forests. OREN supported the extensive use of non violent direct action to stop logging in contentious areas.
Mr Birrell and the OREN team worked with the ALP minority State government in the lead up to the 2002 state election. As a result, former Premier Steve Bracks was elected with a huge popular mandate to create a Great Otway National Park and stop all logging and woodchipping (when sawlog licences expired) in 2008. A total ban on Otway wood-chipping is unprecedented. The Otways represents the only high rainfall tall forest region in Australia, where an existing and well established native forest woodchip industry for both the domestic (to make Kleenex tissues) and export markets has been totally removed.
Every forest debate has its own unique set of circumstances. What was achieved in the Otways, Victoria is not automatically the answer to other forest conflicts in other states.
A mini bio is on its way.
ABC Radio National Bush Telegraph:
Change of heart at Gunns
By Michael Cathcart
Wednesday, 15/09/2010
For decades, environmentalists across Australia have regarded the Tasmanian timber giant Gunns as the headquarters of the dark side. It was cutting down the old growth forests of Tasmania, and sending the trees off the Japan as woodchips.
Well now this tough old company has had a radical change of heart. Last week in Melbourne, Gunns’ chief executive Greg L’Estrange told a Forest Industry Conference that Gunns will stop logging old growth forests in Tasmania. It will move to exclusively plantation timber.
Today, Greg L’Estrange explains the reasons for this change of policy. We are joined too by Tim Birch, national forests campaigner for the Wilderness Society.
Both men discuss the future of plantation timber and of the proposed pulp mill. They find more common ground than you might expect.
In this report: Greg L’Estrange, CEO of Gunns; Tim Birch, national forests campaigner for the Wilderness Society
Listen to or download story: HERE
Gunns chops woodchips trade
By Brad Markham
Timber giant Gunns Limited is to slash the price it pays Tasmanian sawmills for native timber woodchips.
The company has told sawmillers it will only be paying $50 a tonne for the woodchips from October.
That is a drop of more than $20 a tonne.
Gunns is also changing the way it buys the waste woodchips from sawmills.
From next month it will only purchase the woodchips on short-term contracts.
In a letter to sawmillers, Gunns has told them they will need to arrange delivery of the woodchips to Gunns’ Triabunna mill themselves.
The company says falling international demand for ‘natural forest derived’ woodchips is behind the changes.
Gunns has told sawmillers Japan will no longer buy them.
“[Japan] will only purchase woodchips that meet the FSC Controlled Wood Standard,” it said.
“The only sales opportunity we now have is to non-Japanese markets at substantially lower prices than those previously achieved in Japan.”
The price cut has left many sawmill owners, like Larry Jarman who runs a mill near Launceston, reeling.
“I’ve been here for 60 years and I’m very sick about it,” he said.
Mr Jarman says his income is going to take a major hit, putting jobs at risk.
Read the full ABC Online story HERE
ABC Rural
Plantation timber won’t cut it
By Flint Duxfield
Thursday, 16/09/2010
Small sawmill operators in Tasmania fear their access to native forests is being used as a bargaining chip in negotiations over the proposed Gunns pulp mill.
Long-running negotiations between environmental groups and the timber industry were rocked last week when timber giant Gunns Limited announced it would phase out native timber logging.
But smaller operators say discussions about ending native timber logging are premature.
“This whole debate has come out of the blue and I really think it’s about getting the pulp mill up,” said Robert Torenius, who owns a medium sized sawmill at Forcett in the state’s south east.
“We’ve never been against the pulp mill…but if it’s going to be sacrificing the rest of the industry it’s going to be a pretty hard pill to swallow.”
Mr Torenius says native timber logging will need to be phased-out over several decades to allow plantation timber to completely replace native forest wood.
“We need 20-30 years for [plantation timber] to be anywhere near big enough to be sawmill timber. The wood is too young, it’s too springy, it cracks and it’s just not suitable, not for the high end of the hardwood market.”
“If it’s going to be, as we hear, moved into plantation based resources, mills like this won’t be able to operate.”
Environment groups have rejected the suggestion that native timber logging is being used as a bargaining chip in the negotiations over the pulp mill.
“We’re talking about broad principles, we’re not talking about any specific industrial plants or proposals,” said Dr Phill Pullinger, director of Environment Tasmania, one of the key groups involved in the negotiations.
Dr Pullinger said environment groups recognised the need for a transition period to phase out native logging.
“Certainly, no-one’s arguing for an end to all native forest logging tomorrow or anything on the variation of that theme.
We’re looking for the protection of high conservation native forests and we’re looking for a transition out of the native forest sector, but we do recognise that there’s going to need to be a period of time for that jump to me made.”
…
“In terms of the native sector in Tasmania Gunns makes up the lion’s share.”
“So certainly their announcement that they are intending to end their involvement in the logging of native forest does open up significant space for a number of the country sawmills for example, who are using quite small volumes of native timber.”
New-look Gunns ready for Forest Wars truce
It’s the end of an era. Gunns, the timber company which has long been the bete noir of environmentalists Australia-wide has pulled the plug on native forest logging and will be building its future business on plantations. The change came with an admission by Gunns CEO Greg L’Estrange that his company had been ‘out-thought and outplayed’ by the environmental movement; but his thinking may have also been influenced by an extraordinary, come-to-Jesus moment in a mainland juice shop. Mr L’Estrange concedes that there are also some pressing economic issues underpinning his company’s decision, including the undeniable reality that timber plantations are now the main game in the timber industry. Yet the Gunns chief told an audience recently that ‘too many people have been financially and emotionally injured in the Australian Forest Wars’. It’s the end of an era. But how will environmentalists respond to the outbreak of peace?
listen now | download audio: HERE
