Tasmanian Times

Economy

Pulp Friction: one independent’s perspective

The mill is a mirage, a cruel hoax all political parties are exploiting to distract voters from the real problems Tasmanians face.

The Labor Government benefits because they can reconnect with an angry blue collar base looking for a scapegoat (the Greens), the Liberals benefit because it reinforces the perception that they are aggressively pro-business and also anti-Green, the Greens benefit because it reunites them behind a common cause after recent division over the TFA and the Palmer Party benefits because they can present a “sensible compromise” image promoting the “right mill, wrong place” fallacy.

I think the timing of the current legislation in the middle of an election campaign is particularly cynical, with more than sufficient time available last year to deal with permit clarification and extension issues raised by Korda Mentha.

One becomes even more cynical with the revelation after Parliament passed the permit enabling legislation, that the ANZ Bank sold its interest last September in the syndicate of secured lenders owed money by Gunns.

Gunns went bankrupt because they couldn’t raise finance following the GFC and because the Tamar pulp mill simply isn’t viable. It does not have sufficient plantation resources or certainty that they will be replanted; and the prospect of perpetual protests both here and overseas have raised sovereign risk to unacceptable levels.

The slippery slope to unviability commenced over five years ago when the managed investment schemes (MIS) started unravelling and the ownership of the plantation estate gradually dissipated. This is what caused such alarm, which led to the Ferguson report and the latest recall of Parliament. The ownership dispersal of plantations and future yields will make any pulp mill proponent shy away.

At the very time Gunns was trying to convince Richard Chandler to invest (in Feb/March 2011) by saying Gunns’ Tasmanian plantations alone could produce 4.5 billion tonnes of timber, the Pitt & Sherry report for the IVG said the entire Tasmanian resource would peak at 2.5 billion tonnes. Little wonder the Richard Chandler Group walked out the door. It certainly wasn’t just the prospect of more overseas pot-stirring by Peg Putt and Markets for Change.

But apart from certainty of resource I am highly sceptical about the fundamental economics of the project, which reflect increasing supply with new mills and eucalypt plantations coming on line in Asia and South America; and fluctuating demand caused by increasing replacement of paper by electronic communications. A standalone pulp mill would run a severe risk when markets are flooded with unused pulp from integrated paper makers following regular downturns in paper prices.

Clearly, it would be too risky for a mill proponent to invest in a standalone pulp mill in Tasmania and if it is to have any chance it would probably need to be integrated as part of a larger operation, such as an a vertically integrated paper company. That begs the obvious question, if an interested vertically integrated paper company did exist, then why hasn’t it stepped forward already?

Back to basic economics. If the price for pulp is around $800 per tonne and that takes 4 tonnes of plantation timber, so after all the value adding one tonne of timber makes $200 worth of pulp (wharf delivered price). How much is one tonne of delivered firewood worth? A tonne of sawn radiata is worth $400! Apart from the mill owners, what should be an adequate return be given to tree owners and land owners, given the cost of land required to grow suitable crops, plus the relatively slow growing nature of our plantations compared to Asia and South America, plus the high transport costs of plantation to mill, mill to wharf, and then shipping costs overseas with Asian mills closer to Asian markets?

It all adds up to the same conclusion. There will be no pulp mill in the short to medium term so why spend so much time getting worked up about it? The current debate makes about as much sense as fighting over permits to buy a lotto ticket. You might get the permits but you aren’t going to win lotto!

That said, I am not religiously opposed to pulp mills, as many of their detractors would appear to be. I foresee a time when changes in technology may make a 2.5 billion tonne plantation resource both environmentally neutral and economically feasible, but now is not that time.

Hans Willink is standing in the 2014 state election as an independent candidate for seat of Denison. Authorised by Hans Willink, 799 Acton Road, Acton Park 7170. (This article was first submitted at the end of January but publication was delayed while TT’s editors regrouped).

Postscript: Of course this article is already a little dated, in light of the Matthew Denholm’s article in this week’s Weekend Australian which includes the following new information (you will need to subscribe to the Australian’s premium on line service to see the full article). Extracts from the article (which in my opinion validate much of what I wrote in the last weeks article include …..

“The Weekend Australian has learned that former Gunns chief executive Greg L’Estrange organised a bid with a major foreign pulp player hoping to build the $2.5 million mill essentially as planned by the failed timber firm…..

The bid was withdrawn after the first round, with the company deciding the task was too complex and costly compared to Asian and Latin American opportunities….

While Gunns receiver KordaMentha insists two bidders remain interested in bidding for the mill permit, industry sources believe the L’Estrange bid was the only one capable of building the world-scale bleached eucalypt kraft mill “any time soon”…..

They now expect the Gunns assets to be sold to financial investors or a private equity firm, which would woodchip and export the plantations while searching for a pulp mill backer before the permit expires in 2017…..

One timber industry source said a Chinese company was interested in building a “brown pulp” mill, involving the simple extraction of water from the wood before it was shipped to China for final processing and bleaching…..

There was also concern that surviving bidders were unwilling to fund the cost of replanting and regrowing the 90,000ha of Gunns plantations, intending to instead harvest them only once….

This would mean downstream timber processing would be short-lived unless the government agreed to fund the replanting and managing of the plantations…..

……the pulp-mill permit was now expected to be sold very cheaply because the buyer would have to assume the project may not get off the ground and that the plantations would be exported as lower-value woodchips.

…..They said the plantations for sale via KordaMentha would supply less than half the 4.5 million tonnes of wood needed for the pulp mill each year.”

end of extracts

My initial thoughts? I would not be in favour of the automatic transfer of current permit approvals to a new and different Chinese brown pulp mill. I am not in favour of government funding the replanting and managing of the plantations (or any other part of the mill project) and I don’t support a return to a woodchip only industry with no value adding.

Author Credits: [show_post_categories parent="no" parentcategory="writers" show = "category" hyperlink="yes"]
24 Comments

24 Comments

  1. Robin Charles Halton

    February 22, 2014 at 6:04 pm

    #23 Simon, are you aware that on the 4th February 2014 that Andrew Wilkie made it clear to Mr Willink and the public that he does not endorse him or any other candidate in the State election.
    Mr Willink has been mimicking Andrew Wilkie who had written to him to stop his practices immediately.

    Indeed, I would not expect an Independent candidate to stand on anothers shoulder.
    I believe that Hans stands as an Independent Liberal, I am not sure about his dinosaur display, something to do with the competition with the Palmer party but all I want to know if Hans has Green leanings.

    If he wishs to reply he can either pen the message with TT, contact me in person or avoid contact.

    The problem I have with him in all honesty, is where to place him in the 1-5 listing as I suspect he may deserve a better chance than both the Greens and Labor.

    #18 Trevor, we both deserve to know where Hans allegiances, right or left of the middle ground.

  2. Simon Warriner

    February 21, 2014 at 2:04 pm

    Robin, you and TGC alleging Willinks green “leanings” is no imperative for him to admit to them.

    It is such a distorted logic it is emabarrasing to contemplate.

    Just ask the man direct questions that tease out his attitude on the issues that concern you, and use his answers to inform your decisions, and the decisions of others if it suits you to do so.

    In doing so you will serve a greater good and might just help put a grain or two of intelligence into what is otherwise a sad parody of a debate about leadership and direction.

  3. Robin Charles Halton

    February 21, 2014 at 1:06 pm

    Hans much of this State election will probably be about excluding Labor and the Greens, where will your numbers go if you dont get a seat! Please explain!

  4. Robin Charles Halton

    February 18, 2014 at 5:36 pm

    #20 Simon, Wouldn’t, it be common decency if Mr Willink disclosed his leaning and alliances to the Greens! His forestry credentials look pretty Green! I agree with him on the pulp mill and that is about it.

    Next thing he wants scruffy feminists to bust up Mens Clubs, into into todays Mercury comments!

    Much of this coming election is to punish most of the Greens candidates for their attempted rat cunning effort to destroy our remaining economy and showing little regard for lifting the spirit of a society that has to face dramatic economic and lifestyle adjustment in a globalised mess.

    We know Mr Wilkie Federal Independent for Denison, although I still regard him highly, I must say there are some issues that I find edgy to maintain my support for him despite his high level of integrity.

    In this instance we are facing a challenge to search for fine candidates and vote for an improved State government, so far there is not much choice available.

    So far the only evolution could come from PUP candidates under the watchful eye of local CEO Kevin Morgan of Braddon electorate.

    The member for Halifax needs to allow the Tasmanian contingent to run their own campaign.

  5. Simon Warriner

    February 18, 2014 at 3:39 pm

    re 18, as opposed to the Greborals who will say pretty much anything to get elected then weasel their way out of delivering?

    Party political policies have all the credibility of promises not to ejeculate from sexually aroused males and you insult everyone’s intelligence by arguing otherwise.

    What is wrong with campaigning by focusing on your values and explaining what applying those values to the task of government means to you?

    What is wrong with saying that you will determine each issue on its merits, and choose the course of action that delivers the greatest benefit for the most people over the longest term?

    Its a bloody sight better than what lies behind much of the party agenda.

    That could be summed up as whatever best delivers the best outcome for party, individual member, lobby group, donor, government coffers and eventually, at the end of the que, the common good.

    Hank is well advised not to say where his vote is going to go after he votes for himself. Its his business, and who is he to tell others who to vote for other than himself.

    And what is left and right anyway? Why can he not vote differently on different issues depending on where he sees the common good as being positioned.
    The artificial dichotomy is a fiction at best and does nothing to further intelligent debate.

    The real problem Independents present for people like yourself, Mr Cowell, is that you actually have to think for yourself.

  6. Robin Charles Halton

    February 18, 2014 at 3:19 pm

    I suspect that Hans Willink is in the mold of a latent Greenie.

    #18 TGC, yes and directing his “surplus” to the left of other Independents direct to the Greens.

  7. TGC

    February 18, 2014 at 12:01 am

    Hans Willink appears to be basing his candidature on what he doesn’t want( a pulp mill- not at the moment anyway) but there isn’t much from him on what will be the policies he will pursue and his plan for getting those policies enacted.

    And pursuing this Independent business a bit further: if Hank is one of several Independent candidates in Denison he will vote Willink 1 (presumably) then to the other Independents in some order.
    But if he is the only Independent candidate in Denison- where will he send subsequent numbers?
    Obviously he won’t say- can’t say because he needs to preserve the atmosphere of independence so can’t show a leaning to right or left- the middle doesn’t matter because all Independents claim the middle ground.

  8. Robin Charles Halton

    February 17, 2014 at 2:42 pm

    Oh well its good to see that Mr Zucco as the other Independent for Denison who would by now have no friends over his ridiculous challenge to fight PUP in the courts.

    Mr Zucco was never a good choice for any political party to represent voters and never will be.

    Its turned out well for Denison with Barbara Etter running, I look forward to her campaign.

    With respect Barbara had better move on it, time is running out OK!

    Signage in Braddon for PUP’s Kevin Morgan is spotted along the Bass Highway among a proliferation of Liberal signage with the odd sign for Labor.

    So far Denison appears dead apart from a few signs for Liberals Archer and Groom and the odd Labor sign for Boy Bacon.

  9. Russell

    February 17, 2014 at 11:43 am

    Re #14
    Do you?

    The Indigenous Australian system of governing is actually Independent Democracy at its best and it has lasted thousands of years without change to their Law.

  10. Pete Godfrey

    February 17, 2014 at 9:28 am

    #14 TGC Government does not mean that the serfs are here to get lorded over by those from the castle.

    It has changed, it is very easy for independents to represent their constituents, all they have to do is listen, have meetings, have an online method of allowing input from the public.

    Your ideas of party politics are so flawed, we have decades of history to see that it does not work. Sure a party makes all sorts of promises so they can get their bums on the seats, then after the election they become “non core promises”. Since when has a promise been something that can be made and never adhered to.

    Party politics serves those who give them big donations, those who run the media, then the companies who scream the loudest for subsidies somewhere down the line comes the voters. Of course they get thrown crumbs but that is all.

    We do not have democracy at all we have an elected dictator , as Tony Abbotts “captains calls” show.

  11. TGC

    February 17, 2014 at 12:14 am

    #11 and #12 are in dreamland. Both should explain in detail exactly how a Parliament of 25 persons each elected as an ‘Independent’ – that is surely to say-each having no pre-conceived policy imperatives and each (probably) with no idea of the views of any other yet each having (probably) gone to the election saying “I will represent all the views of the electorate” – stop laughing now, this is serious- can immediately form ‘government’

    Do #11 and #12 know what ‘government’ and ‘governing’ means?

  12. Robin Charles Halton

    February 16, 2014 at 10:48 pm

    Hans, I think that the main issue here is that wood pulp processors within an increasingly tight global market have been moving on for at least the past 2-3 decades to favor countries in Asia and the S Americas with lower labor costs, lesser environmental controls and of course locations near paper mills, MDF board mills and so on.

    Probably the best we can do is export boatloads chipwood as I believe we are doing from three smaller operators on the Tamar and one behind Burnie at the Massey Green site.

    Hans, it is also important that you rethink your position on the TFA and realistic views on the use of euc. plantation wood for sawlog.

    I am quite sure that the reduction of available EUCALYPT REGROWTH via the TFA for future high value sawn timber products is an absolute insult to the intelligence of our foresters who are interested in a sustainable resource.

    It is so obvious that FIAT, TA ANN, Bob Gordon, LABOR and the GREENS are either in support of the TFA for differing matters of self interest without any real understanding of the need to provide a reserve of timber resource for the future.

    Similarly waiting for pruned Eucalypt Plantations on State Forest to produce satisfactory sawlog could be at least another 35 years away for the earlier stands.

    One would need to remember eucalypt HARDWOOD is not radiata SOFTWOOD as their wood properties are totally different.

    Based on my knowledge of timber from sawn eucalypt it would takes 65-90 years to produce suitable sawlog for the grade of sawn timber expected by the local market.

    FT’s attempts at using plantation eucalypt in addition to pulpwood as sawlog remains as speculative in the shorter term.

    The Liberals are correct to scrap or at least review the TFA but they need to look further at the impending grim forestry picture for the State and move away from speculating on a pulp mill too!

    However the position for Labor and the Greens despite differences is far worse than those of the Liberals.

  13. Russell

    February 16, 2014 at 9:28 am

    Re #8
    That’s the whole idea of Democracy, Trevor.

    The best person for the job and each being free to think independently and working together for the best outcome for everyone. Something your view of governance hasn’t been able to achieve for decades.

  14. Simon Warriner

    February 16, 2014 at 9:13 am

    RE 10. The gentleman makes the mistake of assuming that everybody elected to public office will behave in the same stupid, ignorant and selfish manner the party politicians have been exhibiting for years.

    The way it is meant to work is that the elected members go into caucus, and form a government based on the selection of ministers and a leader by voting. Mature, responsible, motivated adults are capable of doing that.

    They then deal with the issues of the day on the floor of parliament.

    The dictates of adherence to party policy are a relatively new thing and crossing the floor to vote with the opposition was once a far more common act.

    What about policy platforms used to gain election, you say? Given the regard shown to promises made pre election by governments of all stripes only a complete dolt would pay them any regard. And to what end? They are ideological positions rarely based on best evidence, and the first choice in most cases of less the 50% of the population.

    Far better would be a debate that covered a broader range of possibilities and sought to identify and deliver the greatest common good.

    Something we rarely, if ever, get from a well ordered party dominated parliament.

  15. TGC

    February 15, 2014 at 11:43 pm

    #8 is advocating 25 independents into the House of Assembly. If they are ‘Independents’ then they are not necessarily Green. So who actually governs? who is responsible for a Budget etc?
    #8 won’t concede Labor or Liberal MP’s because they are “stupid” so it’s up to ‘Independents” to do it all on our behalf?
    Absolute, total bloody chaos!#8 joins so many others who really don’t give this issue very much thought.

  16. Russell

    February 15, 2014 at 5:02 pm

    Re #8
    Apart from Kim Booth (and he would probably be the only exception within the Greens and their former voters), I don’t think there is a Tasmanian politician of any colour who could genuinely be regarded as personally popular outside the Party room, do you?

  17. Tonia Bott

    February 15, 2014 at 1:56 pm

    Our Lib Lab politicians are indeed stupid, unimaginative and too keen on personal popularity to govern our State effectively. With independents like this, a Green government could definitely succeed where the others have failed.

    Think long and hard before you opt for the alleged ‘safe’ options. Go out on a limb and make Tasmania’s future far brighter than it can possibly be with those two parties colluding to hold us back.

  18. Frank and family

    February 14, 2014 at 7:12 pm

    RE:
    …” I feel it is wrong for government to try and entice companies to spend substantial funds when a stand alone export pulpmill is likely to be risky without subsidies.”
    Posted by Marcus Higgs on 11/02/14 at 09:21 PM

    Thank you Marcus Higgs,
    I need to ad to the word ‘wrong’ the terms ‘irresponsible and cunning’.
    One sad thing I have observed as an investor and business person is that on our island for some people in leading positions ‘trust’ only emerges in glossy brochures to entice more foreign investors. As soon you made the step and followed their promising image makeover they take you for granted.
    That is what the Japanese Paper Mills found out, that is what Al Corbett and his family from Gympie Qld. learned.
    As soon as they feel they have you over here, they aim lure the next one down.
    How else could it be that the Tamar Valley people, many who trusted the clean, green and clever spin an who have moved here with a commitment of intergenerational investment are simply dismissed as “bloody greenies” or NIMBYs?

    Amazing is that some of these disgusting individuals still brazen enough to aim at politics.
    But as I said before, the world is watching.

  19. Russell

    February 14, 2014 at 10:38 am

    You didn’t answer my question from the other thread regarding your support for the TFA, Hans.

  20. Marcus Higgs

    February 11, 2014 at 12:21 am

    I agree with you Hans that we have witnessed a government political beatup to try to maximise support for Labor in this election campaign. The sad thing is that the majority of voters seem to be gullible enough to accept ‘mushroom treatment’ over information about an export pulpmill, instead happy to be seduced by promises of jobs and political slogans.

    Since the 1970s the succession of feasibility studies (with increasing scale each time) have proven an export pulpmill unviable. The public deserve to have government publish comparative studies of Tasmanian competitiveness against international competitors before seeking social support for a mill project, followed by tendering. They haven’t, but like your view, I suspect a ‘world scale pulpmill’ in Tasmania could only be viable if substantially subsidised for several of its input costs, presumably by taxpayers.

    I feel it is wrong for government to try and entice companies to spend substantial funds when a stand alone export pulpmill is likely to be risky without subsidies.

  21. Kay Seltitzas

    February 10, 2014 at 7:56 pm

    #1 They believe we are cattle and prodded by greed and avarice like they are. And how’s that working for us? Not so good. Now secrecy will be next ie: asylum seekers will be treated worse and worse. But wec wont see it. Abbot’s ABC issues are,I believe, a move to totally control any media that speaks the truth. 2014 WTF?

  22. Steve

    February 9, 2014 at 3:09 pm

    Interesting read Hans. The great unknown in all of this is just how far the Government is prepared to go to make it happen. We’ve seen in recent weeks that they are prepared to change the law to facilitate matters, it wouldn’t surprise me to see them commit tax payers money which would change the whole equation.
    Depending on how stupid they are (and I’m not sure that this has been plumbed yet) we could end up with a situation where a foreign company agrees to take any profits from a mill as long as the Australian tax payer covers any losses.
    It’s a pity that Labour are so craven because they could have done very well politically by standing up straight and announcing that the pulp mill dream was over, the economics simply didn’t stack up and it was time to move on and seek new opportunities.
    They’d have been castigated from all directions but they would have had reality on their side, which is always a great help, and I think they could have come out of it looking like a strong forward looking party with a good grip on economic reality.
    At the moment they appear indistinguishable from the Liberals. This, combined with all the baggage they carry from too many years in power, is going to make it very hard for them to win the election.

  23. Claire Gilmour

    February 9, 2014 at 1:45 pm

    I don’t believe in pulpwood or e. niten plantations fullstop! But then again I actually live with the negative consequences.

  24. John Biggs

    February 9, 2014 at 1:04 pm

    Very sensible Hans. It makes our LibLab politicians look not only cynical but exceedingly stupid.

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