Local timber businesses have about $100 million of investments in planning as they hope to benefit from demand for environmentally friendly products.
Local timber businesses have about $100 million of investments in planning as they hope to benefit from demand for environmentally friendly products.
Global moves toward lower carbon emissions and reduced plastic use are two of the forces contributing to optimism in the forestry industry, with big investment plans on the drawing board.
The industry hopes a collaborative investment effort and a move up the value chain can help it move past the challenges of declining plantation levels and a soft local construction market.
Opportunities for plantation timber include a worldwide move away from single-use plastics, which was already being seen in growing demand for wood fibre pulp for use in packaging, particularly in Asia.
In Western Australia, Business News estimates $97.6 million in forestry investments are being considered, with five projects in the pipeline.
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Wespine, jointly owned by Wesfarmers and Fletcher Building, expects to invest about $1.6 million next year on improving control of its saw line and installing new scanning technology.
The company recently completed an $8 million continuous drying kiln at its lumber mill in Dardanup, which is the largest such facility in Australia.
Fellow Dardanup business Preston Chipping has plans for a $4 million upgrade to its infeed line in 2020, while Oldbury-based Jarrah Select is seeking development assessment panel approval for a $12 million sawmill near Serpentine.
Laminex, also understood to be owned by Fletcher Building, is in the early stages of considering a continuous press plant to produce a new type of particleboard at its facility in Dardanup, which will cost an estimated $50 million.
Meanwhile, the Forest Products Commision ran an expression of interest process last year for an integrated timber processing yard, which Business News understands was to be built in Nannup.
A second version of the proposal is currently undergoing detailed feasibility work, with a yard to be built in Bunbury worth more than $30 million.
WA Plantation Resources, owned by Japanese conglomerate Marubeni Corporation, is one party exploring investing in the Bunbury plant, as is Byford-based Inglewood Products Group.
Inglewood would invest in peeling and pressing equipment for wood blocks at the yard, with an cost of around $10 million.
The project will be an industry collaboration led by the South West Forestry Hub, also known as the Bunbury Geographe Timber Hub, a new body that recently secured $1 million of federal government funding for a four-year period.
The hub will manage the feasibility process.
A further $2 million is in the pipeline for a local branch of the National Institute for Forest Products Innovation, although that would need additional support from the state government, industry and universities to get off the ground.
Hub
Forest Industries Federation WA acting chief executive Matt Granger told Business News the number of hectares dedicated to softwood and hardwood plantations in the state had dropped substantially in recent years.
It fell from a peak of about 250,000 hectares in 2009 to be less than 200,000ha this financial year, according to a report by FIFWA.
Softwood plantations in particular could be less than half the 2008 level of 85,000ha by 2025.
“Without an additional 45,000ha to bring the softwood estate within the strategic hubs to the industry target of 85,000ha, local manufacturing loses economy of scale and therefore competitiveness in a global market,” the report said.
Mr Granger said new plantings had not kept up with attrition or harvesting, while a portion had been burned in fires.
He hoped the South West Forestry Hub would be a launchpad for wider stimulation of the sector.
“(It would) do things like develop the business case to support attracting greater investment, third-party private capital, working with the farming community to get greater establishment of trees on farms,” Mr Granger said.
WA Plantation Resources chief executive Ian Telfer said there had been strong demand in export markets for woodchips, while the business was seeking to develop higher value-added markets domestically.
That would be underpinned by the new integrated yard proposed for Bunbury.
“(We’re) particularly looking at veneer, an integrated veneer, pellet, wood processing yard,” Mr Telfer said.
“We’ll be developing that over the next 12 months.”
Inglewood Products Group principal Carlo Gosatti said the company was eager to invest in new technology for pressing wood at an integrated yard.
“With traditional sawmilling, you get limited recovery (of wood), and you get limited section size,” he said.
“By pressing those together you can get potentially more usable and more engineered products.
“Presses are important (for) taking certain outputs and making them into more commercially viable products.”
Pressed wood products could be sold locally to retailers such as Bunnings, he said.
More work would need to be done to get the project kicked off, however.
“We’re still in the throes of securing some equity investment from a third party,” Mr Gosatti told Business News.
“(WA has) the resource, we need to manage it better, and this ticks all the boxes in terms of sustainability in terms of long-term goals and the wood supply.”
Another issue for the hub would be regulatory obstacles that make it difficult to establish plantations, Mr Granger said.
An example was the water rule, which he said limited plantation owners claiming carbon abatement credits for growing trees in areas with a level of average rainfall exceeding a cap.
The industry has a nationwide target to sequester 18 million tonnes of carbon dioxide a year by 2030.
Optimism
Preston Chipping owner Geoff Brookes said the hub was a cooperative venture that showed stakeholders were optimistic about where the industry was headed.
The business produces woodchips for WA Plantation Resources, which ships out of Bunbury, and processes residue wood for local clients including Wespine, Wesbeam and Laminex.
“I’m pretty excited about what the future of the forestry industry is, especially with the recent commitments by the federal government,” Mr Brookes said.
“The industry has been putting a fair bit of effort into making sure we’re going to have an efficient and sustainable future.”
The company’s $4 million investment in improving its infeed line would improve efficiency and modernise older, mobile equipment, he said.
Mr Brookes said a slowdown in housing construction locally had been counteracted by growth in export markets.
“There’s definitely been a housing slowdown,” he said.
“The industry is getting set up to take advantage of it when it comes back.
“The local businesses are still going quite strong and going ahead with capex to upgrade their equipment and plant, ready for when it does come back in WA, and they are diversifying and finding other markets in the meantime.
“Demand for exports has been quite strong for the past few years, I think that’ll continue.
“Worldwide, fibre resources are only getting more demand.”
Ian Telfer said some of hisbusiness’s overseas sales had been driven by a movement towards environmentally friendly packaging.
“(There’s) an increasing recognition broadly that wood fibre is more sustainable both for building and construction and also for packaging products,” he said.
“That’s driving demand for wood fibre.
“Particularly demand (in Asia) is pulping wood fibre into a whole range of packaging products, replacing plastics.
“Instead of plastic bags you have paper bags.”
Wespine managing director Patrick Warrand similarly highlighted packaging as an area of increasing interest.
Part of that was also driven by local industrial opportunities created by lithium refining and mineral sands mining, Mr Warrand said.
“The industrial packaging market, with the lithium plants coming on (is) very exciting,” he said.
“A lot of the pallets are made from softwood.”
But for the most part, Mr Warrand said Wespine had looked to the east coast timber market as local demand had been soft in recent years.
That was driven by the building industry slowdown, he said, with structural timber a key product line.
“We’ve been looking for other markets, and we’ve been fortunate to open up new markets over east; Victoria and South Australia are the two main ones,” Mr Warrand said.
“I’m relatively new to the industry but it does go through these boom and bust cycles.”
Wesfarmers did not breakdown Wespine’s financial performance separately in its 2018 annual report, although it did offer commentary.
“Timber sales for the 2018 financial year increased by 31 per cent with higher sales to the eastern states more than offsetting sustained weakness in house building activity in WA,” the report said.
“Operating margins also improved during the year, reflecting production efficiencies on higher volumes.”
WA’s three major exporters of fibre have revenue of about $250 million annually between them.
WA Plantation Resources’ revenue in the year to December 2018 was about $138 million, including a $37.6 million increase in the value of the company’s plantations, according to an annual report lodged with the Australian Securities and Investments Commission.
That comprised 15,640ha of eucalyptus, 65ha of leptospermum and 7ha of pine.
The business ranks 18th on the BNiQ Search Engine agribusiness list, up from 20th in 2018.
Bunbury Fibre Exports and Albany Plantation Export Company both have financial years ending March 31, and consequently have not updated data with ASIC since last year.
For the year to March 2013, Bunbury Fibre’s revenue was $53.4 million, while Albany Plantation’s was $61.8 million.
