Six years on from the collapse of the big managed investment scheme promoters, stable new ownership and a low currency are boosting the state’s woodchip industry, despite the number of plantation hectares remaining almost unchanged.
Six years on from the collapse of the big managed investment scheme promoters, stable new ownership and a low currency are boosting the state’s woodchip industry, despite the number of plantation hectares remaining almost unchanged.
The value of woodchip exports jumped to an estimated $285 million in the year to June 2015, making it one of Western Australia’s top six agricultural commodities.
However, the ability of the industry to sustain exports for the long term is clouded by the lack of new plantings.
The Australian Bureau of Agricultural and Resource Economics and Sciences has estimated that WA’s hardwood plantations shrunk by 6.4 per cent over the past three years.
Its 2015 plantations update shows that WA has 287,300ha of hardwood plantations, with nearly all of that being blue gums.
Abares estimates just 170ha of new plantings were undertaken in 2014, down from a peak of 64,800ha in 2000.
The fall in area planted isn’t entirely a bad thing, however, as the MIS boom led to plantations being established in areas with poor rainfall or long distances to port.
The industry also has continued supply coming from ‘coppicing’, or regrowth of stumps in harvested plantations.
The big suppliers in WA include institutional investors Global Forest Partners, through local arm Australian Bluegum Plantations, and New Forests.
They have become large owners of hardwood eucalypt plantations in WA, after buying the assets of failed MIS projects run by the likes of Great Southern and Timbercorp.
A report by New Forests on Australia’s forestry investment sector calculated that 1.1 million hectares has changed hands nationally over the past six years.
New Forests has been the biggest buyer.
In WA, it owns 96,500ha with a net stocked area of 65,000ha.
The institutional investors have joined the big Japanese players, which have consolidated ownership of their WA operations in recent years.
Marubeni moved to full ownership of WA Plantation Resources two years ago, Mitsui bought Bunbury Fibre Exports in 2011, while Oji Paper Co and Itochu have been long-term investors through Albany Plantation Export Company.
In the year to June 2015, WA exported nearly 2.8 million green metric tonnes of woodchips, or about 30 per cent of the national total.
Bunbury continued to pip Albany as the state’s bigger exporter (see chart).
Export volumes have been relatively stable over the past eight years, and most industry participants expect they will stay that way for the next few years.
There will be a small boost from Esperance, where Australian Plantation Log Exports recently completed its first shipment.
Another new player at Esperance is Southern Pacific Fibre, which has teamed up with Australian Bluegum Plantations to harvest mature plantations.
Currency boost
The value of exports has been boosted by the decline in the Australian dollar, which has more than offset a fall in US dollar prices.
Industry analyst RISI said prices had fallen to $US139 per tonne this year (FOB, bone dry metric tonne) from $US171/t in 2013.
New Forests Asset Management chief executive David Brand said there had also been big geographic shifts, with Japan taking 90 per cent of WA exports 10 years ago.
Japan and China are now roughly on par as WA’s biggest export markets.
One of the key issues for the industry is whether Vietnam, which supplies 35 per cent of the total chip market in Asia, enforces a planned reduction in exports.
“They want to see more wood processed into furniture and other value-added products in Vietnam,” RISI director, international timber Bob Flynn told Business News.
“But, through the end of July 2015, export volume has actually been 10 per cent higher than in 2014.
“So, there is no sign yet that the government intends to enforce this new policy.”
