Price talks disappoint timber companies

Australia's major forestry companies are disappointed they have not negotiated an increase for the benchmark price of exported Tasmanian bluegum woodchip with Japan.

ITC chief executive Vince Erasmus, who led the negotiations on behalf of Timbercorp and Great Southern, said the 2008 price of A$207.40 did not reflect the quality and consistency of the product compared to its global competitors, but that it did reflect the premium paid for native forest based products.

Timbercorp chief executive Sol Rabinowicz and Great Southern chief executive Cameron Rhodes both said the nil price increase was a disappointment.

"The quality of our product, the fact that Australian hardwood woodchip is preferred in the Japanese market and our relative cost competiveness are all factors that we hope will be taken into account when the time comes to set a new price for the second half of the year," Mr Rhodes said.

Full announcement below.

Three of Australia's leading forestry companies, ITC Limited (ITC), Timbercorp Limited (ASX:TIM) and Great Southern Limited (ASX:GTP), today announced the conclusion of negotiations for the 2009 benchmark price for Australian plantation grown Tasmanian bluegum woodchip for export to Japan.
Not withstanding the current global economic conditions, a price of A$207.40 per bone dry metric tonne (BDMT), free on board (FOB), has been maintained for plantation grown Tasmanian bluegum exported from Australia up to July 1 2009, representing a nil increase on 2008 pricing.
Mr. Vince Erasmus, CEO of ITC, who led the negotiations on behalf of the Australian plantation hardwood producers, said that all Australian exporters recognised commodity prices are under significant pressure due to global economic conditions and that the Japanese economy is in recession with severe curtailments in production but despite these factors Australia expected more from a valued trading partner.
"To retain the 2008 price in these circumstances is a considerable achievement for the Australian hardwood plantation sector and investors, recognising continued demand for Australian premium quality, sustainable forest products in an unprecedented global economic downturn," Mr. Erasmus said.
"However, it is disappointing that the price does not reflect the superior quality and consistency of our product compared to others globally, our proximity to market and, importantly, the positive medium to longer term outlook for plantation woodchip. The price for plantation based hardwood woodchips continues to reflect the premium paid over native forest based woodchips," Mr. Erasmus said.
Mr. Sol Rabinowicz, CEO of Timbercorp Limited, welcomed the conclusion to the negotiations. He said it was disappointing that there was a nil price increase from the previous year but this would allow harvesting to resume providing security for its industrial operations workforce.
Mr Cameron Rhodes, CEO of Great Southern, said while it was disappointing to not receive an increase at this time, the price would affect the first half only rather than the normal full year and a new price would be negotiated for the second half of 2009. "The quality of our product, the fact that Australian hardwood woodchip is preferred in the Japanese market and our relative cost competiveness are all factors that we hope will be taken into account when the time comes to set a new price for the second half of the year," he said.
The woodchip price applies to all plantation hardwood woodchip exported from Australia to Japan until July 1, 2009 backdated to January 1. Negotiations with Japan will recommence in the second half of 2009.