01/10/2008 - 22:00

Timber industry counting the cost

01/10/2008 - 22:00


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THE timber industry has incurred major losses and continues to struggle as a result of the state's gas crisis following the explosion at Varanus Island.

Timber industry counting the cost

THE timber industry has incurred major losses and continues to struggle as a result of the state's gas crisis following the explosion at Varanus Island.

Numerous businesses, including family-run operations, have been affected by the crisis, which cut the state's gas supply by a third. Losses run into the millions of dollars.

Forest Industries Federation executive director Bob Pearce said he was unsure when the report into the crisis by the National Offshore Petroleum Safety Authority would be handed down, although he hoped it would be sooner rather than later.

"No-one's flagging the fact that the report will be released anytime soon," Mr Pearce said.

"We've been working through possible solutions to the problems the explosion has caused because there's been substantial damage to our members.

"In dollar terms, the figures easily run into the millions."

Mills were forced to wind down operations and make significant job cuts because their gas supplies were dramatically reduced following the daily rations lottery executed by Alinta.

"Damaging is an understatement, it has been very significant, it really has," Mr Pearce said.

"There's been reduced production and significant extra costs to pretty much everyone in the pine sector."

For one operator, Mr Pearce said, the gas shortage proved more costly.

"Pinetec went into receivership shortly after the gas crisis, and that was the impact of the gas crisis," he said.

"Wespine was forced to cut back from two shifts to one, and had to put people off.

"And Wesbeam were being shut down. They've got a big plant which runs continuously and once you shut it down it takes hours to get it started again.

"They were losing gas about one day in every three, and in the end they paid more money to get a more secure supply from somebody else, so it bailed them out but it cost them more.

Meanwhile, documents lodged with the Senate Economics Committee inquiry into the gas explosion identify at least five separate organisations that have been negatively affected by the crisis.

Owner of Plantation Logging Co, Jeff Loton employs 85 people at his Bunbury-based contracting business. Before the explosion on June 3 he thought his company would have little or no exposure to such an event.

"On June 5, we were told to stop log harvesting for the Laminex Mill in Dardanup and shift to a different type of forest to keep employees and equipment working," Mr Loton wrote in a submission.

"Before the end of the following week, both the Wespine saw mill and Laminex Mill were unable to take any more volumes of timber.

"This major slowing up of our pine operations meant we needed to send 12 employees on immediate annual leave and the retrenchment of an additional three employees.

"To run a private company when work stops and machinery repayments continue on through no fault of your own is soul destroying.

"The financial cost to us in real terms was $35,000 per day in net income and continuing machinery repayments of an additional $6,000 per day.

"This continued on until the start of September when the gas started to flow again.

"The company's production of logs is now at 75 per cent of the pre-Varanus crisis and the company has lost a massive amount of money.

"I don't know whether we will recover and neither do our employees."

Premin Holdings director Preston Gardiner has two trading businesses, Donnybrook Logging Services and Gardiner Mechanical Services, both of which are subcontractors to Plantation Logging Co.

Mr Gardiner said he had to reduce the amount of work available for his eight employees in order to stay afloat.

"Before the explosion we were carting between 1,000 and 1,500 tonnes of pine and blue gum logs per week," Mr Gardiner wrote to the Senate Economics Committee.

"Currently we are carting 500 tonnes of blue gum and no pine.

"Since the explosion we are losing between $50,000 and $60,000 per month.

"I have contemplated selling the trucking business, a business I have built from nothing with a lot of support from my wife, Melinda, and two kids, though to currently find a buyer is impossible."

The Laminex Group, which produces particleboard and fibreboard at its Dardanup and Welshpool plants, ended up securing gas supplies brought in by road tanker from South Australia.

In documents tendered to the Senate committee, TLG executive Bryce Nicholson wrote that obstacles were thrown up that precluded quick responses or changes happening that may have assisted TLG in its endeavours to firm up supply.

"The tangible cost impact to the company is conservatively placed at $6 million for the loss of production and sales," Mr Nicholson wrote.

"This of course pales into insignificance when you understand the full impact it has had on families through stress and strains that it has placed on their security and livelihood."


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