Timber millers on edge

TIMBER millers are nervously eyeing the December 31 deadline that marks the final day of their 10-year contracts, amid concerns over the State Government’s ability to make a final decision on volumes and contractual arrangements.

According to industry sources the allocation process is running 12 to 18 months behind schedule, significantly affecting a timber industry desperate to regroup, reinvest and move on with some certainty.

According to Forest Industries Federation of WA executive director Bob Pierce, the whole native timber industry is 12 weeks away from shutting down, a situation he says the Government does not seem to appreciate.

“At the end of December there will be no basis to supply wood to mills,” Mr Pierce said

Slowing the process has been the finalisation of the Forest Management Plan and the ongoing task before the Forest Products Commission of spreading 131,000 cubic metres of jarrah between the remaining 11 mills. This is despite the mills’ need for 142,000cu m of jarrah if the industry’s largest player, Sotico, is to stay in the business.  

The Forest Products Commission is trying to secure the 11,000cu m shortfall from other mill allocations to meet the 70,000cu m jarrah cut Sotico needs to remain viable.

Another key sticking point is the industry request that contracts carry more security of tenure. After 12 months of discussion the Government is yet to make any decision on the issue. 

Mr Pierce said the request that new contracts include a commitment to another 10 years, or provide compensation through a business exit plan, was to encourage reinvestment in the industry.

He said there was a need for the Government to be clear about what would happen at the end of the next 10 years.

“If you are working on an investment recovery over 20 years, you need to be able to invest with confidence,” he said.

Mr Pierce said that, unless the Government gave some commitment to security of tenure assurance, there would be little confidence to invest back into the industry.

He said that, while the State Government had spent $80 million to close down 60 per cent of the industry, next to nothing had been spent on building it back up.

“It seems to me that the Government can’t make a hard decision,” Mr Pierce told WA Business News.

Whittakers Timber Products director Trevor Richardson said reinvestment was needed for the industry to remain viable, but given the trauma the industry had undergone it was difficult to get financial backing or to invest with confidence.

If financial institutions were scared to invest in the timber industry because of Government policy, it was up to Government to rectify the situation, he said.

“The part that has been forgotten by the Government is building up the value adding timber industry.”

For example, Mr Richardson said if the creation of the Manjimup furniture precinct was to occur, a commitment to more than 10 years of resource supply was required to entice large manufacturers move to the South West town.

Agriculture Minister Kim Chance was unavailable for comment at the time WA Business News went to press.

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