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Trees company in a growing market

WA PLANTATION manager Integrated Tree Cropping claims to have been the first to get its prospectuses through under the Australian Securities and Investments Commision’s new guidelines.

ITC managing director, Tony Jack, said ASIC wanted independent experts where any long-term forecasting was done, even the use of a 3 per cent inflation assumption which was later accepted after it was shown that leading economic forecaster BIS Shrapnel used that figure.

ITC is hoping to raise about $60 million to fund an additional 18,000ha of plantation timber and 300-400ha of sandalwood in the Ord irrigation area, near Kununurra.

But Mr Jack said the timing of the changes was the biggest concern.

“The main concern was they arbitarily put it in on one date,” he said.

That meant prospectuses in the current market were governed by different rules.

Mr Jack also had a word for the doomsayers, claiming that Japanese demand for plantation timber and a decline in native hardwood availability in Australia and South-East Asia augured well for the industry.

“We have been in discussions with a number of leading Japanese purchasers of woodchips for paper production and they are planning for a significant increase in the use of plantation timber to replace native hardwood timbers,” Mr Jack said.

“This could see more than 14 million tonnes of native hardwood timbers used for woodchips being replaced by plantation timber over the next 10 years.”

Mr Jack said Australia was the only country able to fill the gap in the market because the expansion of the plantation timber industry over the past two to three years.

“Once a strong exporter, Asia has become a net importer of timber products over the recent years and this situation is only likely to continue,” Mr Jack said.

“As far as we are concerned, talk of the so-called ‘wall of wood’ terms of supply is not likely to materialise.

“We could plant timber on every available block between Perth and Albany and we still wouldn’t be able to satisfy what we believe will be future demand.”

According to a commodities outlook report released by the Australian Bureau of Agricultural and Resource Economics last month, over the next decade world consumption and production of industrial forest products are expected to grow.

Production and consumption are projected to reach 1.87 billion cubic metres by 2010 – an increase of 370 million cubic metres from 1996. Australia’s trade in forest products reached record levels in 1999-2000. During 1999-2000, imports of forest products increased 16 per cent to reach $3.8 billion while exports rose 22 per cent to $1.6 billion.

About 95 per cent of Australia’s forest exports are to countries in the Asian and Oceanic regions. Japan and New Zealand account for around 46 per cent and 20 per cent respectively.

Meanwhile, consumption in the Asian and Oceania region is projected to increase by 120 million cubic metres and 140 million cubic metres respectively over the same period.

“Given Australia’s proximity to the Asian and Oceanic markets, the significant gap between the regions’ projected production and consumption is likely o offer significant export opportunities for Australian producers,” the report says.

Mr Jack said it was unlikely that ITC would follow other timber groups to the Australian Stock Exchange in the near future, because the company was not short of capital or liquidity.

He said elements within the industry still needed to be cleaned up before any negative perceptions would be removed.

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