Bleak outlook for N.Z. timber in Australia

Press, 30 July 1986, Page 51

Bleak outlook for N.Z. timber in Australia

NZPA staff correspondent Adelaide

New Zealand timber pulp and paper exporters face being shut out of one of their biggest and oldest markets within ,25 years as Australia drives towards self-sufficiency in radiata pine.

Throughout a band stretching from South Australia, across Victoria and into southern New South Wales, and also in Western Australia, pine forests planted in the late 1960 s and early seventies are growing towards maturity that will seeAus&aila has all the £ftees it needs by 2010.

While the final use of the trees and the economics of production could still see market gaps, New Zealand exporters will be battling to keep whatever share they can with the emergence of Chile as a new force in the softwood timber industry.

At the same time New Zealand is becoming less cost-efficient as charges and wages soar, pushing production costs closer to market prices. Mr Rob Hanna, the managing director of Sapfor, the forestry company bought in late 1984 by New Zealand giant Carter Holt Harvey, saidiiiihat New Zealand’s ift&rket

share — that in March alone was sAustl6.2 million ($20.08 million) — was under threat. He said that from the late 1990 s when New Zealand’s expected quadrupled production needed a market, it would have to face an increasingly selfsufficient Australian market. Competition is expected to increase with Chile, whose production will also be hitting top gear. It has already shown itself capable of putting its timber and associated products on to the Australian market cheaper than New Zealand.

Add to that a drop in pine plantings in New

Zealand expected to follow the recent abolition of tax incentives, and the picture past the year 2000 when Australian forests are ready for logging, could be difficult.

The impetus for in-' creased Australian pine production has come from pressure on the country’s hardwood industry. “Right now 50 per cent of all Australian timber used is softwood and 50 per cent hardwood,” he said.

“But hardwood usage is dropping because forests are being cut out and because of pressure from to preserve what is left.

“In the late 1960 s and early seventies there was a move to plant more pine, and the projection now is that Australia will be self sufficient in softwood (basically radiata pine) by,2010,” Mr Hanna said.

In part because of the threat from local production and the desire for a piece of the action, the then Carter Holt bought Sapfor, the second-biggest private forestry company in South Australia and one of the biggest in the country.

In doing so, Carter Holt became the first, , and so far the only, New Zealand company to buy ■AUstra-

lian pine forests.

Mr Hanna said that it was in recognising the threat posed by Chile that Carter Holt last month announced a deal with a Chilean company to produce medium-density fibre board.

Carter Holt, now one of the prime-movers in the New Zealand timber industry, took its first step into Australia in 1973 when it bought a Queensland hardware chain, but made its move in Victoria 10 years later.

As Carter Merchants Australia, it built a woodchip loading plant at the port of Portland in 1983 to export woodchip it bought

from Australian timber companies.

At the same time it was negotiating to buy Southern Australian Perpetual Forests which has extensive forests in both South Australia and Victoria, and in what at the time was regarded as a political sign from the Australian Government that Canberra was not blocking New Zealand investment, was given permission to buy the South Australian giant

The approval of the takeover deal in 1984 came at about the same time as the exporting facility at Portland went into“action.

Under Australian law only surplus woodchips may be exported, but, through buying chips from both its new acquisition and from Victorian forestry companies Carter Holt became the sole exporter of softwood chips anywhere in the southern half of the Australian mainland — the radiata pine heartland of the country. As an outsider looking at the New Zealand industry, Mr Hanna said costs were squeezing margins there at a time when competitiveness was critical.

“New Zealanfe costcompetitiveness has de-

teriorated markedly in the last three years,” he said.

"Royalty charges have shot up, road-user charges have also gone up, electricity charges are up, and on top of that last year you gave yourselves a 19 per cent wage rise with more to come this year, On top of that there was the exchange rate, he said.

“In years gone by if costs went up the producers just whacked up the price, but you can’t do that any more, the gap is getting smaller and smaller. “Timber is a commod«i ity. If radiata pine is too

expensive consumers will buy Oregon (from the United States). “You have got to be cost-competitive or you go down the plughole. “You can’t play; ostrich — you must be marketoriented rather than have a cost-plus mentality,” Mr Hanna said. . . .