Chinese demand is transforming Tasmania's blue gum industry, says Green Triangle Regional Plantation Committee chairman; harvesting revenue rises to AU$170M in 2013 from AU$75M in 2012, woodchip prices expected to increase 10%-15% in 2014

, April 14, 2014 () – YEARS of controversy, division and failed managed investment schemes have finally turned to prosperity for the Tasmanian blue gum industry in SA’s Southeast, as export demand for woodchips rises rapidly.

Boosted by heavy Chinese buying, the harvesting of blue gums in the Green Triangle region of South Australia and Victoria has increased revenue from $75 million in 2012 to about $170 million last year, rising to an estimated $250 million this year.

The whole community is benefiting as jobs rise rapidly in harvesting and hauling companies, at fuel suppliers, mechanics and tyre suppliers, as they benefit from the rising fortunes of the industry.

Behind the rapid growth is demand from China to make fine writing, copy and tissue paper, to create rayon for nylon shirts and cellophane wrapping paper, and to produce high-quality cardboard for perfume and cigarette boxes.

Green Triangle Regional Plantation Committee chairman Laurie Hein said the Tasmanian blue gum industry has been transformed from doom and gloom to a vibrant forestry sector, creating jobs and a rising sense of optimism.

He said the need for harvest contractors, freight companies and other service providers along the whole supply chain has risen strongly in the past year as the level of harvesting has grown substantially to meet the Chinese demand.

“We are seeing a return of confidence and a steady increase in harvesting due to excellent demand from China, although prices are still not as good as we’d like to see,” he said.

“The resurgence in both the hardwood and softwood sectors has seen a migration of contractors from Tasmania and the mainland to the Green Triangle in the past year, which has been good for the region after a prolonged period of extremely challenging market conditions.” The biggest bluegum producer and exporter is Australian Bluegum Plantations. Its managing director, Tony Price, said the industry was looking much brighter than before the market turned.

“Back in 2011 we had two or three contracting companies working for us and now we have about 13,” he said.

Mr Price said each harvesting contractor probably employed 10 or 12 workers, while Australian Bluegum Plantations had just employed another three people to help coordinate operations.

He said apart from the rapid surge in export demand, the industry’s recovery had been helped by new owners replacing the failed managed investment scheme companies, such as Great Southern and Timbercorp, established from the 1990s to 2008.

The new companies include private equity-funded businesses such as Australian Bluegum Plantations and New Forests, which are providing a stable, long-term ownership structure for the industry.

Mr Price said the harvest had risen from an estimated 900,000 tonnes in 2012 to about 2m tonnes in 2013 and potentially 3m tonnes this year, as demand from China expanded rapidly.

“Blue gum is the best fibre available for fine writing, copy paper and tissue paper and has been used in China recently to produce dissolving pulp to make rayon for nylon shirts and cellophane wrapping paper,” he said. Australian Bluegum Plantations also owns the woodchip facility at the Portland port, which has a capacity of about 1.5 million tonnes a year, but has the potential to reach 2.5 million.

While the future is far brighter, Mr Price believes the sector will continue to rationalise as some areas should not have been planted in lower rainfall country or were too far from port and will be returned to agriculture. But other areas will be replanted.

“The industry is profitable, but our desire is to put the price up because with the demand as strong as it is, economics should kick in and push the price higher by at least 10-15 per cent,” he said.

“We expect it will be a reasonable industry long-term and although it may be a little smaller, it will be economically viable.” Mount Gambier chipping contractor LV Dohnt & Co managing director Phil Dohnt said that after getting caught up in the Gunns disaster, the emergence of a viable blue gum industry had been a breath of fresh air for the region.

“It’s been a real shot in the arm for the company and our employees to know the future is a lot more certain,” he said.

It has employed 70 people in the past year, while going from chipping 400,000 tonnes to well over one million tonnes a year and expects that may increase by another 200,000 a year.“It has been very positive for the region and there is more confidence in the industry and in Mount Gambier which has been hampered by negative stories for a long time,” Mr Dohnt said.


Companies

Gunns Limited

Timbercorp Limited

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