Forest Economics

Judy Clarke -Economist- researched the National Economics of Forest Management in a report sponsored by various Non-Government Agencies in 1995. A Summary of her findings is given below (from the report) Judy was a guest speaker of the Greens in June 2002 and continues to be involved in forest economics. Her work is at last attracting greater interest from the public as much of her research relates to the profitability of private plantations- which compete with State subsidised native forest "rotation-crop" harvesting. The report is available from Teachers for Forests, The Greens and Environment Victoria.

"Findings." -" Australia's Plantations" Report. 1995

1. Plantations already dominate Australian markets for wood products.

Processed wood products compete with other materials in four main markets -shelter, packaging, communication and personal care products. Most wood used to manufacture products for these markets already comes from plantations. In 1994* plantations supplied 65% of the wood for wood products manufactured 'in Australia for the shelter market; and plantations and recycled paper supplied 70% of the wood fibre used in Australia's manufacture of paper products for packaging, communication and personal care. Wood from native forests accounted for only 35% and 30% respectively of Australia's production.

2. Market competition will continue to favour plantations for wood production at the expense of native forests.

Plantations are an agricultural crop. As such they are well placed to compete on price and quality in the commodity markets which overwhelmingly (80%-90%) dominate the wood products industry. Leading plantation regions, such as the Green Triangle of south-eastern South Australia and western Victoria, grow 14 times more wood per hectare than the average native forest used for wood, production.

3. Plantation wood supplies are poised for continued major expansion

Australia has over one million hectares of plantations, including 136 000 hectares of eucalypts. In 1994, our plantations supplied 9.6 million ml of wood, 80% of which was processed in Australia. By comparison, native forests supplied 10.3 million in 3 of wood, 50% of which was exported as chips in 1994*.

By 2000, our plantations are projected to supply 16 million ml of wood per annum (including 1.6 million M3 of eucalypts. By 2005, plantation wood supply is projected to increase to 18.S million M3 per annum (including 3 million ml of eucalypts.

* 'refers to financial year ending June 1994 with all other years being calendar.

4. Major investment in plantation processing is already underway.

Australia's plantation processors comprise a number of large and internationally competitive companies. They have current plans for approximately $1 billion of investment over the 1990s. This will significantly increase the capacity and efficiency of mills to process plantation wood into sawn timber and wood based panels for the shelter market. The industry is working to secure the domestic market by displacing competitors, particularly Australian producers of native forest sawn timber, and imports. With the economically attractive domestic markets secured, Australia can anticipate expanding exports of plantation based shelter products c& exports of plantation wood based panels increased by 500% over the four years to June 1994.

5. There is enough plantation wood to support even more investment.

The additional plantation wood becoming available could support a range of further investments, for example: three new large scale panel plants and/or three new world scale pulp and paper mills.

There is enough wood that simultaneously-. plantation products could replace native forest sawn timbcr within five years, . Softwood and eucalypt plantations and recycling could support a major expansion in pulp and paper production, shift the industry's wood base to plantations almost completely, and significantly reduce pulp and paper imports, all within ten years.

Wood supply is not a constraint in realizing these opportunities. Rather, the constraints relate to the high level of industry concentration, and the commercial viability of individual projects. These in turn arc partially dependent on government policy with respect to market dominance in the pulp and paper area, and wood production from native forests, and on some assistance to remove bottlenecks associated with skill shortages and improve transport infrastructure.

6. The plantation-based industry is a major job generator because it undertakes extensive further processing.

Plantations are estimated to generate approximately 30 000 jobs at present (90% in manufacturing). The further processing of plantation sawn timber and wood based panels, for example into mouldings, joinery, furniture components and structural fittings, appears to be the single most important source of employment in the Australian wood products industry today.

With the large increase in plantation wood supply, significant additional employment can be expected. By the year 2000 growing, harvesting and processing plantation wood is 'conservatively estimated to generate at least 45 000 jobs in total. Most of the additional jobs (projected 15 000) will be associated with the production and further processing of plantation sawn timber and wood based panels. Because the plantation industry processes a secure resource and is world competitive, jobs are safe, skilled and permanent.

7. Regional Australia will benefit from the growth in the plantation processing industry.

Australia's plantation industry is regionally based. Investment in the plantation sawn timber and wood panels industry is already providing major benefits for regional Australia. Some examples are presented below.

Region Recent investment Planned investment

($ million) second half of 1990s ($ million)

Green Triangle (SANic) 47 135

Bombala (NSW) - 145

Softwoods (NSW) 340 (some already expended)

South East Queensland - 108

North East Victoria 5 85 (some already expended)

Western Australia 25 25

Northern Tasmania - 30 (some already expended)

ACT - 2

Ballarat/Colac (Vic) 3.5 20 (some already expended)

Of the fourteen softwood plantation regions in Australia, nine are coincident with or adjacent to the main native forest logging areas (mainly because many plantations were established by clearing native forests). Australia's eucalypt plantations are also located in relatively close proximity to native forest logging areas.

Because most of the employment associated with plantations is in production and processing, the regional employment implications depend on how much of the processing is captured within these regions (and in Australia).

8. If native forests are to compete with plantations in producing wood they would have to be made like plantations with short rotations and intensive management.

The native forest based industry is characterised by large volumes of low value products (mainly woodchips for export), lack of investment, shrinking employment and high levels of conflict. It cannot compete with the efficient market oriented plantation based industry. The outlook is for most native forest wood to be exported as chips, while re-growth native forests, if allocated for wood production, are converted to plantations.

9. The community has a choice.

Australia by necessity has logged native forests to provide our shelter and paper needs. With the large volumes of plantation wood available for processing the community can now choose the future for Australia's native forests.

10. To reap the benefits that Australia's plantation processing industry can deliver in, the 1990s, all stakeholders have to escape from past attitudes and structures of declining relevance.

Governments.

Policy for the wood products industry should aim to facilitate the development of a world competitive wood products industry through domestic processing of Australia's plantation resource to the maximum extent that is commercially viable. Preparing a plan requires government to distinguish between the plantation and native forest parts of the industry and focus on facilitating the growth potential of the plantation processing industry. The benefits will include long term secure employment growth, and an industry structure able to compete with imports and capitalise on export opportunities.
A rapid phase out of logging from native forests will assist the plantation industry to achieve its potential sooner. It will:

- avert a damaging price war during the impending cyclical downturn in the shelter industry;

differentiate the plantation based industry from the conflict ridden native forest based industry; and

- prevent commercial wood growing on cleared agricultural land from being undermined by the conversion of native forests into plantations.

Management of publicly owned plantations (70% of the plantation estate) should be separated from native forest management. This will enable plantation management to have a greater commercial and market orientation.

Industry.

-The plantation based industry has a very positive message to sell and needs to be more visible in its own right. As an important producer and world competitive processor of agricultural products, it can build up long term positive relationships with the community, government (including local government), its workforce and the environment movement.

It is in the interests of Australia's plantation based industry to be a leader in the task of finding more environmentally friendly-products and processes, eg. to decrease the toxicity of glues, resins and preservative treatments.

Workers and unions.

Job growth in the expanding plantation processing industry presents a major opportunity for workers wishing to remain in the wood products industry. The relatively high skill requirements associated with the plantation processing sector will require additional resources for skill upgrading programs and attention to making these programs accessible to existing native forest based workers.

Significant jobs are generated with the further processing of plantation wood in Australia. Unions have much to gain from a policy that focuses government to encouraging domestic processing of Australia's plantation wood to the maximum extent which is commercially viable.

The structural change occurring in the wood products industry generates economic and environmental benefits to Australia but adversely affects some individuals. The high level of conflict surrounding the native forest based industry has focused the community on the plight of workers. With this awareness, unions and workers in the wood products industry are well placed (relative to other industries) to gain government financial support to enable them to adjust to the changes occurring in the industry. Community support-for such funding assistance can only be expected to remain if logging of native forests is phased down and the conflict is reduced.

Environment movement.

-The environment movement should continue to involve its membership in discussion about the potential benefits of supporting plantation processing, provided that major conservation gains in protection of native forests are achieved as part of the package.
Environmentalists should consider strategies to influence industry directly, through consumer information programs in Australia and overseas.