East Gippsland timber processors will have to put in bids from next January to VicForests to buy their next five years’ supply of mixed species wood.
The state’s commercial forestry arm will also run a “commercial process” later in the year to sell the Victorian ash timber available from 2017. It will take into account the cutbacks in ash supply announced recently. About 50,000 cubic metres of quality (D-plus) mixed species sawlog timber is available from East Gippsland, which includes the Tambo and East Gippsland forest management areas.
Tambo FMA is predominantly ash. VicForests’ 2011 resource outlook found that East Gippsland’s supply had been halved from 100,000 cubic metres due to the creation of old growth and icon reserves, the use of operational cuts due to the heavily fragmented and uneven aged forest, and the very low yield of sawlogs from many of the mixed species stands.
Potentially up to 70,000 cubic metres of mixed species sawlogs are also available from the Central Highlands. From 2017, only 215,000 cubic metres of high quality ash sawlogs will be sold – a reduction of 25 per cent on the previous quota of about 300,000 cubic metres - due to the impact of the three big bushfires of the past decade.
The cutbacks mean that in total, about 335,000 cubic metres of quality sawlogs from Victorian forests will be potentially sold annually by VicForests. The new total is well below the more than 500,000 cubic metre sawlog supply promised by the Bracks Government in its 2003 policy Our Forests Our Future.
Now, about six per cent of Victoria’s 7.8 million hectares of forest are classed as suitable for industry. The 25 per cent reduction is expected to cut about 200 jobs from the Ash forestry sector. Virtually all Victorian timber is now sold on the open market as there are few licenses from the old administrative price system still running. VicForests’ director of planning, Lachlan Spencer, said the commercial process would not be an auction.
The auction process had been very effective, achieving price rises of about 20 per cent. “But auctions only work in certain markets,” he said during an interview in Melbourne. In the current constrained market – sluggish sales, a slow housing market, the high Australian dollar and cheap imports – industry had to be sustainable and profitable.
“The proposal process will allow mills to propose a variety of ways they would use the timber. It is still a competitive process. It will be an evaluation of how the pieces fit together for industry value and Vic- Forests value,” Mr Spencer said. “We will look at a process that has more flexibility and taps into the innovation of industry.”
Mr Spencer said the mixed species resource had been doubly affected by the creation of reserves and the tighter view of the economics of mixed species. When a high volume forest was replaced by a low volume forest, “there is a challenge”.
“However, the current mixed species market is quite strong and customers in East Gippsland have been driving strong innovation of products and product marketing,” he said.
“It is disappointing for them at a time when we are restricting the resource.” Mr Spencer said there was potential from the 70,000 cubic metres of mixed species available from the Central Highlands. “But this does not always offer the same characteristics as East Gippsland,” he said.
Some of the markets are about the beauty of defect, and some Central Highlands forests are not as defective and may not meet their requirements.” Also, the extra haulage distance meant mixed species from the Central Highlands was more expensive.
Mr Spencer said a key problem in selling timber, particularly East Gippsland’s mixed species, was “merchantability”. “To sell a sawlog, you have to sell the accompanying products. It is difficult to harvest a tree and leave a good proportion of the tree on the ground,” he said. “You have already invested in the road, the infrastructure and harvesting… it’s about managing risk.”
Mr Spencer said VicForests had to judge the market. Last year, it had put out a substantial amount of residual and low quality forest to test the market. “Some of that was timber previously committed to woodchip exports, and some additional product we are not selling… That would have underpinned a different view of operational viability. All the forests have some of the products we currently sell… it’s about the mix,” he said. “This process ran, concluded, and has not led to substantial additional sales. This has reinforced our view on where the market is on some of these products.”
The member for Narracan, Gary Blackwood, said VicForests was dealing with things outside their control. Mr Blackwood, a fourth-generation timber industry veteran who was until recently State Parliamentary Secretary for Forestry, said the cut in East Gippsland’s sustainable yield was a direct result of the Bracks/Brumby Government adding 45,000 hectares of forest to EG’s national park.
“This was supposed to occur as promised by that government on the basis of no net job losses. What a joke,” he said. “It was quite common knowledge that 40 per cent of the annual volume was sourced from the area to be included in the park.”
Earlier big cutbacks in East Gippsland to 178,000 cubic metres in the 1987 timber industry strategy was meant to be compensated by the maturing Ash forest in the Central Highlands. “The effects of fires and green demands now have this volume at 215,000,” he said.
As well, Bracks gave the Otways to the greens despite the potential to increase its annual cut of 29,000 cubic metres and remain sustainable. “The industry has been shafted by the Labor/Greens alliance and now we have to try and salvage an almost impossible situation,” he said.
“I won’t give up. There are still genuine opportunities in East Gippsland for the use of low grade wood, the introduction of alternative harvesting methods in the coastal areas, and a targeted program to use the resource that is currently on private land.”