The headline in the Sunday Age in early December 2007 was 'How to turn $99 million worth of trees into a $17,000 loss'. VicForests was exposed as incompetent economic managers of our public forests. Even with a state government gift of tens of millions of dollars to get it set up, it's still not profitable to cut down native forests.
A new era has begun. We have the combined trilogy of; 1) serious climate shift, 2) plantation wood in abundance and 3) a logging industry that continues to rely on public welfare to make a profit.
The annual report showed that an area the size of just under 5,000 football fields of native forests was clearfelled and sold off for woodchips and sawlogs last financial year. The tree trunks were sold for almost $100 million. VicForests was still unable to make ends meet, even with the $20 million start up money the government has been feeding them for the last three years and VicForests' refusal to pay all of its debts. This semi-corporatised arm of the government was to have been able to make a profit and achieve a decent return for the public, who own these forests.
So not only are we losing our critical carbon storage areas, our water makers, our purifiers, our soil stabilisers, our climate coolers and our biodiversity arks, the Bracks/ Brumby government is allowing all this to happen while also losing our money!
In the last financial year, 1.6 million m3 of our carbon storage vessels were hacked from the land. Most of what Mr Bracks and Brumby allow VicForests to sell is pulpwood for making woodchips and paper. It goes for an average of $8.50 per m3. In comparison, plantation pulp sells for about $35 m3. Most plantations are owned by investment schemes but there's little chance they'll be getting much return for the wood if the government keeps squandering taxpayers' dollars to undercut them.
Once the tree trunks are put through the chipping blades, the wood can be sold for about $80 a tonne. After it's been pulped, it goes up to about $1,000 a tonne. So why does VicForests sell it for $8? VicForests claims Victorian native forest pulp is dirt cheap because it has to be trucked so far and we have poorer quality trees (yeah, sure).
Given that the carbon value of trees could be $90 a tonne, we'd all be better off leaving our forests undisturbed.
Two of the three big mills that buy the timber - PaperlinX in the Latrobe Valley (domestic paper makers) and the 100% Japanese-owned South East Fibre Exports (SEFE) at Eden - made a combined profit of $87 million last financial year. Midways, the other woodchip mill near Geelong which exports to Asian paper companies, takes endless trainloads from Gippsland's forests. They don't make their profits known.
Logging industry economist, Dr Judith Ajani, said these results show that VicForests just can't make ends meet. She said logging native forests has historically always been a financial loser.
Plantation logs supply about ¾ of Victoria's wood needs and are superior in many ways. They are better quality. They are easier to grow, cut and cart to nearby mills. They don't destroy ancient forests, cause greenhouse problems or eradicate native animals on a mass scale.
Despite the loss, VicForests paid its shareholders, the public and the State Government a $2 million dividend. This was paid out of their 'piggy bank' rather than profits (because they didn't make any).
The same thing happened last year, apparently. This is hardly an economically prudent way to run a business, and quite alarming considering the board members are such financial experts.
If Brumby is an economic rationalist and if Treasury has any nous, the native forest logging industry and VicForests will be axed.