PHILIP HOPKINS and JOHN CAMERON
By PHILIP HOPKINS
THE state government decision to close the native forest timber industry culminates eight years of mismanagement that turned VicForests from a profitable business into a loss maker, an analysis by a Traralgon consultant has found.
As a result, Victoria will no longer be a major domestic producer of appearance grade and further manufacturing grade sawn timber.
“Also, Melbourne will no longer be the centre of further manufacturing of hardwood sawn timber into value-added engineered wood products that generate lots of jobs,” said consultant John Cameron. Mr Cameron has a Diploma of Horticulture, an MBA from Monash University and a long employment background in forestry, particularly in Gippsland.
Mr Cameron said a chief victim was Gippsland’s largest operation, Australian Sustainable Hardwoods’ manufacturing plant at Heyfield, where 100 per cent of output was appearance grade timber or further manufactured into timber products that expose the natural beauty of the timber.
“ASH is the largest vertically integrated hardwood manufacturer in Australia and directly employs 192 people. Its sawmill and nine further manufacturing plants produce Masslam-laminated appearance beams, staircases, benchtops, custom mouldings, lining, solid flooring and various timber components,” he said.
Mr Cameron said Australian hardwood sawn timber mill gate revenue sold for 3.5 times the price of Australian softwood sawn timber, and contributed to much greater value-adding and job creation than softwood.
“This has been driven by the greater strength, hardness, dimensional stability, low degrade and other unique wood properties of Victorian native eucalypts. The softwood plantations proposed, but yet to be delivered under the Andrews Governments Forestry Plan, are unsuitable for many applications where these qualities are critical,” he said.
Mr Cameron said the state government’s mismanagement had resulting in a raft of bad outcomes:
-Lack of legislative support and mismanagement of VicForests resulted in its net worth declining since 2014-15 by
$64m million,delivering a business that is now worthless. A profitable VicForests was turned into a huge loss maker with cumulative losses of $51m over the past three years to 2021-22.
– In 2021-22 preventable activist litigation cost VicForests $24.1m in legal and associated costs.
-VicForests’ ‘operable area’ has been reduced from 450,000 ha to 160,000 ha due to overzealous increases in ‘various conservation reserves’ that ignored win-win outcomes that would have been available under multiple use, in accordance to the Regional Forest Agreements and the National Forestry Statement.
-The flawed forest policy and lack of a rigorous forest strategy has resulted in a decline in hardwood sawn timber output and also a decline in sawn timber recovery (and a decline in plantations).
-Mills will have to write off large investments made in value-adding for the production of high-value appearance timbers and further manufacturing of timber components. These investments were made on the assumption that government log supply agreements would be honoured.
-The government has scrapped its agreements without adequate consultation and relegated
sovereign risk to something riskier than junk bonds.
-Increased conservation reserves were put in place after the 2019-20 bushfire. The 1.5million ha burnt was preventable and a result of negligent bushfire mitigation under the flawed ‘Safer Together’ bushfire policy that ignores recommendations of the Bush Fire Royal Commission.
COMMENT
By JOHN CAMERON
THE decline in native hardwood log supply over the past eight years has been caused by several factors, chiefly: VicForests management was not supported by government, which removed potential harvestable area through too many reserves; bushfire losses due to management negligence; and allowing activist lawfare to halt log supply.
The state government allowed VicForests’ ‘operable area’ to be reduced from 450,000 hectares to about 160,000 ha over the past eight years, due to increased Reserves, Special Protection Zones and the Immediate Protection Areas. These were created without a balanced appraisal of environmental, economic and social values, nor geopolitical considerations.
Socioeconomic aspects of forest management have been neglected, including ‘win-win’ opportunities if the government supported more balanced multiple-use and delivered conservation with lower opportunity costs. Increased reservation of previously multiple use forest was undertaken solely for protection of biodiversity values as determined by the Department of Environment, Land, Water and Planning in their Forest Protection Surveys.
This reservation was based on an inadequate appraisal of the impact of the increased reservation on economic and social values and ignored the opportunity cost of effectively dealing a death blow to a billion-dollar timber industry.
The decline in native forest hardwood saw log production has not been made up by an increase in plantation saw log production. In fact, there has been a decline in plantation saw log production.
“The Andrews government transition to plantation-based hardwood saw log supply has clearly failed. This is because the Andrews government took four years in office to produce its Forestry Plan in 2019, and after a further four years, the government has yet to implement its Forestry Plan with new planting.
Victoria has been a dominant producer of hardwood timber and accounts for about 30 per cent of Australian hardwood sawn timber output.
This was achieved by the Regional Forest Agreements providing certainty for mills to invest in upgrades.
The RFAs resulted in a world-class hardwood sawmill at Heyfield, with nine further manufacturing plants and one of the most modern hardwood sawmills at Bairnsdale.
Appearance grade accounts for 42 per cent of Australian hardwood sawn timber production and 58 per cent of mill gate revenue. The proportion of appearance grade, including further manufacture into exposed components, is higher in Victoria.
Australian hardwood sawn timber on average sells for three-and-a-half times the price of Australian softwood sawn timber because of its greater strength, hardiness and other unique wood properties (most sourced from native forests). There is substantially more job-creating value-adding in hardwood sawn timber as shown by the substantially higher prices across all sawn timber grades.
The integration of the native hardwood industry ensures no waste. In Victoria, the proportion of appearance grade sawn timber (including further manufacturing of ‘exposed’ timber components) is estimated to be about 60 per cent. ‘Appearance grade’ is well in excess of 2 per cent claimed by an ill-informed MP.
The difference between saw log input and sawn timber output is not wasted but used by an integrated array of businesses. The outer slab wood has traditionally been chipped and used to make white paper in a high-value adding proceeds that supports lots of high paid jobs (Reflex at Maryvale). The shavings and sawdust are sold to chook, horse and goat farmers as bedding, and after that use becomes fertiliser. Some of the shavings and sawdust are also used as renewable boiler fuel.
The Mountain Ash pulp logs have traditionally been the mainstay raw material used to make white paper in a high-value adding process that supports high-paid jobs. The mixed species pulp logs have traditionally been used to make unbleached Neutral Sulphide Semi Chemical (NSSC) pulp, which has a high yield pulp and is used to make high value-added packaging papers. Logging residues from harvested coupes have become an increasing source of firewood supply.
All the output from Australian Sustainable Hardwoods (ASH) mill at Heyfield is either appearance grade or goes into manufacture of timber components that display the beauty of timber. ASH is a leading and advanced manufacturer of innovative hardwood products.
Bushfire mitigation
THE state government’s negligent bushfire mitigation and protection also contributed. The 1.5 million hectares burnt in the 2019-20 wildfire was a result of the inability to contain wildfire, caused by a flawed ‘Safer Together’ bushfire policy, insufficient and ineffective fuel reduction, and tardy fire detection, and failing to implement effective bushfire suppression.
The weather and the forest fire danger index were adequate for effective suppression during the fortnight after ignition of the 2019-20 East Gippsland bushfires.
Lawfare
THE state government stood back and allowed litigation (lawfare) by extreme activists, who failed to respect the balanced outcomes of the Regional Forest Agreements (RFAs) and the National Forestry Statement.
Injunctions granted in legal proceedings made harvesting in many planned coupes unviable or prohibited harvesting altogether. In 2021-22 more than half of approved operations were halted by litigation during planning or after harvesting had begun.
In 2021-22 this cost VicForests $24.1 million comprising direct cost of litigation $10.4m, stand-down payments to contractors of $6.2m and $7.5m in compensation paid to customers for failing to meet supply obligations.
Major Review
THE latest 2021 review of native timber harvesting in Victorian RFAs was a Major Event Review and took into account the 2019-20 bushfires. This review concluded that, after the bushfires, Victoria’s annual timber supply commitments can still be met and support ecologically sustainable forest management. The current timber supply commitments were actually less than the forecast timber supply levels. (VicForests Annual reports 2018-19).
The maximum potential harvest levels for D+ sawlogs as at August 2021 were:
-172,000 cubic metres per financial year for Ash, and;
-144,000 cubic metres per financial year for mixed species.
East Gippsland was the most severely affected RFA region with 757,305 hectares of public forest within the bushfire extent, however West Victoria and Central Highlands RFAs were hardly affected.
Figures for the RFAs were Gippsland, 277,729 hectares; North East, 270,369 hectares; Central Highlands, four hectares; and West RFA, 10,823 hectares.
The government sold the community a dummy and used the bushfire as leverage to increase reservation for conservation.
RFAs
UNDER Victoria’s five RFAs, the forest management system (including legislation, polices, codes, plans and management practices) provides for continuous improvement in relation to ecologically sustainable forest management (ESFM), which is defined as:
“Ecologically Sustainable Forest Management” or “ESFM” means forest management and use in accordance with the specific objectives and policies for ecologically sustainable development as detailed in the National Forest Policy Statement (NFPS).
As signatories to the NFPS, the Australian, state and territory governments committed to the sustainable management of all Australian forests, and were mindful of the important conservation values of Australia’s forests, and of the contribution that forest activities make to the national economy and rural and regional communities. This is reflected in the RFAs, which were a key outcome of the NFPS.
The issue is the state government adopted a narrow view of what constitutes ecologically sustainable forest management. Their view essentially excludes socio-economic imperatives, which results in considerable harm to global ecologically sustainable development, resulting in the use of less sustainable materials, greater imports from countries with appalling human rights and environmental records, and the increasing geopolitical threats, and tragic consequences for timber workers and rural communities.
Further, the adoption of detection-based threatened species reservation essentially follows a single species approach to conservation of threatened species. A landscape approach to conservation of threatened species is likely to be the most efficient and effective with substantially lower opportunity costs with respect to the foregoing of multiple use.
The Author
JOHN Cameron (Dip Hort. Burnley, MBA Monash, and tertiary units in economics, mathematics and statistics) is a forestry and business consultant previously holding positions in general management, corporate development and research in forestry and forest products. Former roles include Chairman of Private Forestry Gippsland, Chairman Southern Tree Breeding Association, Chairman Australian Research Group on Forest Genetics, board member CRC for Forestry Hobart and CRC for Pulp and Paper Science Monash.
