Introduction
2.1
The recent Black Summer Bushfires (2019-2020) inflicted significant damage on native and commercial forests, as well as businesses and regional communities. The destruction of commercial plantations has placed the timber industry under significant pressure.
2.2
This chapter will outline the impact of the Black Summer Bushfires on commercial plantations across Victoria, NSW, and SA. Examining the effect of recent bushfires on supply chains, it will identify key areas of concern for industry in the short and long-term. These include limited local feedstock in some regions with the consequence of significant additional freight costs for some producers.
Review of the Evidence
Extent of Bushfire Damage on Commercial Forests
2.3
The Australian Forest Products Association (AFPA) asserted that the ‘biggest recent threat to Australia’s plantation estate and processors’ was the Black Summer Bushfire season. The Department of Agriculture, Water and the Environment (DAWE) estimated that, as of 28 April 2020, approximately 8.5 million hectares of forest were potentially affected, comprising 8.3 million hectares of native forests, 130,000 hectares of commercial plantations, and 22,000 hectares of other forests.
2.4
While the area of plantations within ‘the fire extent was much smaller than that of native forests, this represented a significant proportion of the commercial estate’. Furthermore, given that, on a per hectare basis, plantations generate a much greater volume of wood than their native forest counterparts, DAWE emphasised that the destruction of even small areas of plantation forest carried considerable implications for timber supplies.
2.5
AFPA estimated that 50,000 hectares, or roughly 40 per cent, of the softwood plantation area in the South West Slopes and Bombala regions of NSW was ravaged by bushfires. Over 6,000 hectares of plantations in north east Victoria were also subject to fire damage, while approximately 95 per cent of privately owned plantations on Kangaroo Island in South Australia were adversely affected. Indeed, Kangaroo Island Plantation Timbers Ltd (KIPT) reported that: ‘Fire losses by the timber industry on Kangaroo Island exceeded the combined losses for all other agricultural enterprises in South Australia.’
Impact on Log Supply
2.6
Inquiry participants made clear that recent bushfires have placed the timber industry under significant strain, particularly in respect to access to log supply which many identified as an area of ongoing concern even prior to the natural disaster.
2.7
As previously discussed, there has been no growth in the size of the Australian plantation estate for a least a decade. Inquiry participants stressed that this lack of growth had placed pressure on the industry and that this has been exacerbated by the destruction of plantations during the recent fires.
2.8
The situation led some inquiry participants to express concern that they may be unable to meet future demand, with negative flow on effects forecast for other areas of the economy. MGA Independent Retailers and Timber Merchants Australia (MGA TMA), for example, stated that: ‘Recent catastrophic bushfires in the Tumut, Bombala and Bathurst regions will affect timber production and availability from the Tumut and Tumbarumba region where significant volumes of pine are and have been grown and produced for the domestic housing and building market.’
2.9
Similarly, SWG cautioned that the adverse effect on plantations has the potential to constitute a ‘huge hit on the economies of the regions … particularly in the loss of jobs’. They estimate that industries established in the South West Slopes of NSW generated 2,000 direct jobs and about 5,000 indirect jobs in the region, ‘so, if you just extrapolate 40 per cent, the numbers are quite high’.
2.10
Referring to its sawmilling operation in Tumut, AKD Softwoods (AKD) forecast that: ‘There will be 70 to 80 jobs lost sometime between [October 2020] and probably June or July next year, when the harvest level reduces. That's an outcome from the bushfires.’
2.11
In response to the negative impact of the bushfires on the timber industry, the Australian Government has announced that it will provide $40 million to the Forestry Recovery Development Fund. This will provide grants of between $1 million and $5 million to privately-owned processors who are facing long-term reductions in log supply. DAWE stated that:
[This would] enable wood processing facilities to develop new processing lines for their business, including upgrades to existing facilities and technologies, and new facilities that complement existing activities. The aim is to support industry to adopt smarter, more efficient practices in product processing and forestry operations and, in turn, provide regional jobs and support regional communities.
Salvage Operations
2.12
Partially mitigating against the short-term impact of the bushfires is the major salvage operations currently underway to harvest damaged wood in fire-affected areas. Participants estimated that the amount of burnt wood will be in the millions of tonnes, with Pentarch Forest Products (Pentarch) asserting that the Black Summer Bushfires have ‘created the largest volume in need of salvage harvesting in our history’.
2.13
It is critical that these operations be carried out as quickly as possible. AFPA stressed that: ‘In the aftermath of a large bushfire, there is a tight salvage timeframe where burnt timber that is deteriorating, and at risk of pests and diseases, needs to be harvested.’ Pentarch stated that ‘most softwood areas can be salvaged and utilised within 12 months but are then unsuitable for domestic construction usage’.
2.14
Unfortunately, the impact on hardwood forests is even greater ‘as the wood fibre is generally then not suitable for export pulp/paper-based processing’ which means that fire-damaged hardwood forests are often written off altogether and replanted.
2.15
Additionally, AFPA stated that: ‘The sheer volume of such timber and the difficulty of storing those logs or processing them into timber or fibre products frequently makes export the only viable option.’
2.16
In order to assist industry in their salvation operations, the Australian Government has provided $10 million to the Salvage Log Storage Fund in order to ‘boost mill capacity to process and store short-term surpluses in burnt logs’. DAWE stated this fund would minimise the overall resource loss which comes from harvesting fire-affected timber. The Commonwealth also allocated $15 million for Salvage Log Transport Assistance to help convey burnt logs to storage and processors. Drawn from the $2 billion National Bushfire Recovery Fund, this support is currently available to transport timber from fire-affected areas in Victoria and NSW.
2.17
KIPT acknowledged Government assistance in salvage operations but emphasised that little can proceed on Kangaroo Island without the construction of a new seaport at Smith Bay. KIPT submitted an Environmental Impact Statement to State and Federal governments in March 2020, insisting they have sufficient capital to build the port themselves and will begin immediate construction upon receiving necessary approvals.
2.18
In the interim, KIPT reported they have begun transporting burnt timber from a small, temporary operation in Kingscote:
The pilot program will establish a route to market for the higher-value, at-risk softwood logs grown by KIPT and independent growers, and is the first step in creating much needed employment opportunities for island residents and south-east based forestry companies.
Ensuring Long-Term Supply
2.19
Although salvage operations currently mitigate against short-term disruptions to log supply, inquiry participants made clear that decisive action is needed to swiftly replant and re-establish commercial forests, thereby safeguarding long-term access to domestic timber. AFPA, for example, argued that State and Federal Governments should, as a matter of urgency, facilitate the replanting of burnt plantations.
2.20
DAWE noted that governments are taking steps to alleviate some of the damage to commercial plantations. In May 2020, for example, the NSW Government announced plans to return the number of stocked trees in state‑owned plantations to pre-bushfire levels within the decade. Drawing on the $46 million in stimulus funding provided to the Forestry Corporation of NSW, they aim to ‘plant 14.5 million trees every year from 2021 onwards to replace the 50,000 hectares’ of burnt plantation, with the aim of returning to pre-bushfire stocking levels within a decade.
Bushfire Planning
2.21
Noting the ongoing threat of natural disasters, participants stressed that recovery planning for the industry needed to take the likelihood of future natural disasters into account. As OneFortyOne (OFO) stressed:
[The] biggest issue is around ensuring that our estate doesn’t burn down. The biggest risk facing this industry is not whether we expand. That is an issue in terms of creating new supply. But we’ve got to make sure that we protect the existing estate from fire.
2.22
OFO added that it has its own fleet of fire tankers and bulk water carriers and collaborates with other growers and government fire authorities. OFO called for the consistent application of restrictions on days of total fire ban, noting that a number of ignitions have occurred in the Green Triangle due to ‘adjacent landholder conducting activities on high fire danger days’.
2.23
In a similar vein, Pentarch asserted: ‘Fires and other natural disasters are creating a baseline loss that needs to be factored into the structure and assumptions of the existing industry’. AFPA likewise emphasised that governments need ‘to recognise plantations as critical infrastructure assets in their bushfire planning going forward’. Similarly, HVP Plantations (HVP) called for a ‘landscape level approach’ for bushfire prevention and suppression including ‘recognition of forestry plantations as a priority asset for protection’.
2.24
In order to avoid similar future destruction to the commercial estate, MGA TMA recommended new plantations be ‘located further apart, in order to isolate plantation fires and avoid the cumulative damage which results from them linking up.’ They also noted that more could be done to minimise fuel loads, a sentiment shared by AFPA who likewise advised that:
A whole-of-landscape approach be taken to land management and bushfire mitigation through mechanical fuel reduction as well as autumn/winter burns to mitigate wildfire risk to an acceptable level, and to harmonise existing land management regimes.
Short- to Medium-Term Supply Chain Disruptions
2.25
It will take a relatively long time, in some cases decades, for new plantations to reach sufficient maturity for harvest. In the meantime, a major concern for the timber industry will be the high costs associated with transporting logs for processing from those areas which remained relatively unaffected by the Black Summer Bushfires. As AFPA noted, some ‘producers will need to haul logs from plantations that are hundreds of kilometres away to continue to operate. The cost of hauling timber can be prohibitive’.
2.26
The experience of Hyne Timber (Hyne) is illustrative of the general challenges facing the industry. Hyne reported that their Tumbarumba Mill in the South West Slopes region of NSW had roughly 40 per cent of its timber feedstock destroyed by bushfires. Previously, they sourced all their timber locally through an integrated supply chain in the South West Slopes region which supported roughly 5,000 jobs and generated almost $2 billion in economic activity.
2.27
Since the bushfires, they have managed to identify a supply of logs within Australia that is currently exported overseas but could be contracted to Hyne instead. They anticipate they will import a volume of roughly 441,500 metres cubed at an additional freight cost of approximately $30 million over a three-year period.
2.28
They estimated that this imported wood would allow them to provide:
timber for 10,000 new homes
104,526 tonnes of chip for Visy in Tumut to produce paper and packaging
24,457 tonnes of bark for Corkhills in Laurel Hill to make commercial applications such as the potting mix
14,109 tonnes of dried wood shavings for Shandleys in Holbrook, which in turn supplies animal bedding for the commercial food sector.
2.29
Hyne also noted that the additional log and the retention of jobs within Tumbarumba would be worth ‘something like $70 million in salaries alone. It’s straight revenue equivalent to about $90 million’.
2.30
While Hyne stressed their ability to compete in buying the logs, they argued that the anticipated added transport costs presented significant inefficiencies of scale:
It is prohibitive for Hyne because of the additional freight costs, which we can’t absorb as a business and can’t pass on to our customers competitively. We can’t compete with imported finished goods if we try and add that freight cost to our finished product. So the reality is that we’re going to have the continued export of quality sawlogs while we have increased imports of finished goods, and at the same time, [impacting] on our manufacturing, resilience, product flow and jobs in our own economy moving forward.
2.31
Hyne cautioned that this set of circumstances posed a significant threat to their business: ‘Manufacturing costs will increase significantly, and when coupled with the capital-intensive reinvestment requirements and no ability to pass these costs on to customers, the Mill will become unviable.’ They warned potential job losses would be devastating to the Tumbarumba community, and stressed that ‘partial financial support from the NSW and Australian Governments is critical’.
2.32
There are several State and Federal support packages currently available to the timber industry, however, Hyne noted these do not specifically include transport support. While the Commonwealth has allocated $15 million in funding for Salvage Log Transport Assistance, for example, this does not appear to extend beyond the period of salvage operations for burnt timber. Hyne, therefore, recommended that:
The Australian Government provides short-term supply chain cost support for businesses, and therefore communities that depend on them who were severely impacted by the recent bushfires through existing programs, or by the establishment of a process for industry led bushfire recovery solutions where no current avenue for support exists.
2.33
This recommendation harmonised with that of AFPA, who likewise advocated for a ‘Federal and State freight support scheme to underpin the increased cost of hauling timber greater distances following the “Black Summer” bushfires’.
Committee Comment
2.34
The Black Summer Bushfires devastated regional communities and businesses across Australia. Unprecedented in scale, this natural disaster has also placed the timber industry under significant strain with large sections of the plantation estate damaged or destroyed. The Committee was impressed with the resilience of the timber industry in its determination to rebuild, however it acknowledges significant challenges moving forward.
2.35
While major salvaging operations will mitigate economic shortfalls in the near future, it is clear that a concerted effort is needed from businesses and governments to ensure the swift replanting of commercial forests in order to safeguard continued access to domestic timber supply. These efforts will need to take the likelihood of future natural disasters into account in recovery planning and implementation.
2.36
As domestic producers and processors wait for new plantations to mature, it is probable the industry will experience substantial supply chain disruptions. Notable among these is the often prohibitive additional freight costs associated with hauling timber great distances from regions left unscathed by bushfires. These increased transport costs will create significant inefficiencies of scale, and some participants expressed doubts about the ongoing viability of their businesses.
2.37
The consequent threat of unemployment is a source of real anxiety for some regional communities where economic activity is heavily reliant on the timber industry. The Committee welcomes Government packages that are supporting the timber industry in the wake of the Black Summer Bushfires. These include $10 million for the Salvage Log Storage Fund and $15 million for Salvage Log Transport Assistance, as well as $40 million to the Forestry Recovery Development Fund. These are intended to help the industry conduct salvage operations and will support processors as they innovate and upgrade their facilities.
2.38
The Committee, likewise, welcomes the initiative of the NSW Government in its aim to plant 14.5 million trees annually from 2021 onwards in order to replace the 50,000 hectares of forestry plantation destroyed by the bushfires.
2.39
Initiatives such as these are vital to ensuring both the recovery and growth of the timber industry and will go a long way to ensuring ongoing access to domestic supply.