Monday, April 22, 2024

Forestry contractors ‘at breaking point’ seek minister’s ear

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Industry pressures, cyclone leave many in dire financial position.
There are a lot of moving parts, which explains why profits on logs and timber have dropped off big time.
Reading Time: 3 minutes

Forestry contracting industry representatives are hoping to meet with new Forestry Minister Peeni Henare as soon as possible to brief him on the dire financial position many are in after Cyclone Gabrielle.

Forest Industry Contractors Association (FICA) spokesperson Ross Davies said the cyclone has exacerbated pressure on the industry, coming on the back of a tough three years, with covid-19, fuel hikes and high inflation resulting in significant interest rate rises – and continuous wet weather thrown into the mix as well.

This is compounded by increased operational costs, staffing and employment issues, market instability and contractual issues. 

They are speaking with government departments to see if there is any support available, such as temporary tax relief to entice those in the industry to stay.

“There’s also talk of trying to place them in other industries in the short or medium term and maybe having to top their wages up if we want them back in the industry,” Davies said.

Contractors are at breaking point, with some already in liquidation and many more are at risk of losing their livelihoods.

Looking at the industry big picture, Davies said contractors will need to work more closely with the logging truck industry. 

“We need to look at what is going on here because it’s going to get pretty nasty. People are losing their houses over this and we don’t want to go through this cycle again as an industry.

“We need to get all of the parties involved in this around the table and try to figure out what is going on.”

Davies said the government could play a facilitating role in enabling this.

“A recent survey of our members showed a widespread reduction in production over the past year. Fifty-seven percent of respondents indicated their production had been reduced by 20% or more, with 16% down more than 30%,” he said.

“When asked if they could survive at an 80% production level for a year, only 26% of respondents indicated that they could. 

“At the moment 21% of the responding contractors do not have a current contract while 40% only have a one-year contract.”

In recent weeks, two larger Gisborne-based contractors have had no option but to cease operations and shut up shop, after operating in Te Tairāwhiti for 15-20 plus years.

“Each day we are getting phone calls that confirm more and more contractors are falling over. Our role at FICA does not stop at the forestry gate – we want to support our members.”

He said he has heard unconfirmed reports that New Zealand has the world’s most volatile log market. 

“We’re still seen as a turn-on, turn-off industry. It’s not a blame game at all, but if we want logging contractors to be around in another 12-24 months then something needs to change now. 

“We employ thousands of people, and we cannot keep operating at a loss. Jobs will be lost. Homes will be lost. Communities will be lost.”

Davies said there are two parts to the issue: the immediate response to help contractors remain viable and the longer-term solutions to help reduce the volatility in the log market.

A further concern is a slowdown in the construction market for new housing. This is having a compound effect on contractors because it will reduce demand for logs from sawmills, he said.

The industry’s business model also needs to be examined. Currently, all of the risk is taken by trucking and logging contractors, he said.

“You have a lot of people asking us to do it right in terms of using the right equipment and do everything right with health and safety and in the environmental space and then you are not prepared to back them up with a contract that rewards that.”

There is a mismatch of risk and many forestry companies owned by overseas corporates are creating contracts not relevant to New Zealand conditions.

“If you want a sustainable industry you have to start looking at the contract model.

“If you want your wood harvested in two years’ time, you’re going to struggle because there will be no one there to do it.”

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