4 Oct 2008

More sawmill closures likely

11:32 am on 4 October 2008

The sawmill industry is being tipped for more closures as it struggles to recover from the economic downturn.

Statistics New Zealand says total timber production has dropped by 6.2% in the 12 months to March.

The veneer and panel sector has been hardest hit, falling by 26%, with an international surplus making it cheaper to import than to source locally.

The Wood Processors Association says fewer new homes are being built. The association's chief executive, Peter Bodeker, says the tightening market here is compounded by oversupply in the Australian market.

He says the Chileans have begun to export to Australia because the United States market was heavily affected even more than New Zealand by the housing market downturn.

"So we saw a double whammy there."

Mr Bodeker says several mills have already closed, and it is likely only the biggest and most efficient of those left, which are able to invest in new technology, will survive.

Martin Verry, a director of Red Stag Timber, which operates the Waipa Mill near Rotorua, says he will not be surprised if half of the sawmills are gone in five years time.

He says 95% of New Zealand's timber is being produced by just 20 of the country's 200 mills.

"The regulations these days in terms of treatment and ensuring that timber is structurally sound, is stiff and strong - require machinery and equipment in order to test them. That has effectively raised the bar for some of the smaller sawmills."

Mr Verry says international timber markets are opening up with higher margins, but the volumes do not compensate for the downturn at home.