Flashback: Strong Long-Term Outlook for Victorian Timber!
As the Victorian government’s decision to close native forest harvesting came into effect on January 1 – ripping the hearts out of timber communities – senior editor Jim Bowden reflects on better times in this Q&A interview on September 19, 1996, with Norm Huon, then executive director, Victorian Association of Forest Industries.
Victoria is poised to reap the rewards of an increased focus on value-adding and export strategies, according to Norm Huon, executive director of the Victorian Association of Forest Industries.
He describes the potential for value-adding as “fantastic” with opportunities across the board.
As for exports, he sees excellent markets in Japan and the US and says VAFI has made a long-term commitment to supplying the export market.
Jim Bowden: What are your major responsibilities?
Norm Huon: I spend most of my time on resource issues, public affairs, political contact and export projects, but the organisation spends a lot of time on the ‘nuts and bolts’ in dealing with a public supply authority. In the case of the state government, 95% of hardwood resources come from state forests, and we deal with issues such as royalty agreements, roading, log grading issues, logging syndicates and licence negotiations.
VAFI represents member companies in industrial relations, and we have provided occupational health and safety services for the past ten years. There have been continuing negotiations with the federal government over the past four years on a regional forest agreement for East Gippsland, due for completion by December 1996.
The RFA for the Central Highlands is due by June 1997. There are complex land-use planning discussions with the state government over which areas are allocated to parks, reserves, and state forests.
“We are not in for a boom, but a slow and steady recovery from the first quarter of 1997.”
Jim Bowden: What are the major issues, and have any of these been resolved?
Norm Huon: The last major issue was the Land Conservation Council study of the Central Highland region, which ran for four years. The timber industry strategy was launched ten years ago, and we were able to negotiate 15-year licences – formerly, there were only one to two-year licences available. Early members’ renewals with ‘evergreen’ provisions were negotiated from 1992, based on substantial investment programs.
Once the RFAs are completed, we can use the product development and marketing opportunities. We have spent 25 years in a detailed process at the state level to achieve an appropriate balance between competing forest users.
The RFA process will hopefully be the last, and we can then pursue the extremely exciting growth opportunities, particularly in export matters, with confidence.
Q: Has it been a difficult time over the last 12-18 months?
A: It has been extraordinarily difficult.
The previous Labor government developed the Timber Industry Strategy, and while we didn’t like all of the outcomes, it has worked fairly well. The incoming Conservative Government supported the strategy, and it has enjoyed bipartisan support. That achieved the continuation of investment programs that are changing the face of the Victorian industry.
Predictably, environmental groups turned their attention to the federal government when demands on the state government had been substantially met.
The annual woodchip licence process became an annual controversy and bloodbath. Federal government decisions were frequently driven by political value judgment rather than environmental balance, sound economics and social justice in rural Australia, which has made life difficult.
Q: Can all members’ production be easily sold, or is there pressure on prices and margins at present?
A: The domestic housing market has slumped by 30%, accounting for around 70% of timber sales. It has been a very tough market. All suppliers of building materials have felt the pinch of pressure on price and margins. The housing market will always be cyclical – that’s why our work on pursuing high-value niche export markets is so important.
Q: We have a trade deficit of around $2 billion in timber, wood and paper products. How best can we replace imports?
A: Softwood processors are becoming internationally competitive. We compete with commodity products, so price, service, and availability are important. Provided cost inputs controlled by the government can be contained, the softwood sector should expand as more resources come on stream.
With hardwood, we need to produce higher value-added products for niche export markets. There will be declining supplies from traditional hardwood exporters, which presents exciting opportunities for the hardwood sector. Our initial success in export markets is very encouraging. The other obvious challenge is to add more value to residual wood through domestic processing – pulp and paper, MDF and other reconstituted products.
Q: Value adding – where are the best opportunities?
A: Kiln-drying of hardwood has enormous opportunities in Victoria for domestic and export markets. In 1988, 10% of hardwood was kiln-dried and currently, 40-45% is kiln-dried, based on substantial investments in further processing.
MDF, LVL, pulp and paper, and engineered softwood products – all have scope for value-adding, and the opportunities are fantastic. A good start at the lower end of the product range would be to approve the export of the millions of tonnes of pulp logs left behind on the forest floor each year.
Q: Can exports take up all excess production?
A: Yes. Export strategies are, by their nature, long-term strategies. Australia produces 1% of the world’s wood. Our excess production is a drop in the ocean. The Australwood Consortium is well ahead of budget with Japan in a classic niche marketing exercise. Opportunities in Japan and the US are excellent if we make long-term commitments to supply the export market.
The Timber Promotion Council is spending a lot of time in assisting industry with export markets and we will move from a net importer to a net exporter over the next decade.
There are increasing supplies of softwood from existing plantations that will provide a surplus of wood fibre. We are one of the few countries around the Pacific Rim in this fortunate position. With an increasing gap between demand and supply of wood products, we are very well placed.
Q: Will certification of sustainably managed forests happen, and will product labelling offer market advantages?
A: Yes, it will happen, and on all available evidence, the experts tell us we have an advantage in how we sustainably manage our forests. The RFA process allowed us to accelerate this process, but we must be careful that customers are well-informed. There are several schemes around – not all focused on an objective outcome.
Q: What does the acceptance of multi-residential timber-framed housing mean?
A: It is enormously significant. Some say this segment could take up to 70% of the market in New South Wales. It will be an increasingly important part of the product mix.
Q: Does VAFI work closely with forestry and government agencies and get enough promotional support?
A: We work closely with the Department of Natural Resources and Environment, which looks after forestry, and we have some support from the Department of Business and Employment. However, we do not receive significant financial support from the state government.
Fortunately, the industry in Victoria has been very good at supporting marketing and promotional programs. We also get good support from Austrade, the Federal Department of Primary Industry and Energy, and the Department of Industry, Science and Technology.
Q: What are market prospects for the next 12-18 months?
A: We are not in for a boom, but a slow and steady recovery from the first quarter of 1997. NSW and Victoria will recover quicker as they don’t have the housing stock oversupply of other states.
Q: How difficult is it to get tangible results working for an industry association?”
A: It is more difficult than running a company where there are clear measures of performance – growth in earnings per share, returns on investment, etc. But we can get tangible benefits, and it is possible to measure them. Security of tenure through 15-year licences has provided tangible benefits. The results of land use decisions are measurable. Market shares in various sectors are also measurable.
Q: Is it a challenging or rewarding position?
A: It is certainly challenging. There has been ongoing conflict and polarisation of views. In Victoria, there has been an extraordinary change in the hardwood sector, in value-adding and in the development of feature timbers. The export success has been enjoyable.
Q: What career could you see yourself in if you had not joined the timber industry?
A: I’ve already had several careers and about a dozen jobs. I don’t know … perhaps run my own business again, consult or teach.
Jim Bowden
Jim Bowden, senior editor and co-publisher of Wood Central. Jim brings 50-plus years’ experience in agriculture and timber journalism. Since he founded Australian Timberman in 1977, he has been devoted to the forest industry – with a passion.