Wood industry 'needs discussion' as Whakatāne mill flags closure

Wednesday, 24 February 2021

Whakatane township has been hit hard, losing tourism business after the Whakaari/White Island eruption in December 2019 and then with Covid-19. Now a local mill is facing closure.

Economic development and forestry minister Stuart Nash says the proposed closure of Whakatāne mill was a blow to the community, but he still believes the wood industry has a future there.

About 210 staff and a large number of contractors work at the mill, which has been open for over 80 years and is the township's largest private employer.

However, the plant had lost its biggest customer and management says it is no longer economic.

“We have begun consultation with staff on a proposal to wind up the business and close the mill,” the mill’s general manager Juha Verajankorva said.

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Whakatane mayor Judy Turner says she would like there to be a wider discussion about supporting the local wood industry.

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Whakatāne mayor Judy Turner said the news was a shock. The mill paid good wages and had been a solid work option for generations who had worked there.

‘’A great number of people in Whakatāne will personally know someone who works there.

‘’This has been one of the stable parts of our workforce and now to lose that is of great concern.’’

Jared Abbott says more mills may close if the Government continues to leave the wood industry to market forces.

She said her first response would be to talk to the workers, but beyond that she wanted to talk to the government.

‘’I think the whole wood processing sector is under pressure in New Zealand. I think some wider discussions, that are wider than our experience, are going to need to be had.’’

Nash said the Government had been working behind the scene for more than a year with the mill’s Swiss owners to help find a buyer, but without success.

‘’This is a real blow for the community and the local economy,’' he said, but added that he still felt wood processing had a future in the Whakatāne area.

‘’There is definitely a future for greater use of wood products and natural fibre products in our packaging industries.’’

The mill said attempts had been made to find a new owner for two years but no other option had emerged.

‘’It’s a big thing for all of us. Everybody was very surprised yesterday and some of the people were even devastated. They did not see this coming,’’ Verajankorva said.

The mill, which makes liquid paper board, had struggled to make it at a competitive cost for its parent company and key customer, SIG Combibloc (SIG), but recently SIG had decided to source that product from elsewhere.

Regulating export log prices would help prevent competitors influencing the fate of mills here, Abbott says.

“Our costs-per-unit can no longer compete with bigger plants overseas,” Verajankorva said.

The company would take about a month to consider feedback from staff, but closure was likely, Verajankorva said.

Job prospects within the same industry locally were not high, he said. ‘’It will be quite hard, there is some industry in Kawerau but … to find a similar kind of job will be a challenge.’’

‘’Our issues has always been scale, we’ve always been a fairly small operator with small capacity. In general the fibre supply in New Zealand is excellent, but energy prices for some reason are very high comparing to other countries.

‘’That is a definite handicap.’’

First Union, which has 100 members at the site, agreed more discussions should be had at government level over how to support the wood industry.

The factory at Whakatāne was quite old and needed more investment, First's secretary of transport, logistics and manufacturing, Jared Abbott, said.

''I think there has been a concern that things weren't ideal. I think it would be untrue to say it was a complete surprise to everyone but people were hoping that the plant would be purchased by another buyer.

''Without having some serious change to how we do things in New Zealand around wood processing, then I don't see that things are going to change and we're probably likely to see more closures.''

One option was the regulation of export log prices, a market that was dominated by China and open to manipulation, Abbott said.

It would also be a huge boon to local sawmills If the Government bought more wood through its procurement policies, giving investors more incentive to upgrade facilities.

‘’Most employers, the lobby and advocacy groups for the employers and unions are all pretty much on the same page on what needs to be done. The model’s replicated in various countries overseas. It just takes some real action and not just talk and virtue signalling,’’ Abbott said.

‘’We’re going through a construction boom – the idea that there’s not a demand for these products if procurement policies were set right is ludicrous.’’

Although the Government has brought in sustainable procurement guidelines for the public sector, it has been noted that the policy is aimed at boosting the use of wood as a building product, rather than food packaging, which Whakatāne Mill produces.

Work is also being done by officials and the industry to draw up a 20-year industry transformation strategy for the forestry and wood processing sectors.

Part of that plan, the Wood Fibre Futures project, is looking at business cases for making biofuels and biocrude, a feedstock, from wood fibre.

The project is due to be finished in the second half of this year.

E tū union spokesman Raymond Wheeler said the proposed closure adds urgency to the Government’s work on an Industry Transformation Plan (ITP) for the forestry and wood processing sector, if local manufacturing is to survive.

“We need to see increased support for manufacturing in the regions, particularly in the form of government procurement for local wood products.

“These industries are also a vital part of the community’s economic wellbeing, as many local businesses such as in engineering, scaffolding, and associated industries, rely on a large operation like the Whakatāne Mill for work.”

An ITP would give workers greater control over their futures by having a say in creating and maintaining decent work, while ensuring that the local manufacturing industry remains viable, Wheeler said.