White knight emerges for Whakatāne mill but workers still worried

Friday, 14 May 2021

More than 200 workers facing redundancy at Whakatāne’s packaging mill are hopeful that they won’t lose their redundancy rights if the mill is saved.

The mill’s Swiss owner SIG has announced that a consortium led by Dr Dermot Smurfit, a European investor with long experience in paper packaging, is in talks with it to buy the business.

“A successful sale may result in the continued operation of WML. However, negotiations are ongoing and, until such time as an agreement is signed, no further comment will be made by either party,” SIG continued.

According to the Irish Times, Smurfit's father Jefferson was an early owner of what is now cardboard box-making giant Smurfit Kappa Group.

The Detail explores why the wood processing industry is under stress and why New Zealand continues to send so many raw logs to China without turning them into something more valuable.

* New hope for future of Whakātane mill

* High power prices caned as another mill mulls possible sale

* Whakatāne mill closure confirmed, 210 jobs to go

Behind the scenes, government agencies, local MPS and unions have been working up to two years to help find a new buyer and keep the mill's 210 skilled staff in the region.

However, in March, workers began preparing for the worst when the mill announced it was closing in June because its parent company was taking its work elsewhere.

Other mills are also under threat, Karl Gradon says.

One of the two unions involved, First Union, welcomed the news and the benefits it could bring.

But First organiser Jared Abbott said the conditions of the deal would be crucial.

He said one of the key issues was retaining staff because the mill's machinery needed to be kept running.

Workers had been given the impression that when SIG announced its exit, full redundancy packages would come into effect, regardless of any rescue bid.

Forestry Minister Stuart Nash has recently beefed up the forestry sector with a $23m injection.

“People have already started to make plans, and what we don't want to see is a situation where our members are told if they don't accept something less than that, than the mill will close down,” Abbott said.

“We’ll stay long enough to make sure people get trained up to do what need’s to be done but our biggest concern is if they're not given those redundancy payments, that goodwill goes, and either way they’ll have a right to their redundancy but they’ll leave the place.”

On the other hand, the mill did need investment, and would probably be repurposed from making packaging for liquid products to more traditional fibre-based products, he said.

Karl Gradon, general manager of strategy at Eastern Bay of Plenty's economic development agency, Toi EDA, said Smurfit Kappa had a good track record of rescuing mills.

”This has been a long time coming, and there's been efforts from both central and local government to support and create an environment for people to invest.”

But he said the wood processing industry’s challenges remained. A larger mill, Norske Skog in Kawerau is under strategic review, and he was worried about it.

“We encourage the Government to incentivise the value add to logs in New Zealand rather than continuing to export. This is one first step.”

The mill's prospective closure comes at a sensitive time for the wood processing industry, as mills struggle with high power prices and to compete for logs at high export prices.

At the end of April, Forestry Minister Stuart Nash indicated he was beefing up the Government’s commitment to forestry by injecting $23 million left over from the One Million Trees campaign into a refreshed version of Forestry Service.

The service, now called Te Uru Rākau - New Zealand Forest Service, will move from Wellington to Rotorua, where it will share a new timber-built building with forest research institute Scion.

“The name change is small but significant. It signals a more hands-on role for a public forestry service, with specialists and advisors working alongside the sector,” Nash said.

Nash said the body's focus would be on tree planting, wood processing and biofuels.

“By retaining more wood processing onshore, we create local jobs and further support rural communities.

“Wood processing plants offer the opportunity to create high-tech, high-value products and by-products to diversify the income streams of foresters.'

CORRECTION: The forestry service is called Te Uru Rākau - New Zealand Forest Service. An earlier version of this story used its previous name, Te Uru Rākau - Forestry New Zealand. (Amended May 14, 2021, 4.06 pm)