New South Wales hardwood flooring manufacturer Australian Solar Timbers (AST) is calling for a State Government inquiry into contracts issued by the state-owned Forestry Corporation of NSW. Source: ABC News
AST’s Douglas Head claims one log supply contract awarded to Boral provided it with commercial advantages over his business.
“My concern is that the contracts issued to Boral are quite different to those available to anyone else in the industry,” Mr Head said.
“We compete in the same market as Boral and we’re getting contracts … essentially if you sum it down, we get the worst logs and they get the best logs.”
The Kempsey mill owner said the Boral contract was in a different league to contracts issued to other private companies.
The contracts issued to Boral give that company priority access to sought-after hardwood timber species before the smaller millers.
“The main issue with hardwoods is we sell our product on species and the only company that has any right to species is Boral,” Mr Head said.
“But at every other level, only their contract refers to diameter sizes, lengths, has effects on the freight, the flexibility of how much they can take over or under the contract.
“We have, according to Forestry — and they’re correct — absolutely no rights to any species and that makes it impossible for us to develop markets.
“Our distribution channels, continuity of supply, our ability to tender on the major jobs — we’re just in the position that we’re massively disadvantaged compared to our main competitor.
“[Boral] have the five main species all nominated in their contract and minimum amounts that must be supplied to them.
“They also have species that they don’t want which they have caps on and that floods back into the rest of the industry’s volume and we must take those logs that don’t meet those specifications for the Boral contract.”
Mr Head said it was possible that AST was missing out on valuable contracts to Boral and his business was at risk of closing.
“It’s entering the market place now that this position is becoming clear and it makes it very, very hard for that,” he said.
“When you’ve got such an unbalanced field and adjustment has to take place, companies who are dealing in the appearance grade market cannot stay in that market if they have no access to species.
“The Forestry Corporation at the moment is saying that they won’t negotiate at all; I can’t speak for other mills but I’ve been told directly, we will not negotiate on species.
“Now when that is already in play with the major player who has that access, ultimately over a period of time all the other players who wish to stay in that market are doomed.”
A spokesperson from the Office of the NSW Minister for Primary Industries, Lands and Water provided this statement: “Forestry Corporation has been working within the parameters of long-term contracts entered into by the former Government in 2003. This Government has been progressively addressing the legacy issues of the 2003 north coast forest decisions and making amendments to contracts to re-position the industry on a long term sustainable footing.”
No-one from Boral was prepared to be interviewed but the company released this statement: “Boral supports the NSW Government’s commitment to improve the long-term sustainability of hardwood timber supply from north coast forests.
As stated in its ASX release dated 24 June 2014, Boral agreed to accept a 50,000 m3 per annum reduction in its timber allocation, primarily of high grade species, for the next nine years to support a more sustainable long term outcome for its hardwood timber business and the industry more broadly.
Boral received $8.55m from the NSW Government to help offset the lower volumes and much of this compensation has now been spent on reconfiguring Boral’s timber mills in line with the significantly reduced throughput.
Executive general manager of Boral Timber, Steve Dadd, said that it had been critically important for Boral to work closely with the Government.
‘As NSW Forestry Corporation’s largest customer and with a major proportion of the industry relying on Boral for employment, it has been important for Boral and NSW Forestry to work together to ensure sustainable harvesting of the north coast forests now and for the future,’ he said.
With the improved certainty for Boral’s business and the strengthened sustainability of the north coast forest resources, Boral is investing further capital into its north coast timber mills to develop new products and improve processes.
Boral has also stepped up to be a member of the consortium that has successfully tendered to manage log haulage processes as part of the open tender process run by Forestry Corporation of NSW.
‘As part of the consortium that will manage NSW hardwood haulage operations, we expect to deliver freight efficiency improvements which will deliver savings and benefits to the entire industry’, Mr Dadd added.”
