Timber firm confident beech will find market

By Mark Reynolds

John Gay, managing director of Tasmanian-based hardwood timber company Gunns, is adamant that a foray his company has made into the New Zealand hardwood timber processing industry will be a financial success.

"I like to work hard and get a return for my employees and shareholders," he said.

It sounds like a simple goal, but given the area of the hardwood industry that Gunns is entering into, the move could be a stern test of Mr Gay's skills.

His company is one of the first timber processing groups to declare an interest in developing a market for the native beech trees that will be harvested from protected forests on the West Coast of the South Island.

Gunns has bought a Christchurch-based veneer slicing plant from Carter Holt Harvey for about $7.5 million. That plant mainly processes rimu and pine now, but Mr Gay said the company intended to upgrade the facility to process beech.

Currently the plant produces about 4.5 million square metres of product a year.

That capacity will be increased by nearly a third.

"We intend to develop the plant fairly rapidly," he said.

"We believe there is a market out there for beech product and we are keen to develop it.

"It is a market that will depend on quality and I think we can set up a facility that caters to that demand."

It is a bit of a gamble though, because the economic viability of the controversial beech harvesting programme is unproven. In large part that is because there has never been a steady supply of beech trees from New Zealand with which to develop a market.

That will change following the Government, late last year, giving the green light for state-owned Timberland West Coast to harvest beech trees from around 93,000ha of South Island forest.

The controversial logging was approved on the basis that it would both fulfil New Zealand's need for high quality timber and offer growth opportunities for financially fragile West Coast communities.

The proposal will see up to 150,000 trees a year harvested from the forests.

The trees will be selectively taken out by helicopter. This is an expensive process but designed to cause the least possible environmental impact on the ecologically delicate area.

The selective logging also has a financial benefit, in that trees will effectively be felled to order. This ability to provide buyers the specific types of beech they need is expected to allow Timberlands to put a premium on the prices it charges for the material.

"There are guidelines for the felling in terms of the environmental sustainability of the felling. But within those guidelines, there is scope to really be selective about the material that is made available to the market," said one forestry analyst, who asked not to be identified.

"That is a great commercial benefit compared with competing forests in South America or Australia, where there is less quality control over the product," he said.

There are five beech species in New Zealand: red, hard (or honey), silver, mountain and black. The demand for each of the species is untested, and the selective logging will, within broad guidelines, allow for the most popular type of beech to be harvested.

Of the beech trees harvested elsewhere in the world, the red, hard and silver varieties are the most commercial. The wood is used as a fine or decorative timber, especially for panelling, flooring, and furniture.

The wood is much stronger than Radiata pine, and is considered to be much more attractive, especially in Asian and European markets.

Mr Gay said he believed Europe would be the main market for the Christchurch veneer production.

"The demand is there. We just need to be able to guarantee a supply to the market and I think we will be able to do that now."

A condition of Timberland's approval to harvest the beech is that it must prove to the Government that the plans are commercially viable.

The demand from Gunns alone will not ensure that, but its interest in processing the wood is expected to help Timberlands create a demand for the product in export markets.