Green light for Pan Pac Otago plants

Whirinaki-based Pan Pac has bought a South Island sawmill and drying operation. Photo / Otago Daily Times

Pan Pac Forest Products is gaining a South Island footprint, receiving Overseas Investment Office approval to buy a sawmill and a timber-drying facility in Otago.

On November 18, the Japan-owned Whirinaki-based company is due to buy the assets from the receiver of Southern Cross Forest Products, which operated several mills.

A subsidiary company, Pan Pac Forest Products (Otago) Ltd, has been formed to operate and manage the assets on two different sites, 7km apart. It will hire staff from next month and will initially employ 31 people.

Pan Pac lumber general manager Michael Reaburn said millions would be spent upgrading the plants before production recommenced in April. In about two years' time, the plants would be combined on to one site. "Obviously, we will continue to grow and develop the site here in Whirinaki but there is also a large resource in the Otago/Southland region," he said.

All sales would be managed from Whirinaki.

Pan Pac paid $1.42 million for the land but Mr Reaburn would not divulge the price paid for other assets.

Brendon Gibson, receiver of Southern Cross Forest Products, said he was pleased to have sold the assets "to a buyer who is committed to operating and investing in a substantial export business".

Production will meet Asian demand for lumber products, which Mr Reaburn said remained consistent.

Pan Pac managing director Doug Ducker said confidence in the industry was strong, despite logs collapsing off record-high prices in March. Returns improved in October, thanks to a fall in the Kiwi dollar.

"Demand is still pretty constrained and stocks in China are still pretty high," he said.

It is Pan Pac's first operation outside Hawke's Bay, where it has operated for more than 40 years with wood pulp and timber.

In August, a subsidiary of Pan Pac owner Oji Holdings was granted Commerce Commission approval to acquire Carter Holt Harvey's pulp, paper and packaging businesses from billionaire Graeme Hart.

Commission chairman Mark Berry said Oji's mechanical pulp mill and Carter Holt Harvey's kraft pulp mills produced different types of pulp, so the merger was unlikely to result in any change to the pulp-supply market.

Should the billion-dollar deal come to fruition, it would be one of Japan's biggest New Zealand investments.