Mill troubles drag on

A "mixed bag" of layoffs and production bottlenecks are rocking Wairarapa saw mills as they are squeezed between skyrocketing prices for logs and weak demand in the building industry.
Massive demand in China has driven log prices to record heights, a boon for New Zealand forestry owners but a nightmare for local mills trying to source wood.
Kiwi Lumber's Masterton mill, the largest of the three it owns in the lower North Island, can't meet demand for framing timber because log prices are so high.
Managing director Adam Gresham said they had managed to maintain steady business during the downturn but couldn't run their mill as long as they would like because paying beyond a certain price for logs became "uneconomic".
He said it was a risky situation as the economy recovered because other mills could step in to the meet the needs of their clients.
Eleven layoffs were planned at the 50-person mill as they upgraded to automated technology that would cut costs while improving production.
Those job losses are the tip of the iceberg according to the National Distribution Union, which says the sector has swallowed 1129 jobs since 2008.
Murray Oakly, manager of Davis Sawmilling in Featherston, said their situation had become "very tight" because of the weak building industry and the future was uncertain.
The company cut six to eight jobs in the darkest days of the recession but had not made any cuts to the 30-strong mill in the past two years.
Paul Jordan, the manager for Juken New Zealand's Masterton mill, said the company laid off 64 workers during 2009 and 2010. However they had since added 45 to 50 jobs, bringing their total staff up 326 and close to their pre-recession numbers.
He said the wood processing industry was in a "mixed bag situation" but Juken was weathering the storm thanks to contracts supplying the company's Japanese homeland.
Although Juken owned its own forests, the mill still paid market prices for logs and was therefore at the mercy of international fluctuations. However, Mr Jordan was optimistic about the industry's future.
"We believe we've been through the hardest part of it. I don't believe by any stretch the recession is finished but you can't beat yourself up either, you have to get yourself up and continue to produce."
Steve Wilton, chief executive of Forest Enterprises, which owns 9615 hectares of Wairarapa forest, said that, much like the sheep and beef industry, forestry was enjoying the highest commodity prices in years. The company was selling logs to Kiwi Lumber and Davis Sawmilling at lower prices than they could get on the international market because they needed the mills to survive when prices changed.
"Everybody needs the domestic mills in the long term therefore it would be suicidal to cut off their supply in the interest of short-term price gains."
This didn't mean business was much easier for those two mills because they sourced logs from a number of forests who charged different prices.
While wood processors struggled, Mr Wilton said the high prices meant a massive boon for his company.
He said it was anyone's guess when log prices would fall but it would coincide with a fall in the building sector in China and India.