Forest product company to shut entire operation as result of energy prices

By Jemima Huston of RNZ

A large forest products company, Winstone Pulp International, is planning to shut its entire operation as a result of high wholesale energy prices.

Earlier this month, the company paused work at its two sites Tangiwai Sawmill and Karioi Pulpmill to consider its future.

In a statement on Tuesday, Winstone Pulp said it told employees about a proposal to close indefinitely at a meeting today.

If the plan goes ahead 230 people would lose their jobs.

Winstone Pulp chief executive Mike Ryan said energy prices have increased from $100 per megawatt hour (MWh) in September 2021 to $500 per MWh in August 2024.

He said power now makes up more than 40% of the company’s costs and the increase can’t be passed on to customers.

“For comparison, our overseas competitors are paying between NZD60 to NZD100/MWhr. At the same time, other input costs remain high and market prices for pulp and timber are relatively low and under pressure.”

Ryan said consultation was underway with all staff given the option of taking voluntary redundancy and set to remain on full pay during the consultation period.

Earlier this month, Winstone Pulp International paused work at its two sites Tangiwai Sawmill and Karioi Pulpmill (pictured) to consider its future. Photo / NZPA

He said the company had done everything to avoid closing, including improving production and energy efficiency and energy price hedging.

Winstone Pulp said its efforts to lobby on the energy crisis in recent weeks had resulted in electricity gentailers coming forward with discounted offers.

But it said it was not enough to remain internationally competitive.

The Port of Napier, which ships much of Winstone’s pulp and timber, has been advised and chief executive Todd Dawson said a closure would hit port earnings.

“While we don’t know the final outcome of WPI’s process, which could include the retention of some or all of their cargo trade, the loss of WPI’s cargo would be a setback for Napier Port.

“Our thoughts are with everyone at WPI... We feel incredibly disappointed they are confronted with no option but to consider ceasing their operations due to current and ongoing challenges related to abnormally high energy costs.”

Another cargo customer of Napier Port, forest product company Pan Pac, has restarted pulp production in a limited capacity after a temporary shutdown due to energy costs.

A final decision on Winstone Pulp’s closure is expected on Monday, September 9.

Other major energy users have been grappling with an extended period of extremely high wholesale power prices including Oji Fibre Solutions which is consulting on closing its paper recycling mill in Auckland.