2009 Victoria's Timber Industry Strategy
2009 Victoria's Timber industry strategy
Timber Industry Strategy overview
The Timber Industry Strategy will assist industry to increase the economic value to Victoria from timber production and processing in a socially and environmentally sustainable manner. It will enable ongoing investment in a productive, competitive and sustainable timber industry that ensures that our forest industries continue to provide jobs and income for regional families and communities, as well as high quality forest products for future generations.
- World-class environmental regulation for forest activities on public and private land will meet the highest possible environmental standards
Timber production in Victoria will operate within the framework of a world-class forest management system that is robust, enforceable and scientifically based to ensure all forest values and uses are recognised and conserved. We will strengthen our forest management system and streamline the processes applied to implement the government’s Code of Practice for Timber Production on public and private land. This will underpin international certification. - The government’s commercial timber business, VicForests, will be publicly accountable, regulated, and operate in designated areas of State forest
VicForests will be able to maximise the long-term economic returns to Victoria from areas of State forest available for timber production in a socially and environmentally sustainable manner. These areas, defined on maps, will be clearly designated as Working Forest Areas, and will be managed in accordance with Working Forest Plans. The maps will be included in the Allocation Order for eastern Victoria. - Secure and competitive investment frameworks will foster productive, competitive and sustainable timber industries and strong communities
A period of substantial upgrade of national parks and conservation reserves has met the need to add further areas of forest to our world-class reserve system. We will secure the resource base on public and private land through a regulatory framework that provides timber businesses and communities with Australia’s best environment for investment and employment. VicForests will offer timber sales agreements of up to 20 years to promote innovative, value-adding investments. On private land, unnecessary planning regulation will be removed and certainty for the sale of resources to industry will be delivered. - Australia’s strongest forest governance arrangements will provide efficient and transparent decision-making
We will build on the reforms made under Our Forests Our Future, and clarify commercial forestry responsibilities of government departments and agencies. - Improved freight infrastructure and logistics will support the timber supply chain
The Victorian Transport Plan will continue to deliver benefits for Victoria’s timber production regions through the development of efficient transport networks to cope with forecast freight growth. South-west Victoria’s Green Triangle Region Freight Action Plan and the proposed Gippsland Freight Action Plan will improve transport infrastructure for forest products. - Building a safe and skilled workforce and attracting people to the timber industry
We will work with the existing Skills Victoria Industry Training Advisory Body, ForestWorks, to raise the level of skills development for the Victorian timber industry. Encouraging Indigenous participation is a key goal. WorkSafe Victoria will continue to work closely with the timber industry to improve workplace safety through adoption of best-practice industry standards. - Understanding and helping the timber industry adapt to environmental, social and economic change
Understanding and managing climate change is a Victorian Government priority. We will help the timber industry and local communities adapt to climate change and develop and commercialise new and emerging markets, including those for carbon and renewable energy production. We will work with the industry to develop and implement a forest and timber biosecurity framework to preserve national and international market access.
A new vision for Victoria’s timber industry
Our vision is for:
A productive, competitive and sustainable timber industry, based on secure and sustainable native and plantation forests, that fosters strong Victorian communities.
A history of challenges
The past 20 years has seen unparalleled changes and challenges for Victoria’s timber industry.
Policy decisions at the state and national level aimed at ensuring the long-term sustainability of public native forests have resulted in a significant decline in the volume of timber available for harvest in Victoria. Victoria’s commitment under the National Forest Policy Statement to establish a comprehensive, adequate and representative reserve system for public native forests saw five regional forest agreements established between 1997 and 2000 and around 900,000 hectares of Victoria’s native forest estate added to national parks and reserves.
In 2002, the Victorian Government’s Our Forests Our Future policy statement introduced changes that revised down sustainable yield levels by 31 per cent and introduced a new market-based system for the sale of timber to industry.
The subsequent addition of further areas of native forest to national parks and reserves and the impact of extreme bushfire events in 2002–03, 2006–07 and 2009 further reduced the volumes of timber available to industry.
The impact on Victoria’s native forest timber resources has been most acute in Ash forest areas in the Central Highlands region. Ash is the most valuable commercial eucalypt species, but also the most sensitive to fire. The 2009 fires have particularly affected 1939 regrowth that had been the focus of recent harvesting programs.
By contrast, the past 20 years has also seen marked expansion in Victoria’s plantation estate, with additional softwood timber plantations and significant new short-rotation hardwood timber plantations. This has been driven by Australian and state government policies that encouraged expansion of Australia’s plantation estate to diversify timber supply and enhance international competitiveness. The expansion has been supported by taxation arrangements that encourage third-party investment. Softwood plantations established in the 1960s and 1970s are now maturing, resulting in sawlog production from timber plantations now exceeding public native forests for the first time.
To make most productive use of the public native forest resource and compete with softwood plantation products, the native hardwood processing industry has pursued value-adding opportunities and embraced new specialty markets. Between 2001 and 2006, the Victorian native hardwood processing industry invested an estimated $50 million in new processing equipment and technologies. A shift to higher-value kiln-dried timber products has enabled an increasing proportion of native hardwood sawmills to remain competitive as resource availability declined. However, achieving economies of scale typically required to stay competitive has been difficult for many sawmills. Rising sawlog prices under the new market-based auction system have resulted in structural adjustment within the native hardwood sector, including sawmill consolidation. Earlier willingness to invest has given way to reluctance to further invest as declining resource availability has eroded confidence.
 |
|
| Fig 1. Trends in the public native forest sector | |
| Source: DPI from various sources, including: Resource Assessment Commission 1992; Ferguson, I.S., 1985; URS Forestry 2007; Comprehensive Regional Assessment Reports 1997, 1998, 1999; and Schirmer J., (forthcoming) 2010. | |
Emerging markets associated with climate change and the need to reduce greenhouse gas emissions brings new risks and opportunities for Victoria’s timber industry. It is well understood that the growth of trees removes carbon dioxide from the atmosphere. After harvesting, carbon remains stored in timber and forest products for varying periods. In this way, native forests and timber plantations play an important part in reducing greenhouse gas emissions and mitigating climate change. Applying an economic value to this service presents possible commercial opportunities for production forests to extend beyond traditional timber products, to include their ability to mitigate greenhouse gases in the atmosphere, or as a renewable energy source.
Domestic and international carbon emission trading schemes are emerging as the preferred market mechanism to achieve reductions in greenhouse gas emissions. The Australian Government has proposed that a Carbon Pollution Reduction Scheme commence in 2011. Existing voluntary international emission trading schemes show that forests can play an important role in offsetting greenhouse gas emissions by acting as ‘carbon sinks’.
Victoria’s softwood plantation processing industry has strived to realise maximum value from the maturing softwood plantation estate. Since the mid-1990s, as plantation volumes available for harvesting have expanded, more than $1.5 billion has been invested in green-field forest product processing facilities in Victoria and in the expansion and upgrade of existing processing operations. With Victoria now home to a number of integrated mills with multiple production processes, the industry has struggled to ensure sufficient sawlog plantation establishment to support the ongoing operation and scale of these new facilities. This is particularly the case as new timber plantations focus primarily on supplying the pulpwood market.
The Victorian Government’s substantial upgrade of the state’s national parks and conservation reserves in eastern Victoria, as outlined in the government’s 2006 election commitment, is now complete. The time is right for the Victorian Government to consolidate and enable the maximum productive use of public native forests available for timber production in compliance with sustainability objectives. Likewise, there are now established business drivers for Victoria’s plantation estate and industry.
Market opportunities multiply when the environmental credentials of timber as a building product are recognised. The opportunity for market recognition of timber as a renewable and environmentally-friendly building product will increase.
The attractiveness and profitability of wood as a source of bioenergy may also increase as the cost of fossil fuel-derived energy increases under a Carbon Pollution Reduction Scheme.
While the new market opportunities are exciting, these do not lessen the need to address key risks and challenges.
As the focus shifts to carbon, forests may be managed differently to protect the carbon they store. If the price of carbon were to rise high enough, markets may dictate that forests are equally or more valuable as carbon stores than as harvested timber.
Research suggests that increased levels of atmospheric carbon dioxide could increase tree growth and improve tree water use. However, climate models for Victoria highlight a number of risks for Victoria’s native and plantation forest estates that are likely to outweigh any potential productivity gains. Climate change is expected to introduce an environment where drought, storms and bushfires could become more frequent and severe, water could be scarcer, and there could be changes in the incidence of pest, weed and disease incursions. These factors could change the biophysical impacts on our native forests and timber plantations.
 |
| Fig 2. Plantation forest area in Victoria |
A future of new risks and opportunities
The future of Victoria’s timber industry presents great opportunities and many challenges for industry, workers, families and regional communities.
Lower rainfall and increased temperatures can lead to more intense competition for land and water. In this context, there could be an increasing tension between competing land-uses.
Pressure on roads and other infrastructure will grow as harvesting of short-rotation hardwood timber plantations in Victoria’s south-west increases. This will generate significant industrial activity, which will be particularly important for the regional economy in this area. The profitability of these large resource volumes, however, will be challenged by the adequacy and capacity of infrastructure to value-add or transport this resource.
The Victorian market could soon face increased import competition. Extensive eucalyptus plantations are being grown in South America (Brazil, Uruguay and Chile) and Indonesia. Providing there are no biosecurity issues, timber from these countries will come into the global market within the next five years, providing competition for Victorian native hardwood timber. As increased quantities of internationally grown timber become available, domestic prices could potentially fall to levels below what is required to sustain local commercial production.
Commonwealth taxation policies have been a major driver in plantation establishment in recent years. Changes to these tax settings would introduce significant challenges to the plantation industry to find new drivers for plantation investment.
Many of the existing challenges will remain
Many of the pressures currently affecting Victoria’s timber industry will continue. The timber industry operates in an environment of intense national and international competition, and maintaining competitiveness is an ongoing issue. In some areas, available timber resource volumes may not be sufficient to achieve production economies of scale required to maintain competitiveness. Further structural adjustment may be needed over the next 20 years to produce more efficient and competitive businesses.
As rainfall potentially decreases and becomes more variable, landholders are concerned about timber plantations intercepting and taking up rainfall that would otherwise replenish local water supplies and stream flows. The community is also interested in the impact of native forest timber harvesting on water quality and yield in water catchments.
As land owners respond to market signals and make best economic use of resources, competition for land between timber plantations and other ‘as of right’ activities in the rural landscape is likely to increase. The timber industry is trade-exposed and participants continue to be affected by changes in international markets, policy settings such as the Australian Government’s proposed Carbon Pollution Reduction Scheme, and interest rates and exchange rates.
The Victorian community demands high levels of competency and care in the management of forest resources. The industry faces challenges to the legitimacy of its operations from a public that is largely unaware of innovations in sustainable forest management. Such innovations have transformed management and harvesting practices in Victoria’s public native forests and timber plantations to international best-practice standards.
Negative public perceptions lower the standing of the timber industry in the eyes of the community and can constrain the industry’s ability to attract and retain skilled workers.
The industry must educate the wider community about advances in the timber industry’s best-practice management of native and plantation forest resources, and promote the wealth and employment generated by timber plantations for local communities.
Victoria’s future timber industry
Victoria’s timber industry faces extensive risks, challenges and opportunities. Like other successful industries, Victoria’s timber industry will need to adapt to a changing operating environment.
An agile response to future challenges will be the heart of tomorrow’s successful Victorian timber industry. As structural adjustment will continue to be a feature of the industry, participants that anticipate and respond quickly to change will be able to reap potentially large rewards. Business closures and consolidation will be a real prospect for industry players who do not adapt to changing operating conditions.
Victoria’s timber industry will need flexibility to adapt and capitalise on opportunities, manage risks and respond to rapid, large-scale change. To remain productive, competitive and sustainable, the industry needs to develop comprehensive strategies that are innovative and outward looking. It must maximise efficient use of available land, water, labour and timber resources. The industry will need to embrace changes in management techniques and invest in research and development. Adoption of new technology and innovative approaches will maximise opportunities to add value and efficiency.
A skilled workforce will be essential. The timber industry must expand its skills base to build its reputation as a productive, competitive industry with a strong safety culture.
A forward-looking timber industry will also access new and existing markets. New markets will be embraced as a way to create value through new investment and employment. The timber industry will focus on demand as well as supply, and strive to provide products and services sought by new and existing markets. Product marketing is an essential part of business.
A strong future timber industry will need to understand evolving community expectations regarding sustainable resource management. The industry will also recognise there may be reservations about the impacts of plantation establishment on communities and the landscape. It will acknowledge that being accepted as a legitimate land-use in the Victorian landscape requires active and targeted management. By building community understanding and through transparent processes it can demonstrate that its operations are sustainable, safe and produce economic, social and environmental benefits.
The transition from the current Victorian timber industry to one that wholly embraces the challenges of the future will not be easy. Industry players will need to rethink their approaches and operations. Many long-standing practices and attitudes will need to change.
The Victorian Government’s role in this transition is to assist the timber industry adapt to environmental, social and economic change, while building the industry’s capability to take a greater role in planning for changing conditions and managing business risks.
A new approach by government
Victoria’s timber industry is of major economic value to the state. The Victorian Government aims to maximise this value in a socially and environmentally sustainable manner. Through the new Timber Industry Strategy, the government will help the industry improve its commercial and environmental sustainability so that it continues to generate wealth for regional towns and families into the future. The government has a regulatory role in relation to Victoria’s timber industry. In some areas, that role is direct, such as managing public native forests on behalf of the Victorian community, and allocating logs for timber production. In other areas the role is more indirect, such as planning processes that govern various land-uses, including timber plantations.
The government will provide a regulatory framework that encourages investment in the timber industry. We will set appropriate policy to enable sustainable native and plantation forestry to occur within the Victorian landscape. We will seek to remove barriers that prevent markets from operating efficiently and effectively. Once in place, these settings should lead to sustainable employment, innovation and value-adding through industry response to market signals, without government intervention.
Victoria’s timber industry has experienced major changes in the past, and it is clear that further change is ahead. The government will put in place appropriate policies and initiatives that enable the timber industry to adapt and address emerging challenges, and capture future opportunities. Improved industry access to information, research and development, and market opportunities are key features of our strategy.
The Timber Industry Strategy reflects the Victorian Government’s commitment to a productive, competitive and sustainable timber industry in Victoria. The strategy centres around 13 key action areas. Each action area presents an action plan that identifies and addresses issues confronting the industry. The strategy provides a new policy framework that generates greater certainty and encourages industry investment. The aim is to ensure that the Victorian timber industry is competitive in a global market, and able to expand its economic, social and environmental contribution to the state over the next 20 years.
Victoria’s timber industry and its related communities have a positive future. The new Timber Industry Strategy provides a framework to take the Victorian timber industry forward with confidence.
National reforms will also be required
Most of the actions in the Timber Industry Strategy can be implemented within Victoria by the Victorian Government, with the support of the timber industry. In some areas, however, reform is needed in other Australian states.
The National Forest Policy Statement (1992) states: ‘Forest services will, where feasible, allocate a substantial proportion of harvesting rights through competitive bidding, with varying time frames and varying wood volumes, to allow opportunities for the entry of new processors and niche operators.’
Some states do not competitively allocate and sell timber from native forests and timber plantations. Substantial timber plantation estates in other states are influenced by non-commercial drivers, or are not managed to achieve competitive outcomes. Such practices are inconsistent with National Competition Policy.
The government will continue to work with other jurisdictions and the Australian Government in seeking greater national consistency across the timber industry. We will continue to seek a national approach for micro-economic reform of policy settings for the timber industry, including the introduction of more market-based approaches to log sales, governance and cost recovery.
Fig 3 Victoria’s forest estate and industry employment
Victoria’s forest estate
Victoria’s forest estate covers around 8.3 million hectares, or 36 per cent of the state. This consists of nature conservation reserves, State forest, other Crown and leasehold land, private native forest and plantations.
Nature conservation reserves
Nature conservation reserves account for around 3.5 million hectares, or 42 per cent of Victoria's forest estate. These areas may be Crown lands formally reserved for conservation, cultural heritage, and recreation and include national parks, nature reserves, state parks, and formal reserves for the protection of water supply catchments.
State forests
State forests occupy around 3.2 million hectares, or almost 40 per cent of Victoria’s forest estate and are managed for various purposes from environmental conservation to timber production. The area available for timber production in eastern Victoria is confined to around 730,000 hectares or nine per cent of the public native forest estate. In any one year, timber production occurs in less than one per cent of Victoria’s public native forest estate.
Plantations (including farm forestry)
 |
| Fig 4. Victoria's timber industry employement by sector |
There are currently around 229,000 hectares of hardwood plantations in Victoria. These are almost exclusively short-rotation plantations producing high quality woodchips. Longer rotation softwood plantations currently occupy around 222,000 hectares in Victoria providing an important source of sawlogs and woodchips. While most plantations are large-scale of at least 40 hectares, smaller-scale farm forestry plantations occur throughout Victoria occupying around 12,000 hectares. Farm forests provide important on-farm benefits and may grow to be a significant source of timber production.
Private native forests
Approximately one million hectares of private native forests are dispersed throughout Victoria. It is estimated that 350,000 hectares of this area may be suitable for timber production.
Priorities
PRIORITY 1: A productive, competitive and sustainable timber industry
PRIORITY 2: Develop and support efficient timber markets
PRIORITY 3: Innovative forestry science, technology, and practice change
PRIORITY 4: Strong timber industry communities
