A forestry worker measures a log at a logging site near Kumara. Photo: 123RF / Lakeview Image Library
Forest industry contractors are rapidly abandoning their business, following too many tough years with no improvement in sight.
Forest Industry Contractors Association (FICA) chief executive Prue Younger said forestry contractors were at a breaking point, with some already in liquidation and many more at risk of losing their livelihoods, amid a global downturn in demand and prices.
The ANZ Bank forestry index fell 3.0 percent in April over March, as China's demand for logs dropped, inline with a downturn in its construction industry, with buyers shopping around for rock bottom prices.
Younger said the downturn coincided with a renewed concern about the viability of the forestry contracting businesses which was more recently dealing with high inflation, higher interest rates, wet weather, as well as the aftermath of the Cyclone Gabrielle disaster.
Those challenges, along with falling prices and staff shortages were making it impossible for some contractors to continue to operate.
A recent survey of FICA members indicated a widespread drop in production over the past year, with 57 percent of respondents indicating their production was down 20 percent or more, and a further 16 percent reporting a drop of more than 30 percent.
About one in five contractors did not have a current contract in place, while 40 percent were operating on one-year contracts.
FICA board member Ross Davis said two large Gisborne-based contractors had recently closed their business after operating in the region for between 15 and 20 plus years.
Davis said the industry was in need of support, given the poor outlook.
"Working with the wider industry and the Ministry of Social Development on the best possible subsidy schemes is imperative," he said.
"We are working with Ministry for Primary Industry - Te Uru Rākau to get better recognition at government level."
The forestry sector was the third biggest contributor to export earnings alongside dairy and meat.
"It's not a blame game at all, but if we want logging contractors to be around in another 12-24 months then something needs to change now," Davis said.
"We employ thousands of people, and we cannot keep operating at a loss. Jobs will be lost. Homes will be lost. Communities will be lost."
Younger said the downturn in the industry was widespread and growing in all regions of the country, with contractors going out of business at a rate of at least one every fortnight.
"We totally understand that export markets are pretty poor at the moment, but long term, if we're expecting blocks to be harvested, there will be no contractors around to do probably more than medium-to-small wood blocks," she said.
"So conversations need to be had as an industry-wide supply chain discussion."