guidance on the likely establishment of new timber...

Department of the Environment

Guidance on the likely establishment of new timber plantations in Australia

Final Report

12 December 2014 A14-20853

Melbourne

DISCLAIMER

Indufor makes its best effort to provide accurate and complete information while executing the assignment. Indufor assumes no liability or responsibility for any outcome of the assignment.

Copyright © 2014 Indufor

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, but not limited to, photocopying, recording or otherwise.

Document Control RecordDate Version Changes/Author27/10/14 0.1 Drafting report (B Freeman)

12/11/14 0.2 Finalisation of drafting for peer review (B Freeman)

13/11/14 0.3 Peer review and revisions to initial drafting (A Morton)

14/11/14 1.0 Draft report (B Freeman)

3/12/14 1.1 Revisions of draft report based on Departmental feedback (B Freeman)

4/12/14 1.2 Peer review (A Morton)

5/12/14 2.0 Report revisions following peer review (B Freeman)

8/12/14 2.1 Peer review (A Morton)

9/12/14 2.2 Report revisions following peer review (B Freeman)

12/12/14 3.0 Final report (B Freeman)

© INDUFOR: 14-20853 New plantation establishment in Australia i

PREFACEThis report was prepared at the request of the Department of the Environment (the Client) by Indufor Asia Pacific (Australia) Pty Ltd. The intended user of this report is the Client. No other third party shall have any right to use or rely upon the report for any purpose.

This report may only be used for the purpose for which it was prepared and its use is restricted to consideration of its entire contents. The conclusions presented are subject to the assumptions and limiting conditions noted within.

Indufor Asia Pacific (Australia) Pty Ltd

Blair FreemanHead of Strategy and Sustainability

Andrew MortonManaging Director

Contact:

Blair FreemanIndufor Asia Pacific (Australia) Pty LtdPO Box 425Flinders Lane VIC 8009AUSTRALIA

Tel. +61 417 381 609

www.indufor-ap.com

ii © INDUFOR: 14-20853 New plantation establishment in Australia

TABLE OF CONTENTSPREFACE

TABLE OF CONTENTS

1. INTRODUCTION

1.1 Background

1.2 Methodology

1.3 National trends

1.4 Plantation types

2. REGIONAL ANALYSIS

2.1 Western Australia

2.2 Northern Territory

2.3 Mount Lofty Ranges & Kangaroo Island

2.4 Green Triangle

2.5 North Queensland

2.6 South East Queensland

2.7 Northern Tablelands NSW

2.8 North Coast NSW

2.9 Central Tablelands NSW

2.10 Southern Tablelands NSW

2.11 Murray Valley

2.12 Central Victoria

2.13 Central Gippsland

2.14 East Gippsland and Bombala

2.15 Tasmania

3. SUMMARY

4. REFERENCES

© INDUFOR: 14-20853 New plantation establishment in Australia iii

1. INTRODUCTIONThe Australian Government Department of the Environment (‘the Department’) is seeking advice in relation to the consideration of plantation-based projects that can contribute to abatement of greenhouse gas emissions. This report relates specifically to consideration of the likely establishment of new timber plantations in Australia and assessment of the ‘additionality’ of new plantations established for the purpose of providing emissions abatement.

1.1 BackgroundThe Department is considering developing a methodology determination under the Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act) for projects that generate abatement by establishing new timber plantations on land that has been previously used for cropping or grazing.

Paragraph 106(1)(a) of the Act provides that a determination must apply to a ‘specified kind of offsets project’. The Department is seeking to determine which kind of projects can meet the relevant requirements in the Act including the offsets integrity standards in section 133.

Paragraph 133(1)(a) of the Act provides that ‘projects of the kind specified in the methodology determination should result in carbon abatement that is unlikely to occur in the ordinary course of events’. This is different from the common practice test, which is the additionality requirement under the Carbon Farming Initiative.

The Department has advised that a new plantation established on land that has been previously used for cropping or grazing will meet the requirement in paragraph 133(1)(a), if it was determined as unlikely to be established in the ordinary course of events. Accordingly, the Department has engaged Indufor to advise:

whether, in the ordinary course of events, new plantations are likely or unlikely to be es-tablished on land that has been previously used for cropping or grazing,

what kind of plantation would be established on this land (regardless of likelihood of es-tablishment), and

the size of any plantations established on this land (regardless of likelihood of establish-ment).

1.2 MethodologyThis report presents guidance on the likely establishment of new timber plantations in Australia. This guidance is based on a desktop review of relevant plantation statistics, notably the most recent publications by ABARES on Australian plantation statistics and Australia’s plantation log supply over a 40 year period (Gavran 2014; Gavran et al. 2012; and Gavran & Parsons 2011). These reports provide an informative summary of the location and characteristics of each of the NPI regions, the pattern and quantum of plantation establishment to date, and a projection of the future log supply based on the existing plantation resource established up to 2010.

To complement this, Indufor has applied its industry knowledge to providing an assessment of the likelihood of new plantation establishment over the next few years, with reference to not only the historical trends but also taking into account the supply-demand balance in each of the regions with demand as indicated by the existing processing capacity in the region.

No consultation was undertaken in preparing this guidance. However, Indufor acknowledges the ongoing work by ABARES in collecting data and plantation area forecasts directly from plantation owners and managers, and State and Territory agencies.

In accordance with the ABARES reporting on plantation statistics, this guidance on the likely establishment of new timber plantations is based on National Plantation Inventory (NPI regions). These regions (Figure 1-1) provide the geographic scope for the analysis.

© INDUFOR: 14-20853 New plantation establishment in Australia 1

Figure 1-1 National Plantation Inventory (NPI) regions

NPI region numbering:

1 Western Australia 6 South East Queensland 11 Murray Valley2 Northern Territory 7 Northern Tablelands 12 Central Victoria3 Mt Lofty Ranges & Kangaroo Island 8 North Coast of NSW 13 Central Gippsland4 Green Triangle 9 Central Tablelands 14 East Gippsland & Bombala5 North Queensland 10 Southern Tablelands 15 Tasmania

Source: Commonwealth of Australia 2014

ABARES’ forecasts for Australia’s plantation log supply over a 40+ year period are based on a range of assumptions that are incorporated in the analysis of future supply set out in this report. Some of the key assumptions underpinning ABARES’ most recent log supply outlook (notably Gavran et al. 2012) include the following:

Most of the forecasts were derived directly from data provided by the owners and managers of large plantation estate, based on their outlook from around 2010. Where plantation owners and managers did not supply log supply forecasts, the estimates are based on yield models developed by the NPI (with source data compiled between 2002 and 2007), using data on plantation areas by species and region.

The forecasts assume that harvested areas will usually be replanted with the same type of plantation species.

Some plantation owners and managers provided smoothed forecasts. For the modelled forecasts, ABARES did not undertake smoothing.

Variations in the area planted from year to year will lead to peaks and troughs in forecast supply. In reality, market demand and supply will influence the actual volumes that are harvested at a particular time, and plantation managers will need to adjust silviculture, scheduling and operational management accordingly.

The forecasts assume that for sawlog production, thinning and pruning operations will be undertaken at an optimal level. If this does not happen, future sawlog yields will be lower than forecast.

2 © INDUFOR: 14-20853 New plantation establishment in Australia

Potential changes in the productivity of future rotations have not been considered in the forecasts produced by the NPI.

Noteworthy implications arising from these assumptions are:

The ABARES forecasts will tend to be ‘lumpy’, reflecting plantation area extrapolations and modelled forecasts that do not factor the dynamics of market demand or infrastructure constraints on actual production (e.g. log haulage or port handling constraints); and

The ABARES forecasts for production beyond the current (existing) rotations incorporate a level of industry expectations, but also a significant component of modelling assumptions that may overestimate the future log supply if there is no new plantation establishment; or underestimate the log supply if there is a substantive level of new plantings.

However, for the purpose of this review and the outlook to 2020, Indufor considers ABARES’ plantation log supply forecast provides a reasonable basis for considering the supply-demand balance in each of the NPI regions.

Drawing on the ABARES data available, Indufor has considered the historical trend in plantation development; the current status of plantation industry development, including the supply-demand balance; and the most recent data on new plantation establishment.

On this basis, Indufor has formed a view on the likelihood of new plantation establishment over the next 5-6 years. These time periods extend to 2020, which aligns with Australia’s current focus on achieving emission reduction targets.

1.3 National trendsAustralia’s total plantation estate was around 2 million hectares in 2012-13 (Figure 1-2), and has remained stable for the past five years (Gavran 2014). This follows a period of substantial expansion between 1995 and 2009 (15 years), during which time the national estate grew from around 1.1 million ha to its current level.

Figure 1-2 Total Australian plantation area by type, 1995 to 2012

Source: Gavran 2014

In broad terms, there have been two main investment models that account for the majority of new timber plantation establishment in Australia. These are:

State and Federal Government investment in establishing softwood plantations on Crown land (from the early 1900s onwards but particularly from the 1960s to early 1990s); and

Retail-based Managed Investment Scheme (MIS) investment, primarily in hardwood plantations on private land (from the late 1990s through to around 2009).

State government investment


The establishment of commercial softwood plantation estates commenced in most states in the early 1900s, following development work on suitable species selection that dates back to the 1880s and 1890s, notably in South Australia, Victoria and NSW. Softwood establishment from the 1920s onwards comprised principally radiata pine (Pinus radiata) and maritime pine (P. pinaster) in southern temperate zones, while in Queensland, initial establishment of slash pine (P. elliottii) was followed by loblolly pine (P. taeda) and Carribean pine (P. caribaea).

State-owned and privately owned commercial pine plantations increased incrementally from the 1920s to the 1950s. The major surge in new plantation establishment came in the 1960s, when the Commonwealth Government established the Softwood Forestry Agreements Act 1967, which (with subsequent acts) provided 35-year loans to the States to increase the total softwood plantation estate from under 200 000 ha in 1967 to close to 1 million ha by 2000. This created the acceleration phase in softwood plantation development in Australia and was essentially the mechanism responsible for the development of 70% of Australia’s softwood plantation resource (de Fegely et al. 2011).

In its recent Inquiry into the future of Australia’s forest industry, the Parliament of the Commonwealth of Australia (2011) noted a submission by the Department of Agriculture, Fisheries and Forestry, which explained:

‘Max Jacobs, Director-General of the Forestry and Timber Bureau, argued in 1964 that Australia should become self-sufficient in wood. The Australian Government supported the States in strategies to establish more plantations to cover the expected shortages, and find pulpwood markets for the otherwise unsaleable trees so that native forests could be regenerated as future tree crops...This was facilitated through the Softwood Forestry Agreements Act 1967 and subsequent acts (1972, 1976, and 1978), and self-sufficiency became implicitly, if not explicitly, a ‘national’ policy.

From the 1960s to the 1980s the rate of plantation establishment increased to an average of around 25,000 hectares per year... Over 90% of the plantations established in this period are exotic pines managed on [30 – 35 year rotations] primarily for sawlog production.’

This now extensive plantation resource has contributed significantly to Australia’s timber and wood-product output. The establishment of these plantations was assisted by loans from the Australian Government to State and Territory governments; and whilst this policy resulted in a considerable plantation expansion, it was largely through government-managed areas (Parliament of the Commonwealth of Australia, 2011).

MIS-based investmentThe next major investment model in terms of creating the Australian plantation estate was the MIS plantings, which leapt forward in the late 1990s.

In 1997, the Australian, State and Territory Governments and the plantation timber growing and processing industry established a strategic partnership with the national forest industry. ‘Plantations for Australia: the 2020 Vision’ was based on the overarching principle to enhance regional wealth creation and international competitiveness through a sustainable increase in Australia's plantations, based on a notional target of trebling the area of commercial tree crops to around 3 million hectares by 2020 (Department of Agriculture, 2014). The Vision was launched by the Ministerial Council on Forestry, Fisheries and Aquaculture, and revised in 2002.

With the 2020 Vision providing a quasi-policy platform, the MIS plantation investment model was developed and refined further on the basis of taxation incentives, which provided retail investors with the capacity to deduct plantation development expenses from other income. The profile of new plantation establishment that followed is shown in Figure 1-3. This profile highlights the predominant focus of new plantation establishment was hardwood plantations, which were established mainly by MIS investment interests in short rotation (10-12+ year) plantations for high quality wood fibre production.

The MIS model proved to be an effective form of incentive to attract investment funds and establish non-industrial plantations; however, in broad terms, it was not successful in creating superior returns for investors (de Fegely et al. 2011). Under pressure from less-than-anticipated growth returns and financial returns, coupled with the impacts of the Global Financial Crisis and tightening credit requirements, the late 2000s saw the financial collapse of the main MIS promoters and a dramatic decline in new plantation development in Australia.


Figure 1-3 New plantation establishment in Australia, 1995 to 2012

Source: Gavran 2014

The national profile of new plantation establishment shows:

The generally flat and then declining profile of new softwood plantations since the mid-1990s, and particularly since the mid-2000s. At a national level, the total area of new softwood plantations established in 2000-01 was around 10,000 ha; in 2004-05 it was around 6,500 ha; and by 2011-12 and 2012-13, it had declined to 700 ha and 300 ha respectively (Gavran 2014); and

The significant decline in new hardwood plantations from 2007 onwards, down to a minimal level of new plantings within the last 3-4 years. This follows the slowing and then winding up of MIS timber plantation programs from 2009 onwards.

As a result of these national trends in softwood and hardwood plantation interests, the rate of new plantation establishment across Australia has declined markedly in recent years. These national trends set the tone for the regional analysis that follows in Section 2. A summary of the outlook for new plantation establishment across NPI regions is set out in Section 3.

1.4 Plantation typesThis advice for the Department considers the types of plantations established in Australia. A simple categorization can be based on whether plantations are hardwood (predominantly eucalypts) or softwood (predominantly pines); and whether they are managed on a long rotation (for sawlogs plus pulpwood) or a short rotation (for pulpwood only). This categorization, set out in below, is used for this analysis.

Table 1-1 Broad categorisation of timber plantation types in Australia

Short rotation Long rotation

Hardwood Typically Eucalypts, e.g. Eucalyptus globulus (blue gum) or E. nitens (shining gum), grown for 10-15 years for pulpwood fibre

Typically Eucalypts, e.g. Eucalyptus nitens (shining gum) and E. pilularis (blackbutt); or Khaya senegalensis (African Mahogany), grown for 16-25+ years, for sawlogs and pulpwood fibre

Softwood Nil known examples in Australia Typically pines, e.g. Pinus radiata (radiata pine) or P. caribaea (Caribbean pine), grown for 28+ years, for sawlogs and pulpwood fibre

Source: Indufor


The vast majority of timber plantations established in Australia to date fall into two categories – softwood long rotation; and hardwood short rotation.

There has been some significant areas of hardwood long rotation plantations established across most states. The total area of plantations in this category currently is in the order of 110,000 ha, or around 11% of the total hardwood estate (Gavran, 2014). In this context, it is a much smaller category than the two primary categories, but nonetheless significant.

In relation to softwood short rotation plantations, there are no significant areas established to date, and Indufor has not seen any investment models or other commercial drivers to date to suggest that softwood short rotation plantations will be established in the short to medium term.


2. REGIONAL ANALYSISThe trends and outlook for plantation establishment in each of the NPI regions around Australia, in the short to medium term, are set out below.

As noted above, various ABARES publications, most recently its research on Australia’s plantation log supply 2010-2054, provide an informative summary of the location and characteristics of each of the NPI regions, the pattern and quantum of plantation establishment to date, and a projection of the future log supply based on the existing plantation resource established up to 2010 (refer Gavran et al. 2012).

This Indufor report was prepared to complement this regular ABARES reporting, by providing an assessment of the likelihood of new plantation establishment over the next few years, with reference to not only the historical trends but also the supply-demand balance in each of the regions.

2.1 Western AustraliaWestern Australia has the largest area of hardwood timber plantations in Australia (approximately 300,000 ha) and, combined with a substantial softwood plantation estate (approximately 98,000 ha), has the second largest area of timber plantations behind Victoria (Gavran 2014).

The plantations are located in the South West of the State, stretching across an arc from the north of Perth to the east of Esperance.

The major hardwood plantation species in Western Australia is blue gum (E. globulus), which is grown mainly for pulpwood production. Most of the blue gum plantation estate was established between 1996 and 2010 – a total of approximately 270,000 ha over this period. The vast majority of the area under blue gum plantation is on private land (Gavran et al. 2012).

Radiata pine (P. radiata) and maritime pine (P. pinaster) are the major softwood plantation species, and have been producing sawlogs and pulpwood for many years. The total area of softwood plantations has declined marginally over the past 10 years because plantations in some groundwater recharge localities have not being replanted following final harvest. The reduction has exceeded the area of new softwood plantations established in other localities (Gavran & Parsons 2011).

Industry and demand driversThe major softwood plantation timber processing facilities are located at Neerabup (notably LVL production north of Perth) and Dardanup (sawn timber and particleboard production, south east of Bunbury). The softwood industry in this region can be considered to be mature. There has been some plantation area reductions over recent years, particularly around and north of Perth; however, the total area of pine plantations has steadied (around 7,000 ha of new softwood plantations were established between 2006 and 2010, partially offsetting the area removed to increase groundwater recharge); and the annual volume of log production is forecast to be around 900,000 – 1 million m3 per year for the next 15+ years (Figure 2-4). This supply is slightly under the existing processing capacity in the region, and during some future periods certain log grades maybe less than those desired by manufacturing enterprises.

In relation to hardwood plantations, the industry is focused primarily on woodchip exports, through the ports at Bunbury and Albany (Gavran et al. 2012). After a rapid ramp up in industry capacity, between 2003 and 2006-07 in particular, the production of woodchips from hardwood plantations has been around 2.5 million m3 per year since 2006-07 (Gavran et al. 2012). The plantation estate is forecast to have the potential to increase to over 3.5 million m 3

per year between 2015 and 2019, and rise further in the subsequent period (Figure 2-5); however, industry capacity to produce and export at this level will depend on a range of factors including port infrastructure, port access for multiple industry players, and international market demand and prices. It is anticipated that these factors will constrain production to some extent over the short to medium term.

Further to this, a suite of hardwood plantations have resulted in lower yields than originally expected, and a significant proportion of these are unlikely to be re-established to plantations, and most likely converted to non-forestry land uses. These combined influences are likely to result in subdued interest in new plantation development.


Figure 2-4 Forecast softwood plantation wood flows in Western Australia

Source: Gavran et al. 2012

Figure 2-5 Forecast hardwood plantation wood flows in Western Australia


Rate of new plantationsReflecting these industry trends in the state, and more widely, the establishment of new plantations in Western Australia has dropped to near zero over the past five years (refer Figure 2-6). In 2004-05, there was approximately 22,000 ha of new plantations established; by 2011-12, new plantation establishment was less than 500 ha and has remained at negligible levels since.

In addition to the reduction in softwood plantation areas, there have been some significant removals of hardwood plantation areas, as lease agreements reach completion and plantations deemed commercially unviable are not replanted. This trend is expected to continue over the next 5+ years as first rotation hardwood stands mature and are harvested.


Figure 2-6 New plantations in Western Australia, 2000 to 2013

Source: Indufor estimates derived from Gavran 2014

Outlook for new plantationsIn Western Australia, there will continue to be replanting of most of the mature softwood plantation estate (with the exception being the Gnangara area near Perth), but only a proportion of the existing hardwood estate. There may be some relatively incremental establishment of new plantations (softwood and hardwood) on land that has been previously used for cropping or grazing, where this is adjacent or in close proximity to the existing estate, but this is likely to be less than the plantation area being changed to non-forestry land uses.

Indufor considers it possible but unlikely that there will be substantive new plantation establishment on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years. This guidance is summarised below.

Table 2-2 Outlook for new plantation establishment in Western Australia, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations, to 2020

Key factors

Softwood – long rotation

Up to 900,000 m3

Indicatively, 900,000 m3

Possible but unlikely

Uncertainty over supply levels Capacity of plantation estate to

support manufacturing base may be tested

Industry in mature phase No new planting for 5+ years

mostly due to difficultly attracting capital to plantation investment

Softwood – short rotation

- - Unlikely No established investment model

Hardwood – short rotation

3.5 - 4.0 million m3

3.5 – 4.0 million m3

Unlikely Supply in 2020 likely to approximate current capacity, then be less than capacity for following decade

Industry restructuring ongoing No new planting for 5+ years Expectation of plantation area

reductions

Hardwood – long rotation

- Not yet established

Unlikely Returns on risk not aligned with investor expectations to date

Source: Indufor, Gavran et al. 2012


2.2 Northern TerritoryPlantations in the Northern Territory are located on Melville Island and some northern parts of the mainland. A relatively small area of pine plantations (primarily P. caribaea) was established on Melville Island in the 1970s and 1980s, totaling around 2,400 ha, and this area has remained static since. Subsequently, between 2001 and 2010, there was a rapid rise in hardwood plantation development. The initial wave was MIS planting of Acacia mangium on Melville Island for short rotation pulpwood production. That expansion created an estate of over 27,000 ha, before MIS interests were curtailed and new planting ceased. The Tiwi Land Council is now managing the Acacia mangium resource (Gavran et al. 2012).

In the late 2000s, significant plantings of African mahogany (Khaya senegalensis) began in mainland Northern Territory, primarily around the Douglas & Daly region. This planting has continued and this is one of the few regions in Australia where there has been new commercial timber plantations established over the past five years. The total area of African mahogany currently is estimated to be around 14,000 ha; and the total area of hardwood plantations in the Northern Territory is around 41,000 ha (Gavran 2014).

Industry and demand driversThe Northern Territory does not have any substantive domestic processing facilities for plantation timber. The small Caribbean pine resource has been utilised for local needs and also exported as round logs to northern Asian markets. The Northern Territory softwood plantation estate appears to be relatively unaffected by market conditions.

The primary focus for plantation utilisation is currently the export of Acacia mangium woodchips from Melville Island, and the Tiwi Land Council is continuing to develop port facilities and other systems to set up and maintain export operations, to North Asia in particular. These operations are at a formative stage and the scope to forecast industry demand, and its likely impact on new plantation establishment, is limited.

In broad terms, the most likely outlook for the next 4-5 years is the replanting of harvested areas, ideally with improved genetics and better silvicultural systems, but limited new plantations. This remains subject to successfully establishing export operations on a profitable footing. To maintain export operations over time, the Northern Territory will need to smooth its hardwood pulpwood flows, which are forecast to move up and down (Figure 2-7) around an average of approximately 570,000 m3 per year for the next 10+ years.

Figure 2-7 Forecast hardwood plantation wood flows in the Northern Territory


In the case of the African mahogany, the industry is at a formative stage of development and the primary focus of industry proponents is building a sufficiently large and contiguous resource base to support competitive supply of high value sawlogs and other wood products. The time horizon for this vision is beyond the outlook period for this report. However, this objective is expected to drive ongoing plantation development, subject to finance and other commercial considerations.


Rate of new plantationsIn contrast to most other NPI regions, the Northern Territory has maintained a level of new plantings over the past five years. These plantings have been all hardwood, featuring Acacia mangium (on Melville Island) and African mahogany (NT mainland) between 2000 and 2010, and African mahogany over the past 3-4 years. Planting rates have declined substantially since MIS programs ceased in the late 2000s.

Figure 2-8 New plantations in the Northern Territory, 2000 to 2013


Outlook for new plantationsIndufor considers it unlikely that there will be substantive new plantation establishment of softwood (pine) in the Tiwi Islands on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years.

In the case of hardwood, there is ongoing plantation establishment of African mahogany on the mainland, around the Douglas & Daly and Katherine regions. Industry proponents are looking to continue developing this resource base. On this basis, Indufor considers it is possible and likely that new plantings of African mahogany will be established in these regions, in the ordinary course of events.

Outside the planting of African mahogany in this region, Indufor considers it unlikely there will be new plantation establishment of softwood (pine) in the Northern Territory in the ordinary course of events over the next 5-6 years. This guidance is summarised below.

Table 2-3 Outlook for new plantation establishment in the Northern Territory, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new


Key factors


15,000 m3 Limited local capacity

Unlikely No new planting for 15+ years No ‘pull through’ demand




Average of 400,000 m3

Port facility to be developed

Unlikely Infrastructure constraints

No new planting for 5+ years


150,000 m3

(at its peak before

dropping back to lower

levels)

Not yet established

Likely New plantings have continued, specifically African mahogany on the mainland

Ongoing focus on developing resource base for high value sawlogs and other products



2.3 Mount Lofty Ranges & Kangaroo IslandThe Mount Lofty Ranges & Kangaroo Island NPI region is relatively small in land area and also planted area compared to other regions. In total, there is approximately 34,000 ha of timber plantations, comprising 20,000 ha (60%) softwood and 14,000 ha (40%) hardwood. The Mount Lofty Ranges, encompassing the Fleurieu Peninsula south of Adelaide, comprises mostly radiata pine (P. radiata) plantations; while Kangaroo Island has a large proportion of blue gum (E. globulus) plantations as well as radiata pine.

As is the case in other regions, the softwood plantations were established progressively over a long period, commencing before 1965-66 and extending to around 2010. Peak planting periods were the mid-1980s and 1990s, but rates of new plantation were generally less than 500 ha per year. The softwood plantations were established mainly for sawlog production.

In addition, since this data was collected, in 2013 a wildfire destroyed most of the Mid-North plantations, and there is uncertainty whether the forest manager will re-establish these plantations.

The hardwood plantations were established primarily between 2000-01 and 2008-09, and almost entirely for pulpwood production. However, the plantation area has declined since, as a result of plantations being written off and decisions to not replant some harvested plantations following a change of ownership.

Industry and demand driversSoftwood wood flow forecasts for the region show a relatively stable supply over the next 20+ years, reflecting the progressive establishment of softwood plantations over time. The forecast supply of sawlogs is significantly smaller than the major plantation timber regions such as Western Australia and the Green Triangle, but substantial nonetheless and it is likely that demand and market access will be more limiting than supply over the next 5-6 years.

Figure 2-9 Forecast softwood wood flows in Mt Lofty Ranges/Kangaroo Island


In addition, the peri-urban nature of plantation areas in this region mean the alternative uses of agricultural land will include hobby farms and potentially residential development, which will in some cases lead to a higher opportunity cost for use of the land for commercial plantation forestry development – and therefore, will tend to reduce the demand side factors further.

For these reasons, Indufor does not expect industry and demand drivers to underpin new softwood plantation establishment in this region in the short to medium term.

Hardwood wood flow forecasts show an irregular, lumpy profile that will present challenges for plantation owners in bringing this wood to market in an orderly way. Kangaroo Island has not yet developed the port facilities to support large scale woodchip export operations; and for this and other reasons noted above, Indufor does not expect there to be new hardwood plantation establishment in this region in the short to medium term.


Figure 2-10 Forecast hardwood wood flows in Mt Lofty Ranges/Kangaroo Island


Rate of new plantingsReflecting industry trends and regionally specific issues outlined above, the rate of new plantation establishment has dropped to effectively zero over the past five years (Figure 2-11).

Figure 2-11 New plantations in the Mount Lofty Ranges/Kangaroo Island, 2000 to 2013


Outlook for new plantationsIndufor considers it unlikely there will be any substantive new plantation establishment in the Mount Lofty Ranges or on Kangaroo Island on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years. This guidance is summarised below.

Table 2-4 Outlook for new plantations in Mount Lofty Ranges/Kangaroo Island, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new


Key factors


200,000 m3 <200,000 m3; variable levels^

Unlikely No new planting for 5+ years

Recent fires impacting estate

Peri-urban competition for land




120,000 m3 Not yet developed

Unlikely Industry restructuring ongoing


Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new


Key factors

Industry infrastructure constraints


Expectation of plantation removal




Industry infrastructure constraints


Source: Indufor, Gavran et al. 2012; ^ indicative annual demand/capacity estimates are based on current levels of operation and subject to considerable variation over time, e.g. mill expansion/closures.

2.4 Green TriangleThe Green Triangle encompasses the higher rainfall areas of southeast South Australia and southwest Victoria. It has been a major softwood plantation region since the early 1900s and includes some of Australia’s most productive radiata pine plantations (Gavran & Parsons 2011). More recently, from 1996 to 2010, there was a rapid increase in the establishment of hardwood (blue gum) plantation to produce pulpwood for the pulp and paper industry. In 2012-13, the total area of timber plantations in the region was around 348,000 ha, comprising around 51% softwood plantations and 49% hardwood plantations (Gavran et al. 2012).

Industry and demand driversMost of the softwood plantations in the region are radiata pine and have provided a steady supply of sawlogs, veneer logs and pulpwood to large-scale integrated processing industries at Mount Gambier, Tarpeena, Dartmoor, Millicent and other sites (Gavran & Parsons 2011).

In broad terms, the softwood industry in this region can be considered mature. The forecast for softwood sawlog wood flows, and pulpwood flows, are relatively stable (Figure 2-12); and industry development is in a phase of consolidation; there has been some recent changes of ownership of processing facilities, but limited investment in new processing facilities or production capacity; and over the past 10 years, there has been closures of regional sawmills (notably at Dartmoor) and also reduction in pulp production capacity (at Tantanoola). Sawlog supply is approximately in line with the existing processing capacity while pulpwood formerly processed at the Tantanoola pulpmill is now exported as woodchip via Portland.

Figure 2-12 Forecast softwood plantation wood flows in the Green Triangle region



The hardwood plantation industry in this region is also in a consolidation phase, albeit following a much shorter history of development. Around 160,000 ha of blue gum plantations were established between 1996 and 2010, principally through successive waves of MIS programs. For reasons that extend beyond the scope of this report, this large-scale plantation establishment wound down to almost zero around 2009-10. Since that time, there have been wholesale changes in ownership. Most of the estate is now owned or controlled by institutional fund managers, who are focussing on consolidating their plantation estates, and securing markets for the wood fibre, predominantly in the form of woodchip exports through Portland.

The ABARES forecast of hardwood plantation wood flows in this region (Figure 2-13) shows two peaks within the next 15-20 years. The first, between 2015 and 2019 represents the maturing of the first wave of blue gum establishment between 1996 and 2003; the second peak is expected to follow around 2030, based on the second wave of MIS-funded plantation establishment between 2005 and 2010 and assumptions about replanting this resource base.

Figure 2-13 Forecast hardwood plantation wood flows in the Green Triangle region


The harvesting of the maturing hardwood plantation estate has been delayed due to softness in international woodchip markets. The average hardwood pulpwood harvest forecasted by ABARES over this period is expected to be around 2.2-2.3 million m3. Given the delay arising from the soft markets, the available volume for the next 3-5 years would be expected to be higher again. This higher volume is close to exceeding the maximum throughput capacity of the current Portland port facilities. Therefore, the throughput capacity of this port has become one of the major factors in any expansion of the hardwood plantation estate in the Green Triangle region. Other factors include the decision by new owners to not replant low productivity sites, particularly those with long haul distances to port, and a rebalancing of the allocation of land to agricultural uses.

Rate of new plantationsReflecting industry trends, the rate of new plantation establishment has dropped to near zero in the past four years (Figure 2-14); and in regions such as the Green Triangle, there has been some significant removals of plantation areas, as lease agreements reach completion and plantations deemed commercially unviable are not replanted. This trend is expected to continue over the next 5+ years as first rotation hardwood stands mature and are harvested.


Figure 2-14 New plantations established in the Green Triangle, 2000 to 2013


Outlook for new plantationsThe Green Triangle is one of Australia’s largest and most productive plantation regions, and therefore there will continue to be extensive replanting of the mature softwood plantation estate but only a proportion of the existing hardwood estate. There may be some relatively incremental establishment of new plantations on land that has been previously used for cropping or grazing, where this is adjacent or in close proximity to the existing estate, but this is likely to be less than the plantation area being changed to non-forestry land uses.

Indufor considers it unlikely there will be substantive new plantation establishment on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years. A summary of this advice is presented below.

Table 2-5 Outlook for new plantations in the Green Triangle region, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new


Key factors


~2.3 million m3 2.0 – 2.3 million m3

Unlikely Supply aligned with capacity





3.0 – 3.5 million m3

~3.3 - 3.8 million m3

Unlikely Due to delayed harvests, supply exceeds current capacity

Industry restructuring ongoing

Expectation of further plantation removals


- Not yet developed

Unlikely Return on risks not aligned with investor expectations to date


2.5 North QueenslandThe total area of timber plantations in North Queensland is approximately 37,000 ha, comprised of around 27,000 ha (72%) of softwood plus mixed plantations and around 10,000 ha (28%) of hardwood plantations (Gavran et al. 2012). These plantations are spread out along the coast between Gladstone and Cooktown.

The softwood plantations are concentrated between Ingham and Tully, and on the Atherton Tablelands, and comprise exotic Caribbean Pine (P. caribaea) and native hoop pine


(Araucaria cunninghamii). These plantations were established progressively from the 1970s, with a peak in planting in the late 1980s (at around 1,000 ha per year).

The hardwood plantations were established more recently, between 2005 and 2009 in particular. These plantations included eucalypts for pulpwood production and also eucalypts, teak and African mahogany for sawlog production. However, recurring disease and cyclone damage led to substantial areas of broadleaved and coniferous plantations being written off in 2010 (Gavran & Parsons 2011). Cyclone damage in 2010-11 resulted in over 6,000 ha of hardwood plantations being removed from the plantation estate (Gavran et al. 2012).

Industry and demand driversThere is limited domestic processing of plantation timber in North Queensland. There are two sawmills of note that are processing softwood plantation timber (at Ravenshoe on the Atherton Tablelands and Bondoola near Yeppoon). These mills rely on securing available supply from existing plantation resources within large and fragmented timber catchment zone (i.e. including long haulage distances). Their operations are small in comparison to the leading softwood sawmills in major plantation growing regions of Australia, and they are unlikely to drive further expansion of plantation resources at a substantive scale. The forecast for softwood plantation wood flows in North Queensland is set out below (Figure 2-15).

Figure 2-15 Forecast softwood plantation wood flows in North Queensland


In relation to hardwood plantation timber, there is minimal processing infrastructure in place in the region currently. The plantation resource was established only recently, and has been heavily impacted by the effects of cyclone damage, in 2009 and also 2010/11, and recurring disease issues. These impacts are reflected in the relatively low volumes forecast for production (Figure 2-16). As such, there is limited market “pull through” at present to justify and provide the investment funds required to establish new hardwood plantations within this region at present.


Figure 2-16 Forecast hardwood plantation wood flows in North Queensland


Rate of new plantationsThe rate of new plantation establishment in North Queensland increased from less than 500 ha per year in the early 2000s to around 2,000-3000 ha at its peak between 2006 and 2009 (not evident in Figure 2-17, but reported by Gavran & Parsons, 2011), but dropped back again to effectively zero over the past five years, as a result of the combined impacts of the incidence of recurring disease in hardwood plantations, cyclone damage across the estate, and the cessation of MIS plantation development programs in the region and nationally.

Figure 2-17 New plantations in North Queensland, 2000 to 2013


Outlook for new plantationsIndufor considers it unlikely there will be substantive new plantation establishment in North Queensland on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years.

Removals of a significant proportion of hardwood plantation areas in particular are expected to continue over the next five years as lease agreements reach completion and plantations deemed to be commercially unviable are not replanted.


Table 2-6 Outlook for new plantations in North Queensland, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new


Key factors


100,000 - 150,000 m3,

but subject to revision^

<50,000 m3 Unlikely Limited industry pull through, and reliant on log exports





<25,000 m3 Not yet developed

Unlikely Industry production constraints

Expectation of plantation area reduction




Cyclone impacts a prominent risk

Source: Indufor, Gavran et al. 2012; ^ Log supply subject to revision following Cyclone Yasi impacts

2.6 South East QueenslandSouth East Queensland is one of the major softwood plantation timber regions of Australia, with mature pine plantation resources and established timber processing operations, including large-scale sawmills and engineered wood products manufacturing.

The total area of softwood plantations in the region is currently around 155,000 ha (Gavran & Parsons 2011). The main softwood species are slash pine (P. elliottii), Caribbean pine (P. caribaea) and hoop pine (A. cunninghamii). The softwood plantation industry was established progressively over time, particularly from the mid-1970s through the late 2000s, during which time the planting rates varied around 3,000 -4,000 ha per year.

The development of hardwood plantations has been more recent. Between 2001 and 2010, there was a rapid expansion of hardwood plantations in the region, totaling approximately 29,000 ha in 2010 (Gavran & Parsons 2011). The main hardwood species is Dunn’s white gum (E. dunnii), but a range of other eucalypts and hybrid species have been planted also. Over 70% was established for pulpwood production, with the remainder managed for sawlog production (Gavran et al. 2012).

The State Government has supported the development of hardwood plantations and promoted their use to replace sawlogs from public native forests, under a Hardwood Plantation Program that now represents a partnership between State government and key industry players. However, similar to North Queensland and other regions around Australia, there has been a mixed range of results to date, and a subsequent decline in the hardwood plantation area over the past five years, due to a combination of factors that include adverse impacts from drought conditions and also disease.

Industry and demand driversThe softwood plantations in the region have provided a steady supply of sawlogs to large-scale processing facilities at Caboolture, Tuan, Imbil and Yarraman (Gavran et al. 2012); and on this basis, the softwood industry in this region can be considered mature. The forecast for softwood sawlog wood flows, and pulpwood flows, are relatively stable, and the current configuration of processing capacity is broadly aligned with the existing supply outlook.

The softwood timber industry in South East Queensland foresees the ‘steady state’ supply (Figure 2-18) will fall short of future domestic demand requirements; however, new plantation establishment up until the late 2000s was modest; and since 2009, has declined to near zero. This can be attributed to the current lack of private sector investment interest in funding the development of new plantations, particularly for sawlog and veneer log (long rotation) products.


Figure 2-18 Forecast softwood plantation wood flows in South East Queensland


The hardwood plantation industry is in a state of flux currently. As noted above, some growers have been forced to write off their eucalypt plantations in the region following damage and poor performance caused by drought or disease or other factors (Gavran et al. 2012). The Queensland Government is currently conducting a review of the ‘Hardwood Plantation Program’ in the South East region, encompassing approximately 15,000 ha of plantations that are now managed by HQPlantations, plus a range of smaller private holdings. Under this program, the State Government had proposed for an additional 5,000 ha of new hardwood plantations to be established in the region. However, the review now underway, due for completion in mid-2015, is expected to provide a set of strategic recommendations for the future directions of hardwood plantation development in the South East region.

Figure 2-19 Forecast hardwood plantation wood flows in South East Queensland


Rate of new plantationsFor reasons outlined above, the rate of new plantation establishment in South East Queensland has dropped to near zero over the past five years (Figure 2-20). Given the lack of private sector investment interest in funding new softwood plantations, and the ongoing reduction in hardwood plantation areas as lease agreements reach completion and plantations deemed commercially unviable are not replanted, this trend is expected to continue over the short to medium term.


Figure 2-20 New plantations in South East Queensland, 2000 to 2013


Outlook for new plantationsSouth East Queensland is one of Australia’s largest and most productive plantation regions, and therefore, there will continue to be extensive replanting of the mature softwood plantation estate, and some proportion of the existing hardwood estate. There may also be some incremental establishment of new plantations on land that has been previously used for cropping or grazing, where this is adjacent or in close proximity to the existing estate; and potentially some replacement of land that is retired from plantations elsewhere (e.g. around Beerburum district).

The review of the Hardwood Plantation Program currently underway may recommend the further expansion of hardwood plantations in the region. However, pending the review outcomes, Indufor considers it unlikely there will be a substantive level of new plantation establishment on land previously used for cropping or grazing in the ordinary course of events, at a substantial level, over the next 5-6 years. This guidance is summarised below.

Table 2-7 Outlook for new plantations in South East Queensland, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


1.7 million m3 1.5 million m3 Unlikely Industry maturity

Lack of institutional interest in establishing new plantations





150,000 m3 150,000 - 200,000 m3

Possible New planting expected under the Hardwood Plantation Program

Review of Hardwood Plantation Program currently underway

Expectation of some plantation removals in the region


Limited; still in development

phase

Not yet developed




2.7 Northern Tablelands NSWThe Northern Tablelands encompasses an elevated region, inland of Wauchope and north along the ranges towards Warwick in South East Queensland. The land area is large but the plantation area of around 24,000 ha is relatively small compared with other NPI regions. Radiata pine (P. radiata) plantations account for most of this resource (approximately 70%), with shining gum (E. nitens) being the predominant hardwood species.

The softwood plantations were established steadily from the early 1970s (generally at less than 400 ha), with planting peaks in the late 1970s and the 1980s (up to 700 ha per year). These plantations have been managed for sawlog production. Most of the hardwood plantations (around 7,000 ha in total) were established between 2006 and 2010, primarily for pulpwood production.

Industry and demand driversSoftwood wood flow forecasts for the region show a sawlog supply of between 150,000 and 200,000 m3 over the next 20+ years (Gavran et al. 2012), reflecting the progressive establishment of softwood plantations over time. These sawlogs are supplied to sawmills at Glen Innes, Nundle and Quirindi, which are relatively small scale compared the leading softwood mills located in regions such as the Green Triangle and South East Queensland. In broad terms, Indufor anticipates these mills can operate at a reasonable level with the supply from existing plantation resources; and they are unlikely to be in a position to drive or otherwise underpin substantial investment in new plantations to meet demand requirements.

Hardwood wood flow forecasts show an irregular, lumpy profile that will present challenges for plantation owners in bringing this wood to market in an orderly way. The nearest port facilities are at Newcastle/Tea Gardens or Brisbane port, which may be within acceptable haulage distances for only some plantations, but have limited throughput at present and are sub-optimal in scale compared with established operations through southern ports, e.g. Bunbury, Albany, Portland, Geelong and Tasmania.

ABARES data indicates the hardwood pulpwood volumes will peak at around 240,000 ha per year between 2020 and 2024 (Gavran et al. 2012). The existing resource base is sub-optimal to underpin competitive costs of production to international markets. Arguably, this presents a case for additional new plantation establishment to increase the resource base to improve the economies of scale. Conversely, current trends across Australia suggest that investment in new (‘greenfield’) plantations will be limited; and where it occurs, it will be directed to those regions which already have scale and established processing and port infrastructure.

Rate of new plantationsSimilar to most other NPI regions, the rate of new plantations has declined (from a relatively low base) to almost zero over the past five years (Figure 2-21). This reflects industry trends in the region and more broadly across Australia.

Figure 2-21 New plantations in Northern Tablelands NSW, 2000 to 2013



Outlook for new plantationsIndufor considers it unlikely there will be substantive new plantation establishment in the Northern Tablelands of NSW on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years. Arguably, there is a commercial driver to increase the hardwood plantation resource area to improve the economies of scale and therefore the capacity to compete in international markets. Indufor considers it more likely the existing hardwood plantation resource will be rationalised, pre- or post-harvest, and potentially reverted to other non-forestry land uses.

Table 2-8 Outlook for new plantations in Northern Tablelands of NSW, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


170,000 m3 <50,000m3 Unlikely Limited industry scale

Apparent lack of investment interest





200,000 m3; but for short

term only, then dropping back to ~50,000 m3

Part of South East

Queensland supply

catchment


Sub-optimal scale in the region; highly variable wood flow levels

Expectation of plantation removal as blocks are harvested


- Not yet developed



2.8 North Coast NSWThe North Coast region in NSW extends north along the coast from near Newcastle to the Queensland border. The total area of timber plantations in the region was around 101,000 ha in 2010 (Gavran & Parsons 2011); the majority of which are hardwoods (around 82%) comprising a range of eucalypt species.

The North Coast region features some of the more established hardwood plantations in Australia, with planting commencing in the 1960s, and peaks in new planting in the 1990s, averaging around 4,000+ ha per year. The main hardwood species are Dunn’s white gum (E. dunnii), blackbutt (E. pilularis), flooded gum (E. grandis) and Sydney blue gum (E. saligna) (Gavran et al. 2012). These plantations have been established on both ex-native forest and ex-pasture land sites.

Most of the softwood plantations in the region were established from the 1990s through to the mid-2000s. The main softwood species are slash pine (P. elliottii), Caribbean pine (P. caribaea) and hybrids of southern pine.

Industry and demand driversSoftwood and hardwood sawlogs and veneer logs are supplied to sawmills at Grafton, Casino, Lismore, Urbenville and Wyan (Gavran et al. 2012). Some of these mills have developed integrated processing systems to handle both softwood and hardwood logs, from plantations and native forests, and to supply a range of timber and veneer products to different markets. This operational flexibility has provided these mills with a level of supply diversification to manage the variation in wood flows from softwood and hardwood plantations.

In this context, softwood plantation wood flows for the region are shown in Figure 2-22. This indicates a stable profile with an increase in supply over the next 20 years. This outlook is not expected to drive an increase in new plantations, and limiting factors observed in other NPI


regions, notably the cost of acquiring suitable land and holding this land for the duration of long rotation plantation investments, continue to apply.

Figure 2-22 Forecast softwood plantation wood flows in North Coast NSW


Hardwood plantation wood flows forecasts are shown in Figure 2-23. Beyond the integrated supply to existing sawmills and veneer operations, this lumpy profile will present challenges for plantation owners in bringing this wood to market in an orderly way. ABARES data indicates the hardwood pulpwood supply could rise to around 600,000 m3 per year between 2016 and 2024 (Gavran et al. 2012).

Figure 2-23 Forecast hardwood plantation wood flows in North Coast NSW


While there are port facilities at the southern end (Newcastle/Tea Gardens) and northern end of the region (Brisbane), a large proportion of the hardwood plantations would face long haulage distances to transport pulpwood material to either of these ports. Furthermore, these ports have limited throughput at present and are sub-optimal in scale compared with established operations through southern ports, e.g. Bunbury, Albany, Portland, Geelong and Tasmania.

Current trends across Australia suggest that investment in new (‘greenfield’) plantations will be limited; and where it occurs, it will be directed to those regions which already have scale and established processing and port infrastructure.

Rate of new plantationsThe rate of new plantations since 2000-01 is shown in Figure 2-24. There was a relatively large surge in new plantations between 2004-05 and 2009-10, predominantly of hardwoods planted for pulpwood production under MIS programs. These programs ceased around 2009-


10, and there has been negligible new plantation establishment of softwoods or hardwoods over the past 4-5 years. In addition, some of the more recently established hardwood plantations are being reverted to non-forestry land uses, partly due to expected low returns and below expected yields.

Figure 2-24 New plantations in North Coast NSW, 2000 to 2013


Outlook for new plantationsBased on the considerations outlined above, Indufor considers it unlikely there will be substantive new plantation establishment in North Coast NSW on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years.

Table 2-9 Outlook for new plantations in North Coast NSW, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


100,000 m3 80,000 m3 Unlikely Limited industry scale

Apparent lack of investment interest





700,000 m3; but uneven wood flows

over next 15-20+ years

Long haul to markets;

wood flows to Southeast

Queensland


Proximity to markets

Expectation of plantation removals





2.9 Central Tablelands NSWThe Central Tablelands region of NSW encompasses the softwood plantations concentrated around Oberon, Orange, Bathurst and Lithgow. The total area of these plantations in 2010 was around 81,000 ha (Gavran & Parsons 2011) and there has been minimal change since (Gavran 2014). These plantations, predominantly radiata pine (P. radiata) were established progressively from the 1960s, with peaks in planting in the late 1970s and mid-1980s and further plantings through to the period between 2006 and 2010.


The area of hardwood plantations in this region is negligible, amounting to some small, dispersed research and demonstration sites, mainly near Wellington.

Industry and demand driversThe softwood plantation timber is processed in a large sawmill and also particleboard and MDF mills in Oberon, as well as sawmills in Bathurst and Burraga (Gavran et al. 2012). Some softwood logs and pulp logs are exported from Port Botany.

In broad terms, the softwood industry in this region can be considered mature. The forecast of wood flows show a relatively stable profile of supply of both sawlogs and pulpwood logs to industry (Figure 2-25); and industry development appears generally stable; with no substantive investment in new processing facilities or changes to production capacity in recent years.

Figure 2-25 Forecast softwood plantation wood flows in Central Tablelands NSW


Rate of new plantationsABARES has reported the plantation area in the Central Tablelands region has changed little in the past decade; and substantial areas of privately owned pine plantations have reached final harvest age and some might not be replanted after harvesting (Gavran 2014). ABARES has also reported ownership changes have made it difficult to obtain up-to-date data on these plantations, and the planted area might therefore be revised down in future inventory updates.

Figure 2-26 New plantations in Central Tablelands NSW, 2000 to 2013


Outlook for new plantations


Based on recent trends outlined above, Indufor considers it unlikely there will be substantive new plantation establishment in the Central Tablelands of NSW on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years. This guidance is summarised below.

Table 2-10 Outlook for new plantations in the Central Tablelands NSW, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


800,000 m3 800,000 m3 Unlikely Supply aligned with capacity

Level of industry maturity

No substantive planting over past 5+ years




- - Unlikely No existing hardwood interests


- - Unlikely Return on risks not aligned with investor expectations to date

Source: Indufor; Gavran et al. 2012

2.10 Southern Tablelands NSWThe Southern Tablelands region of NSW extends from Boorowa (in the west) to the Mossvale/Braidwood escarpment (Southern Highlands) and south to include the Australian Capital Territory (ACT). The region is similar to the Central Tablelands in NSW, in that both regions feature softwood plantations only to any substantive extent, predominantly radiata pine (P. radiata); and both were established over a similar period, from the 1960s onwards with peaks in the 1970s, mid 1980s and again in the mid to late 2000s. The total area of plantations in the region in 2010 was approximately 22,000 ha (Gavran & Parsons, 2011).

Industry and demand driversThe forecast softwood plantation wood flows for the Southern Tablelands show a relatively modest profile of softwood sawlogs (Figure 2-27), with around 75,000 m3 a year for the next 10-15 years before increasing to around 150,000 m3 a year in the subsequent period.

Figure 2-27 Forecast softwood plantation wood flows in Southern Tablelands NSW



Softwood sawlogs are processed at sawmills in Canberra, Penrose and Tumut (Gavran et al. 2012). These processing facilities are small by comparison with leading examples in the major plantation timber production regions, but generally well placed to respond to changes in supply from existing plantations in the region.

Rate of new plantationsAccording to ABARES, the Southern Tablelands plantation area declined significantly in the past decade, as pine plantations in the ACT were not replanted following the bushfires in 2003 and some privately owned pine plantations in the NSW part of the region have not been replanted after harvesting (Gavran 2014).

While there was a level of new plantation development during the 2000s, this reduced substantially over five years ago, and the area of any new planting is likely to be less than the plantation area being changed to non-forestry land uses Overall, therefore, the plantation area is contracting rather than increasing at this point of time.

Outlook for new plantationsBased on recent trends in this region and other softwood production regions more broadly, Indufor considers it unlikely there will be substantive new plantation establishment in the Central Tablelands of NSW on land previously used for cropping or grazing in the ordinary course of events over the next 5-6 years. This guidance is summarised below.

Table 2-11 Outlook for new plantations in Southern Tablelands NSW, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


80,000 m3 Sold to small mills

in region and in the

Murray Valley

Unlikely Lack of significant investment interest in new planting


Plantation removals continuing




- - Unlikely No existing hardwood interests




2.11 Murray ValleyThe Murray Valley region forms one of the larger and most active softwood plantation regions. The region incorporates plantations from North East Victoria through to the southwest slopes of New South Wales, and bordered to the east by the Great Dividing Range watershed. Softwood development expanded markedly in the 1960-1980s as part of the Commonwealth and State Government development programmes. This built on earlier plantings that had occurred post World War 2.

Pooled investment funded plantations expanded the estate in the 1980s, and softwood plantation expansion continued at low levels in the 1990s and early 2000s, supporting major wood processing facilities developments in the region. While MIS funds financed plantings in the middle of the 2000s, much occurred on land that was previously under timber plantations.

There has been limited hardwood plantation development has occurred in the region, with minor plantings in North East Victoria being of note.


Industry and demand driversThe Murray Valley plantations are relatively remote from ports such as the Port of Melbourne or Eden, and therefore the logs are most viably processed within the region. With this orientation and given the long history of softwood plantation development, the Murray Valley region processing capacity has continued to expand over many decades. Major processing hubs occur around Tumut and Albury in New South Wales, and significant mills in the Ovens Valley of Victoria.

This expansion was commonly aligned to wood availability from a maturing softwood plantation estate. In some cases the processing investments initiated further plantation development as part of underpinning longer-term supply.

Current softwood wood flow estimates (Figure 2-28) indicate an estate that is close to steady state, with no expectation of increased wood availability from the existing tree crop. The modelling by ABARES of the current plantation age distribution indicates potential declines in sawlog availability through the next decade.

Figure 2-28 Forecast softwood plantation wood flows in the Murray Valley


Hardwood plantation wood flows (Figure 2-29) are estimated to remain very low given the limited hardwood plantation development completed to date.

Figure 2-29 Forecast hardwood plantation wood flows in the Murray Valley


Rate of new plantations


New plantation development onto ex-agricultural land has remained at low levels for the past decade (Figure 2-30). This development is reported to be solely softwood based, with no real planting in the immediate past years.

The major processing facilities have continued to expand, and have potential interest in increased supplies.

Figure 2-30 New plantations in the Murray Valley, 2000 to 2013


Outlook for new plantationsDespite little recent plantation expansion, processor capacity has the potential to underpin softwood plantation expansion. This underpinning could arise in a variety of modes, and may result in planting on both ex-plantation and ex-agricultural land.

Hardwood plantation development appears unlikely to materially increase from the recent new planting rates.

Table 2-12 Outlook for new plantations in the Murray Valley, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


1.6 million m3 ~1.7 million m3 Potentially but unlikely

Industry maturity No new planting for 5+ years

mostly due to difficultly attracting capital to plantation investment

Market pull through may generate re-planting and expansion of the estate




80,000 m3 Part of Geelong port

catchment


Proximity to markets, currently limited largely to chip exports through Corio at Geelong







2.12 Central VictoriaThe Central Victoria region is located west of Melbourne, extending north from the Otway Ranges to Castlemaine and to the west as far as the Grampians. It encompasses the softwood and hardwood plantations located around Ballarat, Beaufort, Colac and Geelong.

The total area of plantations in the region in 2010 was around 69,000 ha, which comprised around 32,000 ha of softwood and 37,000 ha of hardwood (Gavran & Parsons 2011). The softwood plantation area was steadily planted since the mid-1970s through to 2010, while most of the hardwood plantations were established from the mid-1990s onwards (Gavran et al. 2012).

The main softwood species planted is radiata pine (P. radiata) and the main hardwood species is blue gum (E. globulus).

Industry and demand driversThe softwood plantations supply sawlogs and small-diameter logs to timber processing industries at Ballarat, Beaufort, Colac and around Geelong (Gavran et al. 2012). Some softwood sawlogs are exported from the port of Geelong. Softwood woodchips (from mill residues and pulpwood) and hardwood chips (from pulpwood) are also exported from the port of Geelong.

The forecast for softwood plantation wood flows (Figure 2-31) shows a declining profile over the next 20 years. This decline in plantation supply will create some pressure for new softwood plantations, to maintain or increase the scale of production through competitive processing facilities. However, this demand factor will need to be considered in the context of availability and price of suitable land, in a region which features dairy production and a range of other competing land uses, and some other peri-urban pressures associated with being close to Melbourne and provincial centres. These supply constraints are expected to limit further expansion of the softwood plantation resource to incremental establishment of new plantations on agricultural land where this is adjacent or in close proximity to the existing estate.

Figure 2-31 Forecast softwood plantation wood flows in Central Victoria


The forecast for hardwood plantation wood flows (Figure 2-32) shows an uneven profile, notably a wave of pulpwood totalling up to around 700,000 m3 per year that is due for harvest over the next five years. The existing hardwood resource is sub-optimal due to scale and current overall yields to underpin competitive costs of production and supply to international markets. This may present a case for additional new plantation establishment to increase the resource base to improve the economies of scale. However, given the yields and likely returns in this region, current trends are expected to see further reductions in the hardwood plantation area as plantations are harvested and the land moved into non-forestry uses.


Figure 2-32 Forecast hardwood plantation wood flows in Central Victoria


Rate of new plantationsThe rate of new plantation establishment in Central Victoria over the past decade (incorporating derived estimates for the past five years) is shown in Figure 2-33. Reflecting industry trends more broadly, there has been no substantive softwood plantation establishment over the past five years, and hardwood plantation establishment rates have dropped back substantially.

Figure 2-33 New plantations in Central Victoria, 2000 to 2013


Outlook for new plantationsCentral Victoria has a range of established processing facilities, geared around domestic processing of softwood sawlogs and the export of hardwood pulpwood. Industry demand may lead to some incremental establishment of new softwood plantations in particular, on land that has been previously used for cropping or grazing, where this is adjacent or in close proximity to the existing estate.

However, more broadly, Indufor considers it unlikely there will be substantial levels of new plantation establishment on land previously used for cropping or grazing in the ordinary course of events, at a substantial level, particularly over the next 5-6 years. This guidance is summarised below.


Table 2-13 Outlook for new plantation establishment in Central Victoria, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


220,000 m3 400,000 m3 Possible Market pull-through constrained by lack of investment interest in new planting

No substantive planting over the past 5+ years




400,000 m3 Part of Geelong port

catchment, indicative

capacity of 800,000 m3


Industry production constraints

Expectation of further plantation removals




2.13 Central GippslandThe Central Gippsland region extends east from Melbourne to Bairnsdale and encompasses the Latrobe Valley and the Strzelecki Ranges. The total area of timber plantations in 2010 was approximately 96,000 ha, of which around two thirds are radiata pine (P. radiata) plantations and the balance are a combination of blue gum (E. globulus), shining gum (E. nitens) and mountain ash (E. regnans) plantations.

The softwood plantations were established progressively from the 1980s, with a peak in planting between 2001 and 2005; and since then, there has been almost no new plantings. Some areas of hardwood plantations were established in the 1960s and 1970s, but most of the regional estate was established from the mid-1990s through to the mid-2000s (Gavran & Parsons 2011).

Industry and demand driversThe forecast softwood plantation wood flows for Central Gippsland show a relatively stable profile of sawlog production (Figure 2-34), with a potential supply of around 500,000 m3 a year for the next 20 years before increasing thereafter.

The softwood plantations supply several sawmills in the region, the largest of which are at Morwell and Yarram. These processing facilities are small to medium sized in scale in comparison with leading examples in the major plantation timber production regions, but generally well placed to respond to changes in supply from existing plantations in the region.


Figure 2-34 Forecast softwood plantation wood flows in Central Gippsland


The forecast hardwood plantation wood flows for Central Gippsland show a relatively modest and lumpy profile of pulpwood production (Figure 2-35). The nearest export port is Corio at Geelong, which has traditionally received pulplogs and sawmill residue from Gippsland. However Australian Paper’s pulp and paper mill at Maryvale, near Morwell, represents the most proximate market for this region’s wood fibre, and a significant proportion of the hardwood plantations in the region were established with the view of building a long term supply to the Maryvale mill. The actual supply will depend on the various dynamics of native forest fibre supply (under long term wood supply agreements), mill expansion plans and commercial negotiations with plantation owners.

These dynamics may lead to tighter supply conditions and stronger drivers for additional plantation establishment in the region; however, there is no new plantation activity at present nor plans that would suggest this is likely in the near term.

Figure 2-35 Forecast hardwood plantation wood flows in Central Gippsland


Rate of new plantationsThe rate of new plantation establishment in Central Gippsland over the past decade (incorporating derived estimates for the past five years) is shown in Figure 2-36. Reflecting industry trends more broadly, there has been no substantive softwood plantation establishment over the past five years, and hardwood plantation establishment rates have dropped back substantially.


Figure 2-36 New plantations in Central Gippsland, 2000 to 2013


Outlook for new plantationsThe lack of new plantation establishment over the past 5+ years in Central Gippsland would suggest the likelihood of new planting over the next 5-6 years is limited. The constraints on new plantation establishment faced in other regions would mostly apply in this region also. These include access to suitable land at prices that can support a commercially viable investment; lack of funding vehicles post-MIS models; and uncertainty over plantation performance and the risks associated with pests and diseases and bushfires.

However, a key feature of the Central Gippsland region is the established pulp and paper mill at Maryvale, which will continue to demand wood fibre feedstock, and may look to further increase a plantation based supply. The extent to which the mill will create compelling drivers for new plantation investment will depend on the various dynamics of ongoing fibre supply from public native forests, mill expansion plans and commercial negotiations with plantation owners. While there is no new planting activity at present nor plans that would suggest this is likely in the near term, the drivers for new plantations may rise more quickly in Central Gippsland than in other regions.

Table 2-14 Outlook for new plantations in Central Gippsland, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


400,000 m3 400,000 – 500,000 m3

Unlikely Market pull through constrained by lack of investment interest in new planting





350,000 m3 Part of supply catchments to Maryvale

paper mill (Gippsland)

and Corio (Geelong)

Possible but unlikely


Industry production constraints


Maryvale mill at Morwell may underpin plantation investment in the longer term





2.14 East Gippsland and BombalaThe East Gippsland-Bombala NPI region is centred near Bombala in the Southern Tablelands of southern NSW, and extends to adjacent areas of Victoria’s East Gippsland. Most of the existing plantations are located in NSW, around Bombala and Delegate, and almost 90% are radiata pine (P. radiata) plantations. The total area of plantations in the region in 2010 was around 51,000 ha, of which pine plantations accounted for around 46,000 ha and eucalypt plantations (mostly shining gum (E. nitens)) accounted for around 5,000 ha (Gavran & Parsons 2011).

The pine plantation area was steadily planted from the mid-1970s, with a peak in planting in the mid-1980s, followed by an average of around 1,000 ha per year during the 2010s (Gavran et al. 2012). The hardwood plantations were established from the mid-1990s onwards, but annual planting rates were minimal in comparison to pine plantings in this and other regions.

Industry and demand driversThe forecast softwood plantation sawlog wood flows for East Gippsland and Bombala show some fluctuation up and down around a minimum level of supply of around 300,000 m3 per year over the next 5-6 years (Figure 2-37), before increasing after 2020 to over 500,000 m3 in 2025 and beyond (Gavran et al. 2012).

Timber processing industries are concentrated at Bombala and Eden. In Bombala, the processing industries include a new, high technology mill was opened in 2013, which has capacity to process over 250,000 m3 per year and is expected to contribute directly to maintaining industry demand for pine sawlogs. Log supply to the new mill in Bombala is backed by a 20-year log supply agreement with the Forestry Corporation of NSW. The forecast wood flows indicate that regional capacity should generally increase over this time period, the contractual obligations may contribute directly to investment in new plantation establishment, in particular to address the decline in sawlog availability from 2035 onwards.

Figure 2-37 Forecast softwood plantation wood flows in East Gippsland and Bombala


The forecast hardwood plantation wood flows for East Gippsland and Bombala (Figure 2-38) show the limited scale of this resource. The total volume of pulpwood is forecast to be around 60,000 m3 per year between 2015 and 2019, and to peak at around 120,000 m 3 per year in 2035. The small and fragmented nature of the resource may present challenges for the plantation owners in bringing this pulpwood to market in a profitable way. A key feature of this region is the Eden port, which has exported native forest wood fibre to markets in Japan predominantly for many years. This provides existing export infrastructure within a reasonable haulage distance of most of the hardwood plantations in the region. However, given the fragmented and tenuous nature of the existing resource, it has limited potential to attract and secure new plantation establishment in the region.


Figure 2-38 Forecast hardwood plantation wood flows in East Gippsland and Bombala


Rate of new plantationsSimilar to trends seen across Australia, the rate of new plantation establishment in East Gippsland and Bombala over the past 15 years has declined markedly to essentially zero over the past two years (Figure 2-39).

Figure 2-39 New plantations in East Gippsland and Bombala, 2000 to 2013


Outlook for new plantationsThe lack of new plantation establishment over the past 5+ years would suggest the likelihood of new planting over the next 5-6 years is limited. The constraints on new plantation establishment faced in other regions would mostly apply in this region also – these include access to suitable land at prices that can support a commercially viable investment; lack of funding vehicles post-MIS models; and uncertainty over plantation performance and the risks associated with pests and diseases and bushfires.

Notwithstanding the proximity of the port of Eden and potential for exporting wood products, there is no new planting activity at present nor plans that would suggest this is likely in the near term. Given the steady state level of the pine plantation resources, the limited development of hardwood plantation resources, and the wider national trends that reflect of any new plantation established, Indufor considers it unlikely there will be new plantation establishment on land previously used for cropping or grazing in the ordinary course of events, at a substantial level over the next three years.


In the subsequent three years, it is possible the new sawmill enterprise established at Bombala may create sufficient ‘market pull’ that encourages Forestry Corporation of NSW or other plantation growers to increase softwood resource holdings in the region, and secure their position in supplying the mill with sufficient volume for the longer term. This guidance is summarised below.

Table 2-15 Outlook for new plantations in East Gippsland and Bombala, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


300,000 m3 300,000 m3 Possible but unlikely

Market pull through constrained by lack of investment interest in new planting


New sawmill at Bombala may create some market pull for new pine plantation establishment over the longer term




80,000 - 100,000 m3

Scope for exports through

Eden, which handles

native forest wood fibre

Unlikely No substantive planting over past 5+ years


Limited options for contiguous plantings near port/markets





2.15 TasmaniaTasmanian plantation development has arisen from both public and private organisations. The softwood estate was established in differing locations around the state, with major areas located in the north. The hardwood plantation estate is present in the north west, north east and south east regions.

The total area of the softwood estate in 2010 was around 309,000 ha (Gavran & Parsons 2011), and is now largely moving into a steady state management reflecting the planting programmes actively pursued particularly in the 1980s.

The hardwood plantation estate expanded through both government actions relating to agreed land use and industry policy frameworks of the Commonwealth and State Governments, and private sector organisations seeking to establish a fibre supply for processing facilities. Through the late 1990s and the 2000s, the Tasmanian hardwood plantation estate underwent further rapid expansion, largely financed by MIS investment models.

While the majority of the hardwood plantations have been managed to produce pulpwood suited for chipping, a significant area has been treated to develop larger logs incorporating clear timber resulting from bole pruning. Much of this sawlog plantation is yet to reach maturity.

Industry and demand driversTasmanian softwood processing developed as the plantation estate matured. Processing facilities across a range of finished products have been developed, including recent mill construction now owned by Timberlink at Bell Bay in the Tamar valley of northern Tasmania.


In addition, Tasmania has exported softwood logs across a range of ports, trading logs not utilised by the local processors.

The harvest levels of softwood logs are expected to remain relatively consistent through the current decade, with a potential increase through the first part of the next decade.

Figure 2-40 Forecast softwood plantation wood flows in Tasmania


Processing of native forest logs into both sawn timber and woodchips resulted in the development of an industry across much of the state. The woodchips were exported to northern Asian markets via ports in the northwest, northeast and southeast. The total capacity of the processing and loading facilities allowed Tasmania to be a significant hardwood woodchip exporter.

The woodchip processing and loading capacity still exists in the northern ports areas of Burnie and the Tamar Valley, however woodchip exporting capacity in the south of the state is currently low. It is expected the hardwood plantation resource will be utilised at rates commensurate with existing capacity and aligned to international market demand.

Hardwood plantation wood flows are expected to increase markedly through the middle of this decade, as the plantation estate matures and becomes available for processing. For plantations in the north of the state, the processing capacity should align to the potential harvest volumes. Plantations in the south of the state are less readily able to access market routes such as efficient low cost processing and port facilities, and these harvests maybe delayed due to this restriction.

Figure 2-41 Forecast hardwood plantation wood flows in Tasmania



Rate of new plantationsPlantation expansion through the first part of the 2000s was significant, with a reasonable expansion of the softwood estate but a significant hardwood plantation expansion. This expansion has now effectively ceased (Figure 2-42).

The expansion arose largely as result of companies securing MIS funds. These enterprises have now largely been restructured and funding of new plantation development ceased in this restructuring period.

Figure 2-42 New plantations in Tasmania, 2000 to 2013


Outlook for new plantationsIndufor sees little likelihood of new plantation development occurring in Tasmania. The softwood estate is able to generally supply current processing capacity requirements, with some surplus logs being exported given current international log market conditions.

The hardwood plantation estate is approaching maturity, and as harvesting expands in the next 2-3 years, some areas may well be converted to non-forestry land uses as a result of both the returns from the existing tree crop and the potential increase in land use values available outside the forestry sector.

Table 2-16 Outlook for new plantations in Tasmania, to 2020

Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


500,000 m3 400,000 m3 Unlikely Existing processing capacity adequately met by log availability, with volume exported





~3.5 million m3 4 million m3 Unlikely No substantive planting over past 5+ years


Plantation estate nearing maturity and needing to secure strong sales of increased volumes



Plantation types

Indicative annual

log supply in 2020

Indicative annual

demand/ capacity

Likelihood of new

plantations to 2020

Key factors


~500,000 m3 Not yet developed


Sawmill industry not yet configured to handle plantation logs

Return on risks not aligned with investor expectations to date



3. SUMMARYThis report presents guidance on the likely establishment of new timber plantations in Australia, over the next 5-6 years to 2020. This guidance is based on a desktop review of relevant plantation statistics, notably the most recent publications by ABARES on Australian plantation statistics and Australia’s plantation log supply over a 40+ year period. Indufor has applied its industry knowledge to providing an assessment of the likelihood of new plantation establishment over the short to medium term, with reference to not only the historical trends but also taking into account the supply-demand balance in each of the regions with demand as indicated by the existing processing capacity in the region.

In accordance with the ABARES reporting on plantation statistics, this guidance on the likely establishment of new timber plantations is based on National Plantation Inventory (NPI regions). A summary of the findings from this analysis and the guidance in relation to each of the NPI regions is set out in Table 3-17 for softwood plantations, and Table 3-18 for hardwood plantations.

In general terms, the likelihood for new plantation establishment across Australia in the next five to six years is limited. The Northern Territory NPI region is considered most likely to see new plantation development, notably long rotation hardwoods. The next most likely regions include South East Queensland (hardwoods), the Murray Valley (softwoods), Central Victoria (softwoods) and East Gippsland / Bombala (softwoods). More broadly, Indufor assesses the likelihood of any substantial new plantation establishment between now and 2020, in the ordinary course of events, as low. Key factors underpinning this outlook include:

Land availability: Following the large scale plantation development programs over previous generations, predominantly focussed on softwood (pine) plantations, and most recently the MIS-based surge in plantation development across a broad range of plantation growing regions of Australia (predominantly for short rotation hardwood plantations), much of the suitable land that was available has been established – and new plantation establishment may need to push further on biophysical site characteristics or land prices.

Institutional ownership: Plantation ownership structures have changed substantially over the past 10 years, and there is now a large proportion of plantation interests owned by institutional investors. Between 2004-05 and 2012-13, the proportion of plantations owned by institutional investors increased from around 12% to 40% of all plantations (Gavran, 2014). Most recently, the increase is attributable to growing rights (right to harvest trees) being transferred from MIS plantations and ForestrySA’s plantation estate.

This trend is particularly significant to this review because institutional owners have demonstrated a primary focus on acquiring existing plantation assets and limited appetite for financing new (‘greenfield) plantation development. There is a strong commercial market for established plantations in Australia, but a significant market barrier to investment in establishing new long rotation plantations. This reflects to a large extent the assessment of risks and returns associated with plantation/timberland investments, in Australia and more broadly around the world.

Performance of plantation investment to date: The Australian forest industry has a clear understanding of expected returns for ‘greenfield’ softwood plantation development for most regions around the country. This level of understanding is now also becoming clear in respect to hardwood plantation returns in the differing regions. This broader understanding informs investment decision-making and provides more ready comparison of the underlying returns from new plantation development with the expectations of the investor.

By way of example, an industry study completed in 2011 found that based on a range of typical input and output prices and growth rates, the internal rates of return on new long rotation plantations were less than 5% (de Fegely et al, 2011). These rates of return are attributed to the high initial costs of acquiring land and establishing the plantation, which has an opportunity cost of capital for a period of time until the investment matures – and the growth rates and average log prices have not countered these early costs to provide higher returns. The industry study noted that lowering the cost of access to land and/or introducing additional revenue for environment services (such as carbon sequestration) could lift the investment returns to a higher level, potentially commensurate with or above the risk threshold for a range of investors.


Broader economic impacts on plantation product prices: The Global Financial Crisis and related geo-economic factors have continued to impact on the Australia’s plantation industry in various ways, including the result of soft markets for commodity products such as hardwood and softwood chip fibre, and to a lesser extent, structural timber product prices that are influenced more by domestic housing and building cycles.

The outcome of this has been a more challenging trading environment for plantation owners over large parts of the past five years, and therefore a more challenging investment environment for owners and investors considering new plantations. The more challenging trading environment is reflected in various market trends over recent years, including lower levels of demand in key markets (e.g. Japan’s volume requirements for Australian woodchip fibre); lower prices (e.g. China’s willingness to pay for Australian woodchip fibre); and for domestic timber products, periods of lower rates of nominal price increases over time (e.g. structural softwood timber markets over the past 5-6 years).

These factors will change over time and some could arise through changes in policy frameworks and investment decisions. Similarly, quantum changes in market dynamics and therefore timber pricing could also change this outlook. For example, international demand for bioenergy products that support renewable energy targets could impact on investment decision frameworks around new plantation development in Australia.

Given the array of factors that impact on long term investment decisions, such as new plantation establishment, the scope to forecast the likelihood beyond the next 10 years is limited. In the short to medium term, new plantation development would be expected to be limited to incremental increases where commercial opportunities arise.


Table 3-17 Summary of assessment of the likelihood of new softwood plantation establishment by NPI regions, 2015 to 2020

# NPI Region Indicative softwood

sawlog supply,2020

Indicative demand/ capacity within NPI region,

2020

Likelihood of new softwood plantation

establishment during outlook period1

Type of plantations

Indicative area of new plantations per year in the ordinary course of

events2

Indicative area of net gain/loss of plantation area over the period to

20203

1 Western Australia 900,000 m3 900,000 m3 Possible but unlikely Long rotation Up to 500 ha per year Net loss of 5,000 ha

2 Northern Territory 15,000 m3 Limited capacity No - Nil Nil

3 Mt Lofty Ranges/Kangaroo Is. 200,000 m3 <200,000 m3 No - Nil Net loss of 2-3,000 ha

4 Green Triangle 2.3 million m3 2 million m3 No - Nil Nil

5 North Queensland 100,000 m3 <50,000 m3 No - Nil Nil

6 Southeast Queensland 1.7 million m3 1.5 million m3 No - Nil Net loss of 2-3,000 ha

7 Northern Tablelands 170,000 m3 <50,000 m3 No - Nil Nil

8 North Coast NSW 100,000 m3 <80,000 m3 No - Nil Nil

9 Central Tablelands 800,000 m3 800,000 m3 No - Nil Nil

10 Southern Tablelands 80,000 m3 <80,000 m3 No - Nil Nil

11 Murray Valley 1.6 million m3 1.7 million m3 Possible but unlikely Long rotation Up to 2,000 ha per year Nil

12 Central Victoria 220,000 m3 400,000 m3 Possible - Up to 1,000 ha per year Nil

13 Central Gippsland 400,000 m3 500,000 m3 - - Nil Nil

14 East Gippsland / Bombala 300,000 m3 300,000 m3 Possible but unlikely Long rotation Up to 1,000 ha per year Nil

15 Tasmania 500,000 m3 400,000 m3 No - Nil Nil

Source: Indufor - based on ABARES data and Indufor analyses derived from this dataNote: 1. Assessment based on the likelihood of new plantations being established on land that has been previously used for cropping or grazing in the ordinary course of events.

2. Indicative estimate of area of new plantations, on land previously used for cropping or grazing in the ordinary course of events.

3. Indicative estimate of area of net gain/loss in total plantation area, based on a regional assessment, taking into account anticipated plantation removals over same period.


Table 3-18 Summary of assessment of the likelihood of new hardwood plantation establishment by NPI regions, 2015 to 2020

# NPI Region Indicative log supply,

2020

Indicative demand/ capacity within NPI

region,2020

Likelihood of new hardwood plantation establishment during

outlook period1

Type of plantations

Indicative area of new plantations per year in the ordinary course of

events2

Indicative area of net gain/ loss of plantation over the period to 20203

1 Western Australia 3-5 - 4 million m3 3-5 - 4 million m3 No - Nil Net loss of 30-50,000 ha

2 Northern Territory 550,000 m3 Still being developed Yes Long rotation Up to 1,500 ha per year Net gain of 2–10,000 ha

3 Mt Lofty Ranges/Kangaroo Is. 130,000 m3 Minimal current capacity No - Nil Net loss of 5-15,000 ha

4 Green Triangle 3 million m3 3.5 million m3 No - Up to 500 ha per year Net loss of 15-30,000 ha

5 North Queensland 60,000 m3 Minimal current capacity No - Nil Net loss of 2-5,000 ha

6 Southeast Queensland 150,000 m3 150-200,000 m3 Possible Long rotation Up to 1,000 ha per year Nil

7 Northern Tablelands 200,000 m3 Limited by port proximity No - Nil Net loss of 1-2,000 ha

8 North Coast NSW 750,000 m3 Predominantly pulpwood, limited by port proximity

No - Nil Net loss of 5-10,000 ha

9 Central Tablelands - Softwood only No - Nil Nil

10 Southern Tablelands - Softwood only No - Nil Nil

11 Murray Valley 100,000 m3 Markets to be developed No - Nil Nil

12 Central Victoria 400,000 m3 200-400,000 m3 No - Nil Nil

13 Central Gippsland 350,000 m3 Up to 350,000 m3 with exports through Geelong

Possible but unlikely Short rotation Up to 500 ha per year Nil

14 East Gippsland / Bombala 100,000 m3 Limited by port proximity No - Nil Nil

15 Tasmania 4 million m3 4 million m3 No - Nil Net loss of 5-20,000 ha

Source: Indufor - based on ABARES data and Indufor analyses derived from this dataNote: 1. Assessment based on the likelihood of new plantations being established on land that has been previously used for cropping or grazing in the ordinary course of events.

2. Indicative estimate of area of new plantations, on land previously used for cropping or grazing in the ordinary course of events.

3. Indicative estimate of area of net gain/loss in total plantation area, based on a regional assessment, taking into account anticipated plantation removals over same period.


4. REFERENCESde Fegely, Stephens, M, and Hansard, A 2011, Review of Policies and Investment Models to support continued Plantation Investment in Australia. Report prepared for Forest & Wood Products Australia, PRA189-1011.

Department of Agriculture 2014, Plantations for Australia: The 2020 Vision. Online: http://www.agriculture.gov.au/forestry/policies/2020vision

Gavran, M 2014, Australian plantation statistics 2014 update. ABARES Technical Report 14.2, Canberra.

Gavran, M, Frakes, I, Davey, S & Mahendrarajah, S 2012, Australia’s plantation log supply 2010-2054. ABARES, Canberra, March.

Gavran, M & Parsons, M 2011, Australian plantation statistics 2011, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, August.

Parliament of the Commonwealth of Australia 2011, Seeing the forest through the trees: Inquiry into the future of the Australian Forestry Industry. Inquiry conducted by the House of RepresentativesStanding Committee on Agriculture, Resources, Fisheries and Forestry. Chapter 2.


Indufor Oy Indufor Asia Pacific (Australia) Pty LtdTöölönkatu 11 A, FI-00100 Helsinki PO Box 425FINLAND Flinders Lane VIC 8009Tel. +358 9 684 0110 AUSTRALIAFax +358 9 135 2552 Tel. +61 417 381 [email protected] www.indufor-ap.com

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