Timber industry says it's hit for six by sawlog price rises

May 16, 2005. /Lesprom Network/. Victoria's $1.8 billion native hardwood timber industry is reeling after being hit by price rises of 15 to 25% as its main market, housing, suffers a decline. One sawmiller, Bob Humphreys from Hallmark Oaks at Cann River in East Gippsland, has already announced his intention to sell his business because of the price rises. "There is no point in going on. This is the final thing," he said. Hallmark Oaks employs 52 people. The State Government's commercial forestry arm, VicForests, last week announced sawlog price rises to apply from July 1. VicForests said the average sawlog price would rise by about $5 a cubic metre. Chief executive David Pollard said the increase was relatively minor. It was needed because previous increases since December 2003 had been postponed, the supply chain was profitable, and native timber was scarce. Domestic and international log price benchmarks also had to be taken into account. "The price increases are necessary and justifiable," he said. "It is unlikely that increasing the price will on its own threaten customer viability." However, the Victorian Association of Forest Industries accused VicForests of abusing its monopoly position, price gouging and being out of touch with the market. VAFI public affairs director Pat Wilson said the rises amounted to 22.4% for mixed-species timber and 12.4% for Victorian ash. With a 2.4% rise in licence fees, this effectively meant total rises respectively of 25 and 15%. Mr Wilson said the rises would cost timber processors an average of $100,000 and some up to $1.5 million - when the housing industry was in a slump. "Processors have no prospect of passing on these increases to customers," he said. Sawn-timber retail prices had increased at less than the inflation rate. "Wholesale prices received by processors have been static or declined in the past three years," he said. Mr Wilson said the industry was already suffering from a 30% resource cut, the imminent loss of another 10%, and the pending introduction of an untried auction system. Also, new legislation in Parliament would give haulage and harvest contractors unprecedented power to raise their prices and thus drive up processors' production costs. "You can't just keep hitting the industry from every direction and then expect it to thrive." Mr Wilson said VicForests wanted processors to invest in new technology and have better occupational health and safety systems. "Yet this is the time it decides it wants to strip a major amount of the capital away from them," he said.