Forest contractors are abandoning their business due to years of enduring harsh economic conditions with no signs of improvement.
In an interview with the NZ Herald, Prue Younger, the Chief Executive of the Forest Industry Contractors Association (FICA), has warned that forestry contractors are nearing their breaking point.
Some are already in liquidation, while others are teetering on the brink of losing their businesses amid a global slump in demand and falling prices.
The forestry index of ANZ Bank saw a decline of 3.0 percent in April compared to March, echoing the downturn in China’s demand for logs. This dip aligns with China’s construction industry slowdown, prompting buyers to hunt for the lowest possible prices.
Younger noted that this downturn coincides with an increasing worry over the feasibility of forestry contracting businesses. These businesses have recently had to deal with high inflation, escalating interest rates, inclement weather, and the aftermath of the Cyclone Gabrielle catastrophe.
The combined challenges of plummeting prices, a workforce shortage, and these adverse conditions have made it untenable for some contractors to continue operations.
A recent survey of FICA members indicated a widespread drop in production over the past year, with 57 percent of respondents indicating their production was down 20 percent or more, and a further 16 percent reporting a drop of more than 30 percent.
About one in five contractors have a current contract, while 40 percent operate on one-year contracts.
Ross Davis, a board member at FICA, highlighted that two prominent contractors based in Gisborne have recently shut their businesses after 15-20 years of operation in the region. Davis called for support given the gloomy industry forecast.
“Working with the wider industry and the Ministry of Social Development on the best possible subsidy schemes is imperative,” he said.
“We are working with Ministry for Primary Industry – Te Uru Rākau to get better recognition at government level.”
“It’s not a blame game at all, but if we want logging contractors to be around in another 12-24 months then something needs to change now,” Davis said.
“We employ thousands of people, and we cannot keep operating at a loss. Jobs will be lost. Homes will be lost Communities will be lost.”
Younger said the downturn in the industry was widespread and growing in all regions of the country, with contractors going out of business at a rate of at least one every fortnight.
“We totally understand that export markets are pretty poor at the moment, but long term, if we’re expecting blocks to be harvested, there will be no contractors around to do probably more than medium-to-small wood blocks,” she said.
“So conversations need to be had as an industry-wide supply chain discussion.”