More than 230 New Zealand workers have lost their jobs after Winstone Pulp International (WPI), one of the country’s largest export mills, confirmed that it would shutter two mills, devasting locals in the Ruapehu District, where both mills are “considered the backbone of the community.”
Wood Central understands that staff were told of the decision this afternoon, with production already on hiatus. This comes after the company that runs the Tangiwai Sawmill and Karior Pulpmill proposed an indefinite closure last month.
The decision, scheduled to be announced yesterday, was delayed by 24 hours as executives and government officials worked around the clock to find a solution.
However, that came to no avail with Mike Ryan, WPI’s CEO, confirming the whilst company considered staff feedback, but it wasn’t enough to “offset the dual impacts of internationally uncompetitive energy prices in New Zealand, and the relatively low current and forecast market prices for pulp and timber”.
“We know this decision will hit our people and the community hard,” Mr Ryan said in a company statement. “All of our people have been on full pay during the operational pause and consultation period. They will receive their redundancy entitlements in full, including work through their notice period.”
“This was not a decision taken lightly. We gave due consideration to the feedback and alternatives put forward by staff and unions but have been unable to identify any viable options that enable the company to continue operations on a sustainable basis.”
It comes as Wood Central last month reported that New Zealand’s energy prices are now among the highest in the Western World, leading Prime Minister Christopher Luxon to warn that the country is facing “an energy security crisis.”
At the time, Winstone Pulp International CEO Mike Ryan said increasing energy prices were unsustainable: “We have pulled out all the stops over a sustained period to keep this business up and running in the face of rampantly increasing energy prices.”
Electricity was a significant proportion of the company’s costs, rising from 15% to more than 40%. “The main issue for WPI is the timeline for a potential solution and whether that solution will bring energy costs in New Zealand down to a level where we can be internationally competitive.”
The company said it had “worked hard to consider all available options to keep operations going in some form.”
“That included seeking long-term price certainty for electricity at levels that would enable us to be internationally competitive,” Mr Ryan said, adding that “the nature of our operations means we need competitive pricing to be sustained over a long period; we cannot work around short-term price dips in the market.”
“Even though current spot pricing has fallen significantly from the August highs, current electricity futures pricing indicates that nothing is going to materially change in the medium-term regarding wholesale market electricity pricing.”
Why are (select) NZ mills vulnerable to sky-high energy prices?
Last week, Tim Woods, Managing Director of IndustryEdge, an expert in the Pulp & Paper industry, said NZ’s power price hikes (which have jumped 600% in just two years) have left the country’s mechanical pulp and paper mills especially vulnerable:
“This is the case for the WPI mill, which uses energy to produce a ‘mechanical’ pulp and has limited thermal and even less electrical energy outputs,” he said, adding that “these facilities are essentially stand-alone energy sinks and are far more vulnerable to energy price rises than other pulp and paper mills.”
“Couple that with the vulnerabilities created from selling into global commodity markets where ‘the price is the price’, and we can easily see there is also no opportunity to recover higher energy costs,” Mr Wood said, adding that New Zealand’s challenge is to reduce its reliance on one form of renewable energy over others, and achieve a balance of renewables that have “altered little for over half a century.”
- Click here to learn more” about the power crisis and its impact on New Zealand forestry.
