Gunns Limited and the entire forest industry in Tasmania is in crisis. Gunns chairperson John Gay, and fellow board member and former state premier Robin Gray have resigned from the company’s board.
They were pressured to resign by major shareholders after Gunns posted a 98% loss in half yearly profit in February this year, the April 23 Hobart Mercury reported. Their profit was just $400,000 — down from $33.6 million at the same time last year.
Gray will remain on the board of Gunns’ Plantations. Gay will head a new company, Southern Star Corporation, which is 51% owned by Gunns. Southern Star Corporation will oversee the pulp mill Gunns is seeking to build in the Tamar Valley and Gunns' plantations.
It has also been confirmed that a new project director has been appointed to the pulp mill. Timo Piilonen oversaw the deeply unpopular Metsa-Botnia pulp mill in Uruguay from 2004 to 2008.
The huge profit loss came as a shock to shareholders. A class action law suit is being prepared against Gunns by shareholders who shares in the company at the end of 2009.
ABC Online said on May 20, they claim Gunns misled investors by making positive comments to the stock exchange before it posted its loss. On the back of this news, Gunns’ share price has dropped to its lowest level in a decade.
Another sign that Gunns is in trouble is the continuing temporary closures of its Tasmanian woodchip mills. Due to falling woodchip demand in Asia, Gunns regularly shuts down productions, amounting to 15 non-production weeks since Christmas, the May 7 Mercury said.
Forest contractors who supply these mills with logs have been left vulnerable. Without knowing when they can get work, they have begun sacking staff and owe huge debts on machinery that they can’t use.
It all points to an industry in terminal decline. Three leading players in the forest industry, Forest Enterprises Australia, Timbercorp and Great Southern have all collapsed in the past year. Forestry Tasmania, the state government-owned business, is heading for a financial loss for the first time in 15 years.
Overseas demand for woodchips is dropping, because of the financial crisis and also because Japan, one of the largest customers, wants to buy woodchips only from forests with the Forest Stewardship Council (FSC) stamp of approval.
For years, the environment movement has campaigned for this criteria to be applied to woodchip orders.
Gunns is left with no choice but to seek FSC accreditation, but it won’t be easy. It will have to prove it has responsible forest management and practices. Among other things, it will have to prove the rights of workers and Indigenous communities are respected, and that areas of natural wealth and endangered wildlife habitat are not being negatively affected.
Gunns’ practices will also need the approval of environmental and community groups if accreditation is to be granted.
Tasmanian Premier David Bartlett has renewed his support for the proposed Gunns pulp mill since the election. Some people are looking to the pulp mill as a way out of the industry’s crisis.
Forest Industries Association of Tasmania chief executive Terry Edwards told the May 14 Australian: "We would like to see … a pulp mill that is supported by all players.”
But there are still many blocks to the pulp mill being built. Gunns is undergoing a “restructure”, which involves selling off non-forest related assets like Mitre 10 in Launceston, to try to raise money for the mill.
To raise the $2.5 billion needed, Gunns is looking to partner with an overseas company with experience in the pulp industry, which can invest hundreds of millions of dollars. It also needs an investment bank to provide even more finance; without both, the pulp mill will not get off the ground.
Besides the finance, the mill still needs final approval from the federal government. Environment minister Peter Garrett has until March 2011 to make a decision based on the environmental impact assessment, particularly looking at whether the effluent of the mill will endanger the marine environment.
The community campaign against the mill is as strong as ever. Anti-pulp mill groups still meet regularly. The residents of the Tamar Valley won’t accept a compromise that involves the pulp mill being built.
Bartlett has promised an assistance package of $3.6 million for sections of the industry worst affected by the downturn. But it’s not clear how this money will be spent, whether it will help workers exit the industry or just help companies pay interest on their loans and hope the industry will recover eventually.
Bartlett also announced there would be an industry/conservationist roundtable in the coming weeks to discuss the future for the industry.
He has given Greens MP Nick McKim the task of picking six conservationists; the forestry industry will pick its own six negotiators, and all of them are expected to work out a way forward.
The Wilderness Society criticised this approach for being too rushed. It also said the environment movement should be able to choose its own negotiators.
Bob McMahon, from the anti-mill campaign group TAP Into a Better Tasmania, told Green Left Weekly there needed to be community involvement in talks about the forest industry because it affected the whole state.
What’s the alternative to a native forest logging industry? One answer is to have a plantation-based industry and protect native forests. But plantations have their own problems: the environmental impacts of monoculture, the buying-up of prime farmland for plantations; the use of chemicals to control pests that then can get into the waterways and impact on people’s health.
After decades at an impasse, the forest industry could at last have change forced upon it. We could take the opportunity to build a new industry in renewable energy and retrain workers from the forestry industry, so they can take on sustainable jobs and not be disadvantaged from a shift away from unsustainable logging.