Demise of two forestry contractor businesses sparks fears for industry

A number of factors have combined to put pressure on forestry contracting firms, to the extent that two have ceased operating and one has moved out of town to survive. Picture by Paul Rickard

There are “huge concerns” that the forestry contracting industry is 12 months from collapse, after two long-standing East Coast businesses go into liquidation.

New Zealand’s forestry contractors are at “breaking point”, with compounding pressures from the last three years mounting, the Forest Industry Contractors Association (FICA) says.

“Some are already in liquidation and many more are at risk of losing their livelihoods,” FICA spokesperson Ross Davis said.

“FICA is hugely concerned for the viability of forestry contracting businesses at the moment. Pressure has been exacerbated by Cyclone Gabrielle but it comes on the back of a tough three years, with Covid-19, fuel hikes, high inflation resulting in significant interest rate rises, and continuous wet weather all thrown into the mix.”

In recent weeks, two larger Gisborne-based contractors have had no option but to cease operations, after working in Gisborne for 15-20 plus years.

Speaking to The Gisborne Herald, Mr Davis said both companies — Makaraka-based Stubbs Contractors Ltd and Tokomaru Bay-based Abushman Contractor Ltd — would have run 60 or more workers each.

“I know another contractor in Tokomaru Bay has relocated to Wellington. He’s had to move right out of town just to try to survive.

“Each day we are getting phone calls that confirm more and more contractors are falling over.

“Pressure is compounding with increased operational costs, staffing /employment issues, market instability and contractual issues. The already low log price (which is expected to drop again next month), will definitely mean reduction of harvest targets and cancelled contracts, which many will not be able to endure this time around.

“A recent survey of our members showed a widespread reduction in production over the past year.

“When asked if they could survive at an 80 percent production level for a year, only 26 percent of respondents indicated that they could.

“At the moment 21 percent of the responding contractors do not have a current contract while 40 percent  only have a one-year contract.”

The situation was “extremely worrying”, he said.

“If we want logging contractors to be around in another 12 to 24 months then something needs to change now. 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.”

FICA has called on the Government and the wider industry to discuss possible subsidy schemes.

“We are working with the Ministry for Primary Industry Te Uru Rakau (NZ Forest Service, which sits with MPI) to get better recognition at Government level.

“It’s going to get worse before it gets better. We believe the whole model needs to be looked at around how we market and harvest our wood.

“One thing that’s really affecting everyone is the capital investment that we have to have. In the last 10 years, we’ve gone from manual-type operations to very mechanised operations.

“What has happened is guys have borrowed a lot of money to buy that capital but the minute we stop work the payments keep going out.”

Finance companies were now “pulling the pin” on contractors.

Eastland Wood Council – Te Kaunihera Pororākau o Te Tairāwhiti (EWC) chief executive Philip Hope said EWC acknowledged the difficulties facing the forestry industry and the communities it serves.

“It has been a difficult couple of years with weather events becoming more frequent and severe, especially in 2023 with the impacts of both cyclones Hale and Gabrielle being felt in Te Tairāwhiti.

“The catastrophic weather has been unprecedented, and we acknowledge the impact of this on individuals and businesses too. Due to access restrictions many forestry contractors were unable to work between Christmas and March. The current significant swift downturn in the log export market adds to those woes.

“We cannot lose sight of the fact this is about more than just logs, it’s about people too. Those employed from local communities, the local businesses who look after them, and families right across Tairāwhiti.

“This needs to be our focus while we continue to talk about forestry operations and plan solutions for the future of our primary industry.

“We are committed to continuing to work with our partners, including contractors, industry stakeholders, iwi, Gisborne District Council and government, to ensure meaningful stable employment can be maintained through the market cycles.”