Bushfires and pandemic spell tough road ahead for forestry and wood processing sectors

An easing in residential construction and increased export uncertainty loom as major challenges for forestry and wood processors in the wake of summer’s bushfires and COVID-19, according to an ABARES Insights report released today.

The analysis of Effects of bushfires and COVID-19 on the forestry and wood processing sectors has found that so far trade appears to have been relatively unaffected by either the bushfires or COVID-19.

However, ABARES’ acting Executive Director Peter Gooday said that many of the impacts may take several months or longer to flow through.

“While the duration of the economic impacts of COVID-19 are uncertain, the bushfires could have lasting effects on domestic log supply for decades to come,” Mr Gooday said

“In the medium to long term, the age profile of softwood plantations, particularly in New South Wales, will change significantly as fire-affected areas are replanted.

“In the shorter term, the expected decline in residential dwelling commencements due to COVID-19 related restrictions has fuelled concerns that demand for sawnwood could decline significantly over the next six months.

“We know that several mills are reducing production and cutting staff, with demand for wood-based panels for interior use also likely to decline.”

Potential reductions in domestic demand for wood products are likely to be compounded by an increased supply of logs over the next 12 months, as forest growers salvage fire-affected trees.

At the national level, around 8.3 million hectares of native forests and 130,000 hectares of plantations fell within the extent of the fires. This accounts for about six per cent each of the total native forest area and the total plantation estate.

Mr Gooday said there remained some uncertainty regarding the damage caused by the fires and potential salvageable volumes.

“The extent to which fire affected trees can be harvested depends on the severity of the fires and the types of logs,” Mr Gooday said.

“For example, if they are not severely burnt, sawlogs may still be processed by domestic sawmills and pulplogs may still be chipped to produce packaging and industrial paper and paperboard products.

“With limited opportunities to sell additional logs in the domestic market, growers may look to export markets in the near future.”

Mr Gooday said that based on the latest statistics, trade has remained strong in recent months despite COVID-19 related restrictions.

“While values of forest and wood product exports in January and February were low compared to the previous five years, exports recovered in March, and were still within the historic range,” Mr Gooday said.

“However, we may still see impacts on trade in the coming months as global demand for wood products falls and the effects of the bushfires on log supply are realised.”

In the coming months, ABARES will undertake a comprehensive spatial survey of plantation growers which should provide a more accurate indication of the potential impacts of the bushfires on long-term log supply.

The analysis of Effects of bushfires and COVID-19 on the forestry and wood processing sectors can be accessed here (from 10am 30 June AEST)

A downloadable infographic from the report is also available from the report’s website page.

ABARES Senior Economist Linden Whittle is available for interviews. Contact the Department of Agriculture, Water and the Environment media team on (02) 6272 3232 or email media@agriculture.gov.au