Supplier, buyer woodchip woes for Albany

THE Albany Port Authority oversees the state’s only bulk port without a mine attached to it.

So when one of its major exports, woodchips, takes a major hit from both the supply and demand end, the port’s bottom line sinks.

Port chief executive Brad Williamson says the Port Authority is facing a $1.6 million slide in revenue this financial year.

“We are 36 per cent down on this time last year,” Mr Williamson told WA Business News, referring to export figures.

Timbercorp got one ship away last year before the company completely unwound, and shipments for Great Southern ran aground after the timber heavyweight was felled.

The collapse of both companies occurred relatively shortly after bumper harvests, marking a sharp turn-around in fortunes for those relying on the forestry sector.

In its 2007 annual report, Timbercorp boasted: “Just over 50,000 tonnes of wood fibre was harvested, processed and delivered to the Albany Terminal in July ... an exceptional performance by our harvesting crews.”

Albany port exports for forestry company ITC have also fallen (down 8 per cent), as have shipments by Japanese firm Albany Plantation Export Company (down 22 per cent).

The slide in woodchip exports could potentially be offset by bumper grain consignments– the port’s number one export – however grain shipments are also down.

The problem for the Albany port and affected industries is that the woodchip woes aren’t confined to the suppliers. All woodchips from the port are exported to Japan; a country experiencing its worst post-war downturn.

Mr Williamson says a country’s gross domestic product and paper consumption are linked.

“When an economy goes backwards they just don’t produce the same amount of forms or letters,” he says.

Albany-exported woodchips tend to be high quality and are used for products such as photocopier paper.

Efforts are being made to pull Asian’s biggest economy out of the doldrums while keeping its soaring national debt under control, with a flagged move to weaken the yen (in order to protect Japanese exporters) the latest development.

But few expect a quick turnaround for Japan after its prolonged woes.

One of Australia’s most successful fund managers, Kerr Neilson of Platinum Asset Management, bet on a Japanese recovery for years before eventually backing away from his strong stance.

Platinum notes in its most recent update on its Japanese share fund that the “Japanese have a habit of stealing defeat from the jaws of victory”. Yet, on a more positive note, the stockpickers at Platinum believe any broad devaluation of the yen would act as a much-needed accelerant for the local stock market.

On the woodchip supply side, investors aren’t the only ones to benefit from the appointment of Tasmanian company Gunns to bring nine of Great Southern’s timber plantations to harvest.

The alternative to the appointment of Gunns – or one of the rival bidders – was a wind-up that would have done nothing for Albany (except perhaps for local real estate agents offloading the land).

Gunns made the controversial move to prohibit the re-planting of trees after harvest by the current investors – a decision that suited Great Southern creditors – which means it is not known what the land will be used for in the foreseeable future.

Gunns has flagged its interest in acquiring some of the pulpwood for its own Tasmanian mill, however it’s not known if that interest will extend to Albany-based plantations.

The muted outlook for grain and woodchip exports cast a shadow over the port and affected community (workers and contract companies, for example), however there are other opportunities on the horizon.

Final state government approval was granted for Grange Resources’ Southdown magnetite iron ore project at Wellstead and its associated pipeline infrastructure late last year.

This takes Grange a step closer to the start of construction and development of an open-pit mine.

Another major step taken last month was the Environmental Protection Authority recommending conditional approval for the Albany Port Authority to expand the port.

The proposal involves dredging in Princess Royal Harbour and King George Sound for a shipping channel, berth pocket and turning basin. Dredged material would be used to reclaim land to construct an additional berth, with excess dredge material placed in deep water within King George Sound.

Up to 12 million cubic metres of material would be dredged over a seabed area of about 247 hectares.

EPA chairman Paul Vogel says the authority considers that the dredging and disposal will need to be comprehensively monitored and proactively managed to ensure that the port authority’s predicted effects are not exceeded and that the ecological values of Princess Royal Harbour, King George Sound and Oyster Harbour are not compromised.

“A number of submissions expressed a view that the APA should have selected the outer disposal site as part of the proposal to minimise environmental impacts on King George Sound,” Mr Vogel said in a statement.

“However, APA has undertaken the necessary investigations for the EPA to conclude that the proposed inner spoil ground is likely to be stable and not cause sedimentation of marine communities in King George Sound.”

The Albany Port Authority would dearly like to shed its mine-less tag to lessen its reliance on timber plantation operators and grain-affecting weather conditions.

If the example of Fremantle Ports’ current dredging program is anything to go by – which just got started despite an 11th-hour attempt to suspend operations – the Albany port has some work ahead of it.

“We are the only bulk port in the state that doesn’t have a mine,” Mr Williamson says.

“It’s much easier running a port with mines because it’s not dependent on rain.”