The extent, ferocity and impact of the 2019-20 wildfire season in Australia will be felt long into the future at the personal, community and business levels. It may be that we have reeled from one crisis to the next right now, however the impact of the fires will be felt for a long time.
Often overused, it seems appropriate to say in this case that the fires have been unprecedented. But as the COVID-19 crisis continues to unfold around us, it is just as clear we are living an unprecedented year.
- Estimates suggest as much as 9 million hectares of Australia’s land mass was impacted by the fires
- Up to 100,000 hectares (10 percent) of softwood plantations have been impacted
- The ability to salvage wood from affected land is variable (some major efforts commenced soon after the fires)
- Plantation establishment strategy is now urgent and requires reconsideration
Like others, IndustryEdge has been inundated with information requests from those seeking to understand the scale of the fires and their likely impact on Australia’s pulp and paper industry.
Until heavy rains put out many of the fires and reduced the immediate risks, we considered it more appropriate to wait before providing comprehensive overviews. Loss of life, housing, livestock and livelihoods have been the main focus. Recovery of communities, families and personal and business lives was rightly the focus.
WATCH: Tim Woods of IndustryEdge Discusses the Impacts of COVID-19 on the Forest Supply chain in Australasian Markets.
What is the impact on the wood products’ sector?
Most of the impact assessments we have considered, and of which we are aware, relate to the utilization of the softwood resource. With the fires predominantly in the largest softwood plantation region (Murray Valley), processing in that region will be hardest hit.
Short term supply from salvage will provide sufficient wood for most processors to continue operations – pending the suitability of the fire-impacted fiber. The downgrading of some log resources may mean the region’s contribution to structural sawn softwood supply will tighten. Based on the processor profiles in both Victoria and New South Wales, IndustryEdge estimates that around 25 percent of Australia’s sawn structural softwood is currently produced in the fire-affected region.
Ultimately, after salvage logs are extracted and exhausted, deficits that make fiber scarce are likely to see shortages flow down to lower-value wood products over time. Poles and packaging grade materials could be most impacted at that time.
Pulpwood resources will be similarly constrained in the future, impacting panel products manufacturing, as well as the pulp and paper sector.
IndustryEdge does not currently have transparency into the impacts on the native forest sector.
What is the likely impact on Australia’s pulp and paper sector?
With most of the impact of the plantation estate being felt in New South Wales and in softwood species, we can reasonably expect the major impact of the fires to be felt in the packaging sector. Long softwood fibers provide the strength required of Kraftliner as a key component of corrugated boxes carrying the nation’s goods domestically and internationally.
The extensive softwood plantation fires in the catchment of Visy’s Tumut mill make an already tight wood supply even tighter. The recent acquisition by Visy of the softwood plantation timber previously owned by Norske Skog will provide some relief but is unlikely to plug the long-term hole.
In the short-term, some Q1 disruptions were inevitable. Medium term, so long as salvaged logs can be processed and chipped without damage to equipment, the impact may be minimal. Longer-term, the simple reality is that any gap in supply will become evident.
In short, there is not likely to be a significant impact on the pulp and paper sector in the near term.
IndustryEdge notes that other sources of fiber, especially secondary fiber like recovered paper, are all the more important in this context.
We are also reminded that much of southern Australia has been gripped by torrential and, thankfully, fire-quenching rains in recent weeks. This serves as a valuable reminder of how quickly conditions can change, even in a dangerous fire season that now lingers until at least mid-March each year.
What does this mean for significant timberland users? The fragility of wood fiber supply in a landscape that can display such hostility has been fully exposed. And if we apply purely economic thinking to that proposition, one thing is clear: Increased scarcity, variability and risk mean the underlying value of wood fiber (and all biological fiber), has again increased.