Gunns has threatened to log more native forests to feed its proposed pulp mill if the government reduces subsidies for plantations.
The Australian reports Gunns chairman John Gay as saying that the government’s plans to limit tax breaks for plantation managed investment schemes (MIS) would “destroy the forest industry”.
Gay added that cuts in plantation subsidies would make it far more difficult to build Gunns proposed pulp mill. “It would make it a lot, lot more difficult and we would have to have a lot more native forests available to us,” he told The Australian.
Under the existing scheme, investors in plantations can claim a 100% tax deduction on the cost of establishing trees in the first year. Cabinet is currently considering a cap on tax deduction, probably of A$6,500 per hectare for the first year, with remaining costs deductible in future years.
Gunns plans to start up the mill using 80% wood from native forests. Plantations are supposed to gradually replace this wood eventually providing 80% of the raw material for the mill. The Tasmanian Wilderness Society points out that Gunns’ Integrated Impact Assessment for the proposed pulp mill shows that forests from all over Tasmania will be fed into the mill or exported as wood chips.
“No forest outside of a conservation reserve will be safe if the pulp mill goes ahead,” says Wilderness Society’s Geoff Law. “Gunns has divided the state’s forests between the proposed pulp mill and its export-woodchip mills.”
The government claims that the pulp mill will not lead to increased logging, because it will use raw material that would otherwise be exported as wood chips. But Gunns’ 2005 Annual Report states that the pulp mill will be in addition to its wood chip exports: “The [pulp mill] project provides an ability for the Company to obtain an increase in the value of pulpwood through accessing the pulp market in addition to its current woodchip markets.” Currently, Gunns exports about 3.5 million t/yr of wood chips. In 2008, the company anticipates exporting a little over two million t/yr and using about 3.2 million t/yr in its pulp mill (according to the IIS – p.47).
Gunns plans to export the pulp from its mill to China: “Industry forecasts indicate the demand for market bleached hardwood kraft pulp (BHKP) in China will grow strongly over the next decade.” However, with the capacity of pulp mills worldwide expanding, Gunns will face major competition. In the next two years almost 4.5 million tonnes new capacity will come on stream in Latin America, according to Pulp and Paper International (January 2006). PPI estimates that Chinese imports will accommodate only one-third of this growth.
A 2006 report by CommSec, the stockbroking part of the Commonwealth Bank, titled “Building a pulp mill is not the solution” points out that as a high-cost producer Gunns will not be able compete against cheaper pulp from Chile and Brazil.