Apart from the social fallout from the failure of the...

Apart from the social fallout from the failure of the arrangements between the Tiwi Land Council and Great Southern Plantations there are the very real questions about what will happen to the trees in the ground will they be left to rot or is at least some part of the project capable of being salvaged?

On 16th May 2009 Administrators were appointed to Great Southern Group. Subsequently, on 18 May 2009 McGrathNicol were appointed Receivers and Managers of Great Southern Limited and certain subsidiaries of Great Southern.

In September McGrathNicol issued Circulars to Investors advising that the Tiwi Island forestry schemes (which consisted of a large number of tree-plots leased by small investors) would be unfunded after 30 September.

On 2 October McGrathNicol issued a further Circular to Investors in the Tiwi Leases, advising that:

The Tiwi Island operations are commercially unviable. The operating costs and capital expenditure requirements are extremely high. As we have been without funding for the Tiwi Island operations from 30 September 2009, we have commenced cessation of these operations. We also wrote to the landlords, the Tiwi Land Council, on 30 September 2009 advising that we will not be accepting any liability for the lease costs from 30 September 2009.

On 1 October 2009 the Tiwi Land Council terminated all head leases on the Tiwi Islands, relying on a clause contained in the head leases which entitled the landlord to terminate in the event of the insolvency of GSMAL.

In June the Tiwi Land Council had told the ABC that it needed a total of $120 million in order to:

make the forestry plantations on the Tiwi Islands viable following the collapse of Great Southern Plantationsthe land councils Cyril Kalippa says he has asked the Federal Government for help because Great Southerns account estimates show substantial money will need to be found to keep it going. We need about $80 million for the next three years thats for the wages and the things that we need to operate the forest. And also we need $40 million to extend the wharf or the jetty so that 50 tonne ships can come in and pick up the chip wood.

Apart from the huge sums to keep the trees in the ground and alive and the money to rebuild a ruined jetty there remain very real questions about the viability of the whole scheme and who might front the large sums of money in a very tight market to a project with a troubled past and a far from certain future.

In early October The Australian reported that the Tiwi Land Council was optimistic that the project was still viable:

Despite the withdrawal of support from a banking consortium last month, Tiwi Land Council chief executive John Hicks said global demand for woodchips indicated the scheme was clearly a viable operation. We have got it debt-free, Mr Hicks said. And it has a minimal rate of return of between 15 and 30 per cent. The plantations will be harvested on decade-long cycles and landowners now have title to all fixed assets, including the camp headquarters, sewerage farm, port infrastructure, and airstrips. The TLC estimates it will need $80m to manage the plantation to maturity in 2013 and fix the Melville Island wharf so the trees can be exported.

Mr Hicks said at least 15 private investors had indicated they were prepared to support the group in the run-up to the first harvest in 2013. Mr Hicks said the 20 staff on the operation had been retained and that the plant had the potential to create 660 jobs in associated industries.

The controversial venture has already fallen victim to a cyclone and Great Southern was last year ordered to pay $4m for breaching environmental guidelines.

On 2nd October the same day that McGrathNicols described the Tiwi Forestry project as commercially unviable, Dr Judith Ajani gave evidence to the Senate Committees Inquiry at Hearings in Canberra.

Dr Ajani is an economist specialising in forest and plantation research at the Fenner School at the ANU, where she has worked since 1996. She is the author of The Forest Wars (MUP 2007) and is well placed to comment on the Tiwi forestry schemes.

Dr Ajanis evidence to the Senate Committee centred on her assessments of the short-term propsects of Australias woodchip production and exports, the likely demand for the low-grade woodchips from the Tiwi Islands over the period 2010 to 2014 and the looming glut in supply caused by the rapidly increasing supply of plantation hardwood chips from plantations planted under the MIS schemes.

This is a glut that Dr Ajani says will require Australia to double the volume of sales into a flat market (Japan) where we export up to eighty-five per cent of out chips and where we already supply about one-third of their intake and that this will commence as soon as early in 2010.

Responding to questions from Greens Senator Rachel Siewert, Dr Ajani told the Committee that:

Dr. Ajani: What we have at the moment, and it is the really crucial issue here, is a very big volume of hardwood chip resources coming on stream from [Australian] plantations and we also have the native forest resource hanging in there as a continuing significant supplier of hardwood chips.



So what we are looking at here is Australias plantation chip resource increasing from our current level of production of around 4 million cubic metres per annumthat is the volume of that resource that we export currently from hardwood plantationsto around 14 million cubic metres per annum by 2010-2014. Native forest resources in there at the moment are supplying around 5 million cubic metres. We have inevitably some very big resource volumes coming on stream very quickly. Some people might say that this is not a glut situation. I think they are not being open in their assessment of the reality here.



with a glut we have a problem that happens in any commodity industry. Lower quality resources are the ones that always struggle to get market share and, in particular, to get market share at the price they expect.



the Tiwi Islands chips using Acacia mangium are of a lower quality. They are of a lower quality, according to Great Southern plantations, because they have a lower pulp yieldin other words, you need more wood to make the same volume of pulpand they are of a lower quality in terms of the additional costs that are required with respect to bleaching for paper production. That is information that Great Southern itself presented.

NT Labor Senator Trish Crossin asked Dr Ajani how the Tiwi might deal with their very real practical problems they have trees in the ground that will cost a lot to maintain before they can be harvested and sold into an uncertain market:

Dr. Ajani: it is a complicated problemthe Tiwi Island issue is embedded in a much bigger problem, which is the plantation MIS arrangements as a whole. The first job is to contain the problem. It is not just for the Tiwi islanders but also Australia widethat is, in my view we should terminate the plantation MIS arrangements, because the last thing we want is greater havoc being played because we have more investment going into these operations while we are facing the market as I have described. The issue you raise is: what then happens to the trees?



given the information that Great Southern itself provided some time ago and given the market conditions, there should be a great care about further expanding the plantation estate.

Liberal Senator Ian McDonald, in previous governments a Minister that provided no small measure of support for the plantation industry in general and MIS schemes in particular, asked a number of forceful questions of Dr Ajani, concluding with a question that revealed his belligerence and inability to comprehend her evidence:

Senator IAN MACDONALDChair, I am at a loss to understand the evidence Dr Ajani is giving.

Chair of the Committee is the Liberal Senator for South Australia, Simon Birmingham asked Dr Adjani about the prospects of the world hardwood chip market.

CHAIR Dr Ajani, is the global hardwood chip market still growing?

Dr AjaniThe global hardwood chip market is largely flatThe trade figures are largely flat. The current downturn also is not presented in this graph on page 4. I do not see the hardwood chip trade globally recovering to such an extent that the wood volumes that we have coming on stream, virtually immediately, are going to be cleared easily and without putting pressure on the price.

Dr AjaniWe are seeing globally a very strong separation of wood into wood productspaper and sawn timberand the actual production trends of those products. In other words, what we are seeing globally are resource saving technologies coming through such that the strong growth in wood products is not flowing through to strong growth in wood input.

CHAIRRecycling technologies and so on are substituting for plantation and native woodchipsis that your contention?

Dr AjaniYes. The main play here in the paper market is the role of recycled paper dampening the demand for wood despite strong growth in paper consumption.

Senator McDonald returned for one last unsuccessful shot at Dr. Ajani:

Senator IAN MACDONALDWhat is your concern about the Tiwi Islands, from the Tiwi Islanders point of view?

Dr AjaniI think they have a product which is not well placed in the play that is going to unfold over the next few years as our hardwood plantation resource comes onto the market.

In short, it seems that the Tiwi have been landed with a white elephant of monumental proportions large swathes of pristine, high conservation-value tropical forest have been stripped and burned or sold off in curious deals that have only made a loss to date.

The Tiwi have now been forced to go cap-in-hand for money from a cautious market and Governments that, understandably, have little inclination to throw good money after bad for a resource of dubious sustainability and diminishing value.

Many think that Tiwi Forestry is just another Northern Myth an ambitious but poorly-researched and managed scheme that will if it has not already see large tracts of precious tropical forest land laid to waste for no good end.

As I indicated above, the Tiwi Islands forestry case is complex and I have only just touched the surface here.

I dont expect everyone to agree with me so if you have a view contrary to mine please register, and leave a (hopefully constructive) comment.

Similarly if you feel you may have something to add to or support my comments then please do the same.

You can read some background material (from a blog run by the NT Environment Centre in Darwin) here.

And Id encourage you to read the Submissions and Transcripts of Evidence given to the Senate Committee at the Committees website here.

Thanks for taking the time to get this far!!


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This entry was posted on October 28, 2009 at 12:35 pm and is filed under Abetz, Blogroll, Christine Milne, Global initiative on Forests and Climate, Great Southern, Howard, Indigenous, Landclearing, Northern Territory, Rudd, Tiwi Islands, Tiwi Red, buffer, environment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.