1 NAFI Submission Gunns Ltd's Pulp Mill Draft Integrated Impact

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					                                           NAFI Submission

                Gunns Ltd’s Pulp Mill Draft Integrated Impact Statement


The National Association of Forest Industries (NAFI) appreciates the opportunity to
comment on Gunns Ltd’s Draft Integrated Impact Statement (IIS) for its proposed
Bleached Kraft Pulp Mill at Long Reach in Northern Tasmania.

NAFI is Australia’s peak forest industry body representing the interests of the forest
industry to the public, governments and public authorities on matters relating to the
national development and use of Australia’s forests and forest products.

For many years NAFI has been actively involved in lobbying governments, both state
and federal, for their support of industry investment in, and subsequent development of,
downstream ‘value-adding’ processing technologies. Gunns Ltd’s proposed pulp mill is
a critical component of the Australian forest industries’ endeavours to maintain and
enhance its competitiveness both domestically and overseas.

The focus of the following submission is on the significance of Gunns Ltd’s proposed
pulp mill, as outlined in the Draft IIS, on Australia’s forest industry both domestically
and at an international level.

Forest Policy Context

Since Australia’s adoption of the National Forest Policy Statement in 1992 and the
various Regional Forest Agreements (RFAs) that followed, there have been substantial
changes in the forest resources available to the industry.

As a result of the RFAs, over 11 million hectares of Australia’s public native forests,
previously available for timber production, have been placed into conservation reserves.
This has led to a substantial reduction in hardwood timber availability to the industry.
As a consequence of this, a commitment was made by governments and industry to
expand Australia’s plantation resources to limit the impact on wood production
resulting from reserving native forests.

The Plantations for Australia: 2020 Vision, endorsed by the Australian Government in
1997 and in 2002, has been the main initiative to guide plantation policy and direct
government involvement in shaping the future of the plantation industry. The
overarching principle of the policy is ‘….to enhance regional wealth creation and
international competitiveness through a sustainable increase in plantation resources’.

Forest Industries House  Napier Close Deakin ACT 2600  Box 239 Deakin West ACT 2600
                         24                             PO
Phone (02) 6285 3833 Fax (02) 6285 3855 Email enquiries@nafi.com.au Internet www.nafi.com.au   1
The aim of the 2020 Vision is to increase Australia’s plantation base, which is currently
just over 1.7 million hectares, to 3 million hectares by the year 2020. In line with this,
new investment in downstream ‘value-adding’ processing facilities, such as Gunns
Ltd’s proposed pulp mill, was identified as a critical factor in effectively utilising this
expanding resource for its highest possible end-use value.

This is supported by all RFAs including the Tasmanian RFA which was signed by the
Commonwealth and Tasmanian Governments in 1997. It provided the framework for
delivering a number of objectives related to investment in downstream processing
within Tasmania. Section of the Draft IIS cites the following objectives from the

    -    Clause 19: Active encouragement of the development of downstream processing
         within Tasmania such that the preferred market for growers is within the State.

    -    Clause 74, Attachment 12: A range of new and enhanced initiatives designed to
         encourage investment, plantation development, downstream processing, value-
         adding, industry development and employment growth in Tasmania’s forest-
         based industries.

In the context of Australia’s forest policy, Gunns Ltd’s pulp mill proposal is a critical
step towards maximising the utilisation of our valuable forest resources and for the
industry to become more competitive in both domestic and international markets.

National Industry Significance

For many years Australia has carried a large deficit in the trade of its wood and paper
products and it currently stands at close to $2 billion per annum (annual exports are over
$2 billion and annual imports are nearly $4 billion). This large trade deficit is mostly a
result of Australia’s significant exportation of predominantly unprocessed forest
products (mostly woodchips) and our heavy reliance on the importation of higher value
processed wood and paper products.

Australia currently exports around 7.5 million cubic metres of hardwood pulpwood each
year, mainly to Japan with a small proportion to Korea and China, where it is processed
into high value pulp and paper products. The majority of this pulpwood is currently
sourced from native forests, however as Australia continues to rapidly expand and
utilise its plantation resource, this proportion will shift towards plantations.

Currently there are only two mills in Australia with the capacity to utilise hardwood
pulpwood (PaperlinX Maryvale and Wesley Vale pulp mills). These mills have a total
hardwood pulpwood input of only around 500,000 cubic metres each year. With less
than 7 percent of Australia’s hardwood pulpwood currently processed on-shore and the
projected significant future increase in pulpwood availability, it is not surprising that
there is an urgent need to increase domestic investment in downstream processing

The recent rapid growth in hardwood pulpwood plantations in Australia has stimulated
considerable interest in industry development to utilise this expanding resource. There
are currently 13 proposed new processing facility developments, at various stages of

Forest Industries House  Napier Close Deakin ACT 2600  Box 239 Deakin West ACT 2600
                         24                             PO
Phone (02) 6285 3833 Fax (02) 6285 3855 Email enquiries@nafi.com.au Internet www.nafi.com.au   2
planning and development, to utilise the hardwood pulpwood resource. These include 6
pulp mills, 3 sawmills, 3 woodchip and export facilities and an engineered wood
product mill. The total of current industry development proposals, will add over $4.5
billion worth of new capacity to the industry.

The Gunns pulp mill proposal, along with the other current hardwood pulp mill
proposals across Australia, including those in Maryvale, western Victoria (Heywood),
southeast South Australia (Penola) and southwest Western Australia, have the potential
to increase Australia’s domestic processing of hardwood pulpwood to almost 10 million
cubic metres per year.

As stated in Section 4.2 of the Draft IIS, the Gunns pulp mill ‘will process between 3.2
to 4.0 million GMt per year (used to produce 820,000 to 1,100,000 ADt of pulp). This
amount is less than Gunns’ average exports over the past 5 years of 4.7 million GMt per

Given that plantation woodchips currently fetch around $90 per green tonne in
international markets compared to around $800 ADt for pulp, as stated in the Draft IIS,
the potential for value-adding and increased export earnings in Australia from the
Gunns facility is significant.

The Gunns pulp mill is anticipated to add between $400 and $450 million each year in
direct economic value to Australia’s forest industry. This would be an enormous boost
for the domestic and international competitiveness of the industry and it would have a
significant impact on reducing Australia’s current trade deficit in wood and paper
products by somewhere in the order of 20 to 25 percent.

Domestic and International Demand

There is a direct link between Australia’s plantation expansion and industry
development, with opportunities for the capacity of the processing industry as
plantations reach maturity and have the critical mass to support the resource
requirements of processing facilities, such as Gunns Ltd’s proposed pulp mill.

As a result of Australia’s projected plantation expansion (around 80,000 hectares per
year), by the year 2020 the nation’s supply of hardwood pulpwood is expected to be
almost 23 million cubic metres each year. This is almost triple the current supply of
hardwood pulpwood, which is around 8 million cubic metres, the bulk of which is
sourced from native forests.

With such a dramatic increase in Australia’s wood availability, it is not surprising that
there is an imminent need for investment in domestic processing capacity for ‘value
adding’ purposes. If the current proposals for industry development proceed, including
the Gunns proposal, then around 10 million cubic metres of hardwood pulpwood of the
23 million cubic metres projected for 2020 is likely to be consumed in the Australian

Despite some largely unsubstantiated assertions to the contrary by some industry
commentators, growth in domestic demand from proposed new investments in
pulpwood processing capacity, such as the Gunns pulp mill, and growth in international

Forest Industries House  Napier Close Deakin ACT 2600  Box 239 Deakin West ACT 2600
                         24                             PO
Phone (02) 6285 3833 Fax (02) 6285 3855 Email enquiries@nafi.com.au Internet www.nafi.com.au   3
markets, is expected to exceed supply of pulpwood from Australia’s plantations and
native forests.

Environmental Sustainability

As with any project of this magnitude, there are a number of environmental
considerations which need to be adequately taken into account. Without going into any
significant detail on any specific aspects, the Draft IIS for the Gunns pulp mill proposal
comprehensively addresses these environmental considerations, both in isolation and in
the context of other relevant social and economic values.

As stated in the Draft IIS, Gunns’ proposed pulp mill is set to ‘establish new
environmental benchmarks and has been designed to meet environmental and
technological best practices as outlined in the Tasmanian Government’s Enviromental
Emission Limit Guidelines for any New Bleached Eucalypt Kraft Pulp Mill in

Importantly, the pulp mill’s wood resource requirements are not projected to place any
added pressure on the utilisation of native forests or plantations. As stated in Section 4.2
of the Draft IIS, ‘the pulp mill project is a downstream processing initiative and will not
involve any changes to forest resource access or additional intensification of forestry
operations. It is based upon diverting resource that would otherwise have been exported
in chip form to the pulp mill for value-added processing’.

Also, as stated in the Draft IIS, pulpwood supply for the proposed mill is ‘governed by a
number of legislative and policy instruments…overseen by key government and non-
government agencies. The key components include…the Tasmanian RFA, the Forest
Practices Act (1985), the Forestry Act (1920) and voluntary forest certification under
the Australian Forestry Standard’.


The National Association of Forest Industries strongly endorses and supports Gunns
Ltd’s pulp mill proposal as contained in the Draft IIS. From a national perspective,
Australia’s forest industries are in critical need of further investment in downstream
‘value-adding’ processing, such as that contained in the Gunns proposal.

With the projected expansion of Australia’s plantation resource and the ongoing
increase in domestic and international demand for wood and paper products, Australia is
in the enviable position of capitalising on this situation. The approval and subsequent
development of the Gunns pulp mill is a critical step towards Australia taking advantage
of this unique opportunity.

The alternative approach of ‘doing nothing’ by not proceeding with the pulp mill, would
result in a foregone opportunity to achieve a number of significant and long-lasting
socio-economic benefits which are outlined comprehensively in Gunns Ltd’s Draft IIS.
The pulp mill would not only be a huge boost for Tasmania’s and Australia’s economy
and regional development, but would also play a significant role in reducing the
nation’s current trade deficit in wood and paper products.

Forest Industries House  Napier Close Deakin ACT 2600  Box 239 Deakin West ACT 2600
                         24                             PO
Phone (02) 6285 3833 Fax (02) 6285 3855 Email enquiries@nafi.com.au Internet www.nafi.com.au   4

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