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Kangaroo Island has timber solution but can't ship it off

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In part three of InDaily’s special report on the national timber shortage, thousands of tonnes of structural grade timber is ready to be shipped to sawmills from Kangaroo Island but transport issues and high costs are hampering efforts.

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Special Report: South Australia timber industry

Listed company Kangaroo Island Plantation Timber says it has about 300,000 tonnes of structural logs available to be shipped.

The logs would produce about 100,000 tonnes of structural timber, enough to build about 10,000 homes and ease shortages.

The structural timber shortages are threatening to derail the state’s housing boom created by the Federal Government’s HomeBuilder Scheme, which was launched more than 12 months ago in response to the coronavirus pandemic.

Kangaroo Island Plantation Timber has about 14,200 hectares of plantations, about 80 per cent hardwood (blue gum) and 20 per cent softwood pine, which is used to produce structural timber. This represents close to 10 per cent of the state’s plantations.

But about 95 per cent of it was damaged in the Kangaroo Island fires that began on December 20, 2019 and burnt 210,000ha – almost half of the island – across a 612 km perimeter before being declared contained on January 21, 2020.

The company has received more than $60 million in insurance payout following the fires and has since been in a race against time to salvage the timber and ship it off the island before it rots.

In total, KIPT estimates it has 4.5 million tonnes of bushfire-affected timber that could still be salvaged and sold.

But it says its window to ship burnt softwood pine trees before they decayed was now a little over a year while the hardwood blue gums could potentially last up to another four years.

KIPT Managing Director Keith Lamb said the 4.5 million tonnes of timber on the island included 1.5 million tonnes of standing pine softwood logs, of which about 20 per cent is considered structural grade.

“That’s 300,000 tonnes and that would produce about 100,000 tonnes of structural timber and that’s about enough for 10,0000 homes, which represents about one year’s construction in the Adelaide market,” he told InDaily.

“Normally there would be a bit more than that but the impact of the fire means we are harvesting different forests at different ages when they are not fully mature.

“It’s a very unique opportunity to plug a gap that’s been created by a breakdown in the supply chain due to COVID.”

KIPT’s plans to set up an export hub on the island have been in train since long before the 2019-20 fires.

The company revealed plans in 2017 to build a $40 million port at Smith Bay, on the island’s north coast.

The proposal has been declared a major project by the State Government but has faced strong opposition, including from the neighbouring Yumbah Aquaculture abalone farm.

The project is yet to be given approval.

“It’s 19 months since the fires and I had anticipated we were going to get approval a year ago and we didn’t get anything,” Lamb said.

“Secondary approvals are also needed including from the Federal Government, which could take several months.

“Once we’ve got them in place and we understand what the constraints and the operating conditions are, we are looking at a two-year build to get the port up and running.”

In the meantime, KIPT began using SeaLink’s ferry service from Penneshaw to Cape Jervis in February to begin trucking softwood logs to the mainland.

The loaded trucks then drive from Cape Jervis to Port Adelaide where KIPT has established a depot to store timber before it can be on sold to local sawmills or shipped overseas.

Lamb said the company was initially trucking two to three loads a day on the ferry but that had recently reduced to one since SeaLink had reverted to its winter schedule, which allows it to service vessels during the quieter period.

KIPT is also working on plans to barge logs from Kingscote.

Local entrepreneur David Harris is in talks with the company to use his wharf lease in American River to barge logs to Port Adelaide.

The deal is awaiting final permits but, like the Kingscote option, it has faced community opposition amid concerns the additional truck movements will cause local traffic issues.

Lamb said it would be convenient to start in American River and then move to Kingscote.

“We need a higher level of capacity and that’s what Kingscote and ultimately Smith Bay will give us,” he said.

“We’ll continue to use SeaLink,it’s very important for us to maintain that service. But the challenge for us is it’s a passenger service, not an industrial service and we have to meet the ferry schedule, there are limited spots available to us and it’s not viable to get all the timber off.”

It is one thing to make the timber available, but the other challenge is the capacity of local sawmills to cut it.

There are two major sawmills in South Australia that supply structural timber, both in the South East, but both are at capacity.

The State Government last month announced a $2 million fund to increase the supply of structural timber for local South Australian home builders.

An Expression of Interest (EOI) process was opened on June 25 and applicants had until July 15 to submit their case.

Primary Industries and Regional Development Minister David Basham said several expressions of interest had been received for the fund, which were still being assessed.

The  Federal Government announced in May 2020 $40 million in funding from 2020-21 to 2022-23 to assist privately-owned wood processing facilities to recover and rebuild following the 2019-20 summer bushfires.

It included the $15 million Forestry Transport Assistance scheme to subsidise the transport of fire-affected timber. But it was only made available to Victoria and NSW after they agreed to match funding.

Basham flew to Canberra last month vowing to raise the issue of SA’s inclusion in the scheme with his federal counterparts but an announcement is yet to be made.

He said the booming local housing industry was great news for the economy but acknowledged the increased demand for timber had increased pressure on supply chains.

“The Marshall Liberal Government is exploring all possible options to boost supply to meet house-building demand and support local jobs in both our regions and across metropolitan Adelaide,” Basham said.

“This includes maximising the amount of sawmill quality log available to local processors, lobbying the Federal Government for industry access to the Forestry Transport Assistance scheme and a $2 million Expression of Interest process aimed at manufacturing additional logs into structural timber for local South Australian home builders.

“We will continue to work with industry and all levels of government to address supply chain issues.”

Some of KIPT’s shipments this year have gone to Morgan Sawmill in the Mid North after the Jamestown business last month lost its Forestry SA sawlog contract.

However, high transport costs mean it is not sustainable.

Morgan’s is not currently set up to produce building-grade structural timber but has applied for funding under the $2 million scheme so it can upgrade its facilities.

Lamb said the federal transport assistance scheme would be vital for Morgan’s to reduce the “extraordinarily expensive” costs of moving logs the 400km from Kangaroo Island to Jamestown.

He said KIPT was also in talks with “two or three” other mills in SA and interstate that are ready to go if the federal subsidy is extended.

“There is an argument that can be made that given that prices have risen so much that these sawmills should be able to pay the extra freight costs to source the wood but there’s a couple of barriers to that,” Lamb said.

“All the sawmills are running flat out already and so by taking our wood, that is blackened by the fire and needs extra care and attention, they would need to take that on as extra at a time when they are already fat out servicing the sector.

“We’re hopeful that what we’ll be able to do is with the assistance from the Federal Government with this package, we’ll be able to deliver to them so they can burden the additional cost of handling this timber and get it through their mills and recover it.

“In some cases that will allow their own resource to grow on a little bit more or in other cases it would replace material that’s no longer available.”

The Master Builders Association of SA in conjunction with KIPT, Morgan Sawmill and the South Australian Forest Products Association sent a proposal to Basham in May following a State Government roundtable on the issue in April.

The proposal included shipping 25,000 cubic tonnes of KI timber to Jamestown initially via the SeaLink ferry and then by barge to Port Pirie. However, the deal required government support.

Master Builders SA CEO Will Frogley told InDaily this week that the Kangaroo Island timber is and always was the best local solution to the building industry timber shortage.

“Being an island without adequate port infrastructure makes things tricky, but that’s where the government can help with the transportation costs,” he said.

“Given how important residential building is to the economy and record-high building approvals in the pipeline, Master Builders SA believes getting the timber to the local market would actually result in a net government gain.

“We all want to see the benefits of a booming building industry continue and whilst this isn’t a magic bullet in terms of addressing all the supply shortages and price increases it’s something we know will really help.”

Frogley said the government’s $2 million EOI fund had shown it was supportive but “the clock is ticking”.

“There really needs to be a sense of urgency about finalising this otherwise Kangaroo Island timber will be used to build homes interstate or overseas instead of right here in South Australia,” he said.

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