Forestry industry looking to more on-shore processing

According to International Tropical Timber Organization figures, Papua New Guinea is the second-largest exporter of tropical hardwoods in the world after Malaysia, with about 15 million hectares of the country’s 30 million hectares of total landmass consi

Products include raw log exports, sawn timber, veneer sheets, logs, plywood, processed timer and woodchips. Most raw timber logs are exported to China, which bought 78% of PNG’S forest exports in 2011.

Of PNG’S total forest area, 1.2 million hectares have been set aside as ‘protection forests’, based mainly on their biological or cultural significance. A further 13.2 million hectares are yet to be classified, while PNG also has around 62,000 to 70,000 hectares of plantation forest.

Almost all of PNG’S forests (99%) are owned by customary landowners.

Value-adding

Currently, only about 20% of timber is processed incountry, for which the main export markets are Australia and New Zealand. However, the PNG Government has established a policy to increase onshore processing to 80% by 2030.

While only 0.2% of PNG’S forest products are sold in the European Union (EU), the EU’S demand for Chinese goods utilising PNG timber means there is a need to demonstrate a sustainable supply chain.

‘We are the only country in the world where our export of logs is subject to 100% independent auditing and certification, prior to exporting,’ says Bob Tate, Executive Director of the peak industry body, the PNG Forest Industries Association. This is carried out by the Swiss company, SGS.

Commission of inquiry

In the past few years, PNG’S forest industry has had to address a Commission of Inquiry into forestry-related Special Agricultural Business Leases (SABLS). This found most of the 70-odd leases were obtained corruptly, mostly for the benefit of logging companies.

‘Our position has always been that the concept of land mobilisation for real agricultural development has underpinned forestry development in PNG since the late 1960s,’ says Tate.

‘We do believe it was seriously hijacked in this latest round of SABLS and there was significant abuse.

‘Of the 70-odd leases granted for forestry there are only four which will become real, viable: two in East New Britain and two in Sepik that are making real and significant progress and which will become serious, large-scale operations.’

Stiff competition

Fortunately, 2014 was a better year for the sector, with timber prices higher and total export income from round log exports up around 25% for the 12 months ending September 2014, according to Bank of PNG figures.

However, Bob Tate says the PNG industry is facing significant competition in Asian markets from softwood producers.

‘For example, New Zealand exports of timber into China are nearly four times the level of PNG. From North America, Canada and far eastern Russia, exports into the Asian markets are rocketing ahead. We do not have the potential to compete with their scales of production.'