Red Stag Timber plans to lift production from its Waipa 'super mill'

Red Stag Timber, which developed New Zealand's first 'super mill' a year ago, plans to step up production next year to meet demand in its local and overseas markets.

The Rotorua-based Waipa Mill increased its production of sawn timber to an annual 550,000 cubic metres from 450,000 cubic metres after investing over $100 million in more efficient machinery, transforming the mill, and plans to lift production further to 600,000 cubic metres from next year, general manager Tim Rigter told BusinessDesk in an interview at the Waipa State Mill Road site.

The mill, developed in the 1930s by the state to process maturing exotic trees from surrounding forests, was once the jewel in the crown of the Forestry Corp. Sold by the government in 1996 to the Central North Island Forest Partnership, it was bought out of receivership by the Verry family in 2003 and now focuses on structural timber production with 60 percent sold in New Zealand and the rest to Australia, Asia and the Pacific Islands.

"We are developing markets not just in New Zealand but overseas so we believe we can sell that 600,000," Rigter said. "It's utilising your assets and that lowers your cost."

A 'super mill' can process 1 million tonnes of logs a year and Red Stag's mill was the first of this scale in the Southern Hemisphere, with its current production amounting to about 900,000 tonnes of logs a year.

Rigter said about half of the increased production is expected to be sold in New Zealand, where the mill is widening its product offering to include posts, palings and decking, and the other half will head overseas.

"We have got quite a nice diversification for markets and regions," Rigter said. "You want to spread your markets because if one country has a downturn you don't want to have all your eggs in one basket."

In New Zealand, Rigter sees steady future demand for wood underpinned by new building to meet the housing shortage, although he notes the market has flattened recently with wood supply coming back into step with demand.

"We see steady demand but we do see supply and demand in balance so there won't be a shortage of timber. We are one sector in the industry that can keep up with the current demand...between us and other sawmillers, there is enough supply."

Red Stag is Rotorua's largest private employer with 290 staff and another 80 full-time contractors. The forecast increase in production will see the mill continue to run two shifts a day, totalling 80 hours over four days, with a step up in overtime.

While the mill has expanded at a time of increased demand for structural timber, Rigter notes that margins have been squeezed in the past 12 months as prices for structural logs hit new highs, with only some of the increase being passed on to customers.

(BusinessDesk)